One of the reasons foreigners visit Polish lawyers is that they want to establish businesses here. And in most cases, there is no better form for such a venture than a spółka z ograniczoną odpowiedzialnością.
We usually translate this as a limited liability company (LLC). However, we must be aware that this particular legal structure may work a bit differently in other countries (in fact, it does). So, don’t you think it would be useful to be able to explain to our foreign clients how things work here in Poland?
For this text I drew on the article available here: https://www.wolterskluwer.com/en/expert-insights/how-to-form-an-llc-what-is-an-llc-advantages-disadvantages-and-more as a source of information about LLCs in the US. But the article you are reading now is about the Polish state of the law.
Moreover, I’m sneaking in a few English equivalents of Polish lawyers’ favourite saying: co do zasady — and I’m curious how many you will spot. So, let’s get the ball rolling!
What is an LLC?
A limited liability company (LLC) is a business structure that offers limited liability protection, because owners cannot typically be held personally responsible for the LLC’s debts and liabilities. The LLC exists as a legal entity separate from its owners.
Benefits of forming an LLC
The benefits of creating an LLC — as opposed to operating your business as a sole proprietorship, general partnership, or corporation — typically outweigh any perceived disadvantages.
1. Creditors cannot pursue the personal assets (house, savings accounts, etc.) of the owners to cover the debts of the LLC. With a sole proprietorship or general partnership, the personal assets of the owners can be pursued for the business’s debts. In principle, that is not the case with LLCs.
2. LLC members can be individuals, partnerships, trusts, or corporations, and there is no limit on the number of members. The owners also tend to run their LLC on their own.
3. In the US, as a general rule, starting an LLC may help a new business establish heightened credibility, more than if the business is operated as a sole proprietorship. However, I’m not fully convinced this applies in Poland — some of my clients have struggled to obtain bank financing for their new LLCs. What do you think?
Disadvantages of forming an LLC
There are a few disadvantages to creating an LLC, but generally the advantages outweigh the drawbacks.
1. An LLC usually costs more to form and maintain than a sole proprietorship or general partnership. The State charges an initial formation fee, and accounting services are more expensive for LLCs than for sole proprietors.
2. Typically, with LLCs, all members must approve adding new members or altering the ownership percentages of existing members. Generally, this is done in the form of a resolution.
3. LLCs in Poland are taxed as corporations, which is why pass-through taxation is not an option. Keep this in mind when talking to foreign clients — for example, in the US there are situations in which an LLC may avoid double taxation, and clients may expect the same here.
Would you like to add something?
Meanwhile, back at the ranch — how many different versions of co do zasady did you find? I counted five, and here they are: to tend to, typically, generally, as a general rule, in principle. But remember: I’m a Polish lawyer. That means I can slip co do zasady into a text without even noticing — it’s stronger than me.
Now, we should probably practice these new – and you must admit, absolutely necessary – expressions.
Here are five sentences for you to translate into English. They all relate to LLCs and they all include a version of co do zasady. Try to use all available alternatives. I provided the key, but you go first! Once you’re satisfied with your version, check mine — and don’t cheat, I’ll know!
1. Co do zasady, właściciel spółki z ograniczoną odpowiedzialnością nie są odpowiedzialni za jej długi.
2. Co do zasady, spółka z ograniczoną odpowiedzialnością jest najlepszą opcją dla obcokrajowców chcących założyć biznes w Polsce.
3. W Polsce właściciele co do zasady prowadzą spółkę sami i nie zatrudniają zawodowych menadżerów.
4. W USA Spółka z ograniczoną odpowiedzialnością zapewnia co do zasady większą wiarygodność.
5. Co o zasady przeniesienie prawa własności spółki z o.o. wymaga uchwały wszystkich wspólników.
Key
Each of the following sentences is just one of possible options. If your version differs, that is probably not the end of the world.
1. In principle, owners of an LLC are not liable for its debts.
2. Generally, an LLC is the best option for foreigners to establish their business in Poland.
3. The owners typically run the LLC on their own rather than hire a professional manager.
4. In the US, an LLC tends to provide heightened credibility.
5. As a general rule, transfer of ownership in an LLC requires a resolution of all owners.
