For a foreigner, a limited liability company (spółka z o.o.) is usually a safer and more accessible form of running a business in Poland. A sole proprietorship (JDG) is simpler, but its establishment is restricted to specific groups of foreigners, such as EU citizens or holders of the Pole’s Card (Karta Polaka).
Which foreigners can set up a sole proprietorship (JDG)?
Not every foreigner can set up a sole proprietorship in Poland. Only specific groups of people who have the appropriate residence status or citizenship have the right to do so.
According to the Act on the Freedom of Economic Activity, a JDG can be set up on the same terms as Polish citizens by, among others:
- Citizens of European Union member states and the European Economic Area.
- Foreigners holding a permanent residence permit, long-term EU resident permit, or temporary residence permit for specific purposes (e.g., family reunification).
- Holders of a valid Pole’s Card (Karta Polaka).
- Persons under international protection (e.g., refugee status).
If you do not belong to any of these groups, setting up a JDG will be impossible. In such a situation, the only available option remains setting up a capital company, for example, a limited liability company (spółka z o.o.).
Why is a limited liability company often a better and safer choice?
A limited liability company is available to every foreigner, regardless of their citizenship or residence status. More importantly, this legal form ensures limited liability, which protects your private assets.
The main advantage of a limited liability company is the separation of company assets from the private assets of the shareholders. In the event of financial problems and company debts, you are liable only up to the amount of the contributed shares. In a sole proprietorship, you are liable with all your personal assets, without any limits.
A limited liability company is also perceived as a more professional and credible form of business. This makes it easier to acquire business partners, loans, or leasing. If you plan to grow the company and hire employees, a limited liability company provides much more stable foundations.
What are the key differences in taxation and ZUS (Social Security)?
A sole proprietorship offers simpler forms of taxation and lower ZUS contributions at the start. A limited liability company requires full accounting and involves double taxation, but offers greater optimization possibilities.
The table below compares the most important differences you must consider when making a decision.
| Feature | Sole proprietorship (JDG) | Limited liability company (Sp. z o.o.) |
|---|---|---|
| Liability | Unlimited, with all private assets | Limited, up to the amount of contributed shares |
| Taxes | PIT income tax (tax scale, flat tax, lump sum) | CIT income tax (9% or 19%) + PIT on dividends (19%) |
| ZUS contributions | Mandatory (possibility of start-up relief) | No obligation for shareholders (with min. 2 shareholders) |
| Accounting | Simplified (KPiR) or full | Mandatory full accounting |
| Setup costs | Free registration in CEIDG | From approx. 700 PLN (online) to several thousand (notary) |
How much does it cost to set up and run both forms of business?
Setting up a sole proprietorship is free, while registering a limited liability company involves court and possibly notary fees. Running costs, mainly accounting, are also higher in the case of a company.
At Progress Holding, we perfectly understand the needs of entrepreneurs from abroad. We offer comprehensive support at every stage.
- Registration of a limited liability company: Our team will guide you through the entire process, from preparing documents to entry in the KRS (National Court Register). The cost of the comprehensive service of setting up a limited liability company at Progress Holding is 3500 PLN net.
- Accounting services: Keeping accounts is crucial for legal operation. The monthly cost of accounting services in our company starts from 599 PLN net for JDG and from 799 PLN net for a limited liability company.
Choosing the right legal form is just the beginning. Do you need support in further steps? Contact us, and we will help you register the company and provide professional accounting services.
Our data: Most common mistakes of foreigners when choosing a business form
Based on our experience working with over 500 companies established by foreigners, we have identified key traps. Avoiding them will save you time and money.
Analysis of registration processes from 2023-2025 shows that most problems stem from a lack of full knowledge of Polish regulations. Here are the most common mistakes:
Mistake 1: Incorrect assumption about the possibility of setting up a JDG
About 40% of foreigners from outside the EU who contact us assume they can open a sole proprietorship without any problems. Unfortunately, the lack of an appropriate legal basis (e.g., Pole’s Card) makes registration in CEIDG impossible and leads to a loss of valuable time.
Mistake 2: Underestimating the costs of running a limited liability company
Entrepreneurs often focus on registration costs, forgetting about ongoing obligations. Full accounting, mandatory financial statements, and legal services generate fixed costs that must be included in the business plan. At Progress Holding, we always transparently present the full picture of costs.
Mistake 3: Choosing JDG due to lower ZUS with high income
ZUS reliefs in JDG are tempting, but with rising income and business risk, the lack of liability limitation becomes a huge threat. Many of our clients decide to transform their JDG into a limited liability company as soon as their business gains momentum to protect their private assets.
Frequently asked questions
Can I transform a JDG into a limited liability company in the future?
Yes, a sole proprietorship can be transformed into a limited liability company. It is a formal process that allows for maintaining legal continuity, including the NIP number and concluded contracts. However, this process requires legal and accounting support.
Do I have to pay ZUS as a shareholder of a limited liability company?
It depends. A sole shareholder in a single-member limited liability company is treated as an entrepreneur and must pay full ZUS contributions. If the company has at least two shareholders, this obligation generally does not arise, unless the shareholder is employed by the company under an employment contract.
Which form is better if I plan to hire employees?
Both forms allow for hiring employees. However, a limited liability company is perceived as a more stable and credible employer, which can facilitate recruitment. The company structure also better separates company assets from private assets, which is safer with a growing scale of operations.
Do I need a PESEL number to set up a company in Poland?
Yes, a PESEL number is essential for board members of a limited liability company and for individuals setting up a JDG. It is required to handle most official matters, including ZUS and the tax office. Progress Holding offers support in obtaining a PESEL number for 500 PLN net.
How can I withdraw money from a limited liability company?
Money from a limited liability company can be withdrawn in several ways. The most popular are dividend payments (after the end of the financial year), remuneration for appointment to the management board, remuneration from an employment contract or civil law contract, as well as non-monetary benefits.
The choice between a JDG and a limited liability company is one of the most important decisions for a foreigner starting a business in Poland. A limited liability company offers universal access and safety, while a JDG tempts with simplicity but is available only to a few. Do you need professional support in making a decision and registering a company? Contact us at Progress Holding at +48 603 232 418 or via email office@progressholding.pl.
