Self-employment offers a lot of freedom and independence in business. However, it comes with many challenges. One of them is starting your own company. In this article, we will explain what a sole proprietorship is, how to start it, and what obligations entrepreneurs have.
Table of Contents
- What is a sole proprietorship in Poland?
- Who can run a sole proprietorship in Poland?
- How to register a sole proprietorship?
- Is it always necessary to register a business activity?
- Taxation of sole proprietorship
- Social security contribution for sole proprietorship in Poland in 2024
- Health insurance contribution for sole proprietorship in Poland in 2024
- Summary
What is a sole proprietorship in Poland?
A sole proprietorship has three crucial features. It is:
- an organised gainful activity,
- performed on your own behalf,
- and on a continuous basis.
As a rule, it requires mandatory registration in the Central Register and Information on Economic Activity (CEIDG). Entrepreneurs can choose their business profiles within the statutory legal limits.
Who can run a sole proprietorship in Poland?
A sole proprietorship can be conducted, among others, by:
- an adult (18 years and more),
- a foreigner,
- a minor (between 13 and 18 years of age). In this case, application for registration must be submitted by a legal representative. Usually, it is a parent.
How to register a sole proprietorship?
You can register sole proprietorship through the biznes.gov.pl portal. You need to create an entrepreneur’s account and fill out the e-application for registration in CEIDG. Then you should sign it with a Trusted Profile or qualified electronic signature.
In the CEIDG registration application, you should provide:
1. Basic information identifying the entrepreneur. For example: name, date of birth, type and identification number of the identity document.
2. Information about the sole proprietorship, including:
- company name – at least name and surname; you can add other elements defining the company, including business profile,
- business address, e.g. place of residence,
- service address – i.e. the place where company correspondence is collected,
- PKD code (Polish Classification of Activity). It defines the type of business activity. The code is chosen from a publicly available list at the moment of the company’s registration. The PKD code is important, among other things, for the form of taxation of business. It should correspond to the profile of the conducted activity. You can choose one main code and any number of additional ones.
Upon registration in the CEIDG, entrepreneurs are assigned a Tax Identification Number (NIP). It is issued within one day. The National Business Registry Number (REGON) is issued within 7 days after registration.
Is it always necessary to register a business activity?
Not every activity needs to be registered. Activities not subject to registration are small businesses of natural persons. This corresponds to their small forecasted revenues. Therefore, such business activities:
- generate monthly revenues not exceeding 50% of the minimum salary in the given year.
- do not require permits or licenses,
- have partners who are not involved in civil law partnerships and have not conducted any business activity in the last 60 months.
The obligation to register in CEIDG does not apply to:
- agrotourism activities of farmers,
- wine production by farmers,
- a farmer registered in REGON.
Taxation of sole proprietorship
Each year, the entrepreneur decides on the form of taxation, unless the nature of his business dictates a specific form. You can choose from three tax methods:
1. General rules – tax scale
- Basic form of taxation, calculated automatically unless the entrepreneur chooses another form.
- the tax-free amount is 30 000 PLN,
- the basic tax rate is 12% on income up to 120 000 PLN,
- for income exceeding 120 000 PLN, the tax rate is 32%,
- it provides tax reliefs,
- the chosen form applies for subsequent tax years until you notify the tax office of a change in taxation form within the statutory period.
2. A flat tax
- The tax rate is 19%, regardless of the income earned.
- Income from sole proprietorship is subject to taxation.
- Profits from sole proprietorship cannot be combined with income from other sources.
- The chosen form applies for subsequent tax years until you notify the tax office of a change in taxation form within the statutory period.
- It provides tax reliefs (to a lesser extent than within the scale).
3. A lump-sum tax
- It is a simplified form of taxation.
- Tax rates depend on the business profile of sole proprietorship (PKD code) and range from 2% to 17%.
- The tax base is the generated income, after taking into account applicable deductions.
- costs of obtaining income are not taken into account,
- There are restrictions on who can choose this form of taxation.
Social security contribution for sole proprietorship in Poland in 2024
Entrepreneurs running a sole proprietorship must pay social security contributions by the 20th day of each month for the previous month. There are the following schemes for paying ZUS contributions:
1. Relief for starting a business
- Available to entrepreneurs starting a sole proprietorship for the first time. Also available for those who restart it after at least 60 months of suspension.
- It is voluntary.
- You pay a health insurance contribution for the first 6 months after starting a sole proprietorship. During this period, there is no obligation to pay social security contributions.
2. Preferential ZUS contributions
- Available after the start-up relief period ends.
- It is voluntary.
- Involves reduced social security contribution rate (at least 30% of the minimum salary) for 24 months.
- The health insurance contribution remains unchanged.
3. Small ZUS+
- Concerns entrepreneur whose business income did not exceed 120 000 PLN for the previous calendar year. It applies to those who ran a sole proprietorship for at least 60 days in the previous year.
- Applies only to social security contributions, health insurance contribution is paid in full.
- Also available when using preferential ZUS rates.
- Effective for 36 months, within the following 60 months of conducting the business.
4. Full ZUS
- Applies to entrepreneurs who are not subject to relief.
- The contribution rate is 60% of the projected average monthly salary.
- Includes health and social security contributions.
The method of calculation and the amount of contributions depend on the stage of running a sole proprietorship. Another important factor is the minimum salary threshold. As of 2024, monthly social security contributions for entities not benefiting from relief will amount to 1600 PLN. This value does not involve health insurance contributions.
Health insurance contribution for sole proprietorship in Poland in 2024
The health insurance contribution for sole proprietorship must be paid, even with minimal profits or losses. It depends on the taxation method and the minimum salary. In 2024, the health insurance contribution will amount at least to 381.87 PLN per month.
It will amount to:
1. 9% of the contribution assessment basis (income) – in the tax scale
2. 4.9% of the contribution assessment basis (income) – in the flat tax,
3. in the lump sum – it will depend on the earnings threshold. After exceeding in a given month, the basis for calculation in the next month is the subsequent revenue threshold:
- Up to 60 000 PLN – 60% of the average monthly salary.
- 60 000 PLN – 300 000 PLN – an amount equal to the average monthly salary,
- Over 300 000 PLN – 180% of the average monthly salary.
Summary
Setting up a sole proprietorship begins with submitting an electronic form. The next step is choosing the form of taxation. Entrepreneurs must also pay ZUS contributions every month. Regular monitoring of changes is necessary for business success.
If you are interested in the above article and want to know more about the subject, we invite you to cooperate with us. Experts from our legal office in Łódź are eager to support you. Contact us today and let us help you. If you simply need help in establishing a family foundation, send us a message.
