A limited liability company (spółka z ograniczoną odpowiedzialnością, sp. z o.o.) is one of the most frequently chosen forms of doing business in Poland, particularly among entrepreneurs seeking to limit personal liability and develop their business within a well-structured legal framework. In this article, we outline what to pay attention to when establishing a sp. z o.o. and discuss the accounting implications of choosing this legal form for running a business in Poland.
The Obligation to Keep Full Accounting Records – Where to Start?
From the moment it is registered with the National Court Register (Krajowy Rejestr Sądowy), a limited liability company is subject to the provisions of the Polish Accounting Act. This means that the company is required to keep full accounting records, regardless of the scale of its operations or the level of revenue generated.
Already at the organisational stage, it is essential to prepare a chart of accounts and define the accounting policies that will apply within the company. The absence of these elements makes it difficult to correctly record accounting documents and to prepare the opening balance sheet.
Opening Balance Sheet – Key Points to Consider
The opening balance sheet is of fundamental importance, as it reflects the company’s financial position as at the commencement of its operations.
In practice, particular attention should be paid to the correct recognition of the share capital and the contributions made by the shareholders.
Cash contributions must be supported by evidence of funds being credited to the company’s bank account, while contributions in kind should be valued in a reliable manner and properly documented. An incorrect valuation of a non-cash contribution may result in consequences not only for the balance sheet, but also for tax purposes, in particular with regard to depreciation.
Share Capital of a Limited Liability Company – Requirements, Structure and Accounting Records
The minimum share capital of a limited liability company (sp. z o.o.) amounts to PLN 5,000; however, in practice, companies are often established with a higher initial capital. From an accounting perspective, it is essential that the capital structure is consistent with the company’s articles of association and its entry in the National Court Register (Krajowy Rejestr Sądowy). Any change to the share capital, regardless of its scale, must be properly recorded in the accounting books and reflected consistently across corporate documentation and accounting records.
Share capital may be covered by both cash contributions and non-cash contributions in the form of contributions in kind. In the case of contributions in kind, particular importance is attached to the correct determination of their value and the scope of rights transferred to the company, which should be clearly reflected in the articles of association. Tangible and intangible contributions in kind have a direct impact on the structure of the company’s assets as presented in the opening balance sheet, and their incorrect valuation may lead to a distortion of the company’s financial data.
Examples of Share Capital Accounting in a Limited Liability Company
With the minimum share capital of PLN 5,000, a shareholder may subscribe for shares by making a contribution in kind in the form of computer equipment with a market value of PLN 5,000. This equipment is recorded in the accounting books as a fixed asset or as equipment, depending on its nature and the expected period of use, and its value forms the basis for depreciation charges.
Where the share capital is higher, for example PLN 50,000, a contribution in kind in the form of a vehicle with a value of PLN 40,000 may constitute part of the share capital, while the remaining amount may be contributed in cash.
Accounting and Corporate Tax Obligations – CIT and VAT
Corporate Income Tax (CIT) in a Limited Liability Company
As a legal entity, a limited liability company (sp. z o.o.) is subject to corporate income tax (CIT). The accounting system must allow for the correct determination of the tax base through reliable recording of revenues and tax-deductible costs. For newly established companies or small taxpayers, it may be possible to apply a reduced CIT rate of nine percent; however, this requires ongoing monitoring of statutory thresholds and compliance with the applicable legal conditions. In practice, this means the need for continuous analysis of financial data, rather than merely periodic tax settlements.
Value Added Tax (VAT) in a Limited Liability Company
Many limited liability companies become active VAT taxpayers at an early stage of their operations. Maintaining VAT records requires a high level of diligence, particularly with regard to the timely issuance of invoices, the correct settlement of input VAT, and the submission of VAT returns. Errors in this area are among the most common reasons for tax audits; therefore, it is advisable to implement clear document circulation procedures from the very beginning.
Accounting and Payroll Obligations When Employing Staff
Employing employees or cooperating with individuals under civil law contracts gives rise to additional accounting and tax obligations. In such cases, the company acts as a withholding agent for personal income tax (PIT) and social security contributions. Each payroll list must be prepared correctly, and liabilities towards the tax office and the Social Insurance Institution (ZUS) must be settled on time. In practice, particular attention is also required when settling the remuneration of management board members, which is often based on various legal titles.
Financial Statements – How to Prepare and File Them in Compliance with Regulations
At the end of each financial year, a limited liability company (sp. z o.o.) is required to prepare its financial statements. This process involves the prior closing of the accounting books, reconciliation of balances, and verification of the accuracy of accounting entries.
The financial statements must be prepared in accordance with the applicable regulations, approved by the shareholders’ meeting, and filed with the National Court Register (Krajowy Rejestr Sądowy) within the statutory deadline. Failure to comply with these obligations may result in liability of the management board members and financial penalties. This issue has been addressed in more detail in a separate publication: What Are the Consequences of Not Approving Financial Statements?
In-House Accounting or Outsourcing? How to Choose the Best Solution for Your Company
From a practical accounting perspective, one of the key decisions is the choice of how accounting services will be organised.
Some companies decide to employ an in-house accountant in order to ensure ongoing access to financial data and greater control over documentation. Others choose to outsource their accounting to specialised accounting firms. A professional accounting firm offering comprehensive services and advice from experienced specialists may prove to be the optimal solution and a valuable business partner for the company’s management board.
Regardless of the solution chosen, it is essential to ensure high-quality accounting records and continuous cooperation between the management board and those responsible for the company’s finances.
Summary
Establishing a limited liability company requires a well-considered approach to accounting matters already at the organisational stage. Proper maintenance of accounting books, reliable tax records, and timely fulfilment of reporting obligations form the foundation for the company’s secure and compliant operation. Experience shows that the earlier a company implements appropriate accounting procedures, the lower the risk of issues arising in the course of its further business activity.
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