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Limited Liability Company – Pros and Cons

A limited liability company (sp. z o.o.) is one of the most popular forms of business entities in Poland. It comes with both advantages and disadvantages that should be considered before deciding to establish one.

Pros of a Limited Liability Company:

  • No liability of partners for company obligations – partners are not liable with their personal assets for the company’s obligations, meaning financial risk is limited to the capital contributed to the company.
    Quick registration – the company registration procedure through the KRS24 system is relatively fast and can take as little as two days. This is an attractive option for entrepreneurs who want to start their business quickly.
  • Estonian CIT – the possibility of using Estonian CIT, which allows for the deferral of income taxation until profits are distributed, which can be beneficial for companies planning to reinvest their earnings.
    Flexibility in drafting the company agreement – when establishing a company in the standard mode (with a notary’s involvement), the company agreement can be tailored to the specific needs of the partners, providing greater flexibility in managing the company.
  • Protection of personal assets – in case of the company’s financial problems, partners do not risk losing their private assets.

Cons of a Limited Liability Company:

  • Double taxation – company income is taxed at the company level (CIT), and then, when profits are distributed to partners, they are taxed again as personal income (PIT).
  • Full accounting records – maintaining full accounting records is mandatory, which generates additional costs associated with accounting services and audits.
  • Liability of management board members – management board members may be personally liable for the company’s obligations if they failed to file for bankruptcy in due time.

If you are considering establishing a limited liability company or need support with its operation, we are at your disposal. We provide comprehensive assistance at every stage – from registration to day-to-day management. We invite you to cooperate with us!

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