Traps awaiting when converting a company into a partnership

The most popular legal form of doing business in Poland is JDG (sole proprietorship). Such a company is easy to set up, registration costs nothing, and usually full bookkeeping is not necessary. However, over time, when the company starts to grow, an injection of capital may be needed. In this situation, it is worth considering setting up a company and knowing what risks await the entrepreneur. What are the risks? We suggest.

According to Tax Care (Entrepreneurship Index), almost 3 million sole proprietorships were registered in Poland by the end of 2018. This strong trend is continuing, as from January to February this year, more than 900 companies per day were added on average in Poland.

While there are plenty of advantages to running a JDG, it is also not without disadvantages. One of the biggest is that the owner is liable for the company's debts with all its assets. This can be particularly risky when the business has spread its wings. In the event of financial difficulties, this can end up loss of liquidity financial and consequently bankruptcy of the owner. However, once the company has been transformed, it is the company that is liable for its debts and not the entrepreneur with all its 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