Traps awaiting when converting a company into a partnership

The most popular legal form of running a business in Poland is JDG (sole proprietorship). Such a company is easy to set up, registration of the business does not cost anything, and usually there is no need to keep full accounting. However, over time, when the company begins to grow, an injection of capital may be needed. In this situation it is worth considering setting up a company and knowing, what risks lurk for the entrepreneur. What are these risks? We advise.

According to Tax Care data (Entrepreneurship Index), almost 3 million sole proprietorships were registered in Poland by the end of 2018. This strong trend continues, as from January to February of this year the number of sole proprietorships increased In Poland, on average, there are over 900 companies daily.

Although running a JDG has many advantages, it is not without its disadvantages. One of them the biggest one is the responsibility of the owner for the company's obligations with all his assets. This can be especially risky when a company has spread its wings. In case of financial troubles, it can end loss of liquidity financial and, consequently, bankruptcy of the owner. However, after the transformation of the company, it is the company that is liable for its obligations, not the entrepreneur with all his assets.

Forming a company also allows you to raise additional capital to run your business, which encourages business growth. Most entrepreneurs know the advantages of converting a sole trader into a company. However, few know that there are mines along the way that can be defused in advance.

What should be borne in mind?
1. Remember the transition period
2. Close the accounts
3. make a list of assets
4. report to the Tax Office that you do not pay VAT
Remember the VAT-7 tax return
6. Don't forget the VAT-R registration declaration
7. Remember your obligations to the Social Security
8. Open the accounts
9. take a reading of the cash register
10. be aware of company name issues
11. enjoy an extended financial year, but not for too long
12. in certain situations, you may be liable with your assets for the company's liabilities

A full discussion of the above topics can be found below:

The material appeared in Gazeta Małych i Średnich Przedsiębiorców:

1 July 2019:
" 12 traps that lurk for the entrepreneur

PMR team

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