When the operation of a sole trade is increasingly profitable and more business risks arise, the decision to convert the sole trade into a limited liability company (most often a limited liability company) should be considered.
The main benefits of the transformation are:
- limiting liability for the company’s obligations with the entrepreneur’s personal assets,
- limitation of the risk of the business only to the amount of the contribution made,
- ease of selling the company or its inheritance,
- the possibility of attracting an investor.
The conversion process itself involves changing the legal form of an existing business without liquidating that business. It is a complex process that requires the entrepreneur to plan the various steps, such as:
- preparation of the entrepreneur’s transformation plan with attachments, followed by its verification by a certified auditor,
- preparation of the entrepreneur’s transformation statement,
- conclusion of the company contract and appointment of members of the transformed company’s bodies,
- registration of the transformed company in the National Court Register,
- deletion of the transformed sole trade from CEIDG (register of sole trade).
When deciding to convert a sole trade into a limited liability company, the following points should be kept in mind:
- running a limited liability company is more formalized and requires more money (e.g., full accounting costs are higher);
- the company’s income is taxed twice, once at the level of the company (CIT) and a second time, when dividends are paid to the shareholder (PIT);
- the transformed company receives a new NIP and REGON number;
- the transformed company remains the subject of permits, licenses and concessions that were granted to the entrepreneur before its transformation, unless the law or the decision to grant the permit, license or concession provides otherwise.
Deciding to convert a sole trade into a limited liability company requires legal and tax knowledge.
SKLAW conducts a benefit analysis, compares the advantages and disadvantages of sole trade and limited liability company in order to optimize the business and based on the business model and planned business ventures.
SKLAW supports clients in carrying out the process of transforming a sole trade into a limited liability company from conducting the analysis to registering the new entity in the National Court Register and deleting the entrepreneur from the CEiDG.