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How to transform a sole proprietorship into a company?
With the advent of the Polish Deal program and the changes in financial law that follow, more and more entrepreneurs are noticing more and more challenges for their businesses. One of these difficult choices is the nature of the business and whether we can change it to another, and more importantly whether it will be profitable for us, or maybe it is worth considering a virtual mailing address or a virtual office. In the following article, we will try to explain a bit how to transform a sole proprietorship into a company.
Let's start with the definition itself, borrowed from the government website:
"Transformation involves a smooth change of the legal form of a current business activity without the need to liquidate that activity. Entrepreneurs most often decide to transform for financial reasons, for example to optimize their business activity."The transformation itself may allow us to: increase capital, change the scope of responsibility, reduce operating costs and improve the decision-making process, attract an investor, reduce tax burdens, or even introduce the company to the stock exchange.
Unfortunately, there is no rose without thorns, and this means that we can make a transformation under certain conditions. Because an entrepreneur who is a natural person and conducts business activity on his own behalf, can transform the form of business into a single-member capital company, i.e. a single-member joint-stock company or a single-member limited liability company. It is also worth remembering the so-called continuity principle, which means three things. Firstly, the partners of the company being transformed will become partners of the transformed company on the day of transformation. Secondly, the same rights and obligations remain. Thirdly, the new company remains the subject of permits, concessions and reliefs that were granted to the company before the transformation, unless the law provides otherwise at a given time.
We can perform the transformation according to the proposed order:
1. We prepare a transformation plan with attachments - primarily: a draft resolution on the transformation of the company, a draft agreement or company statute, valuation of the assets of the company being transformed.
2. We submit the transformation plan to the National Court Register.
3. We request the appointment of an expert to examine our transformation plan.
4. We shall notify the company's shareholders twice about the transformation: the first notification - no later than one month before the planned date of adopting the resolution, the second - no later than two weeks after the date of the first notification.
5. We inform employees about the change in the form of business at least 30 days before the transformation.
6. We adopt a resolution on the transformation of the company.
7. We submit an application to the National Court Register for registration of the company transformation.
8. We register the transformed company in the National Court Register.
We must remember that our liability for the company's obligations will be limited and all concluded agreements, granted permits and concessions, as well as reliefs remain valid. We will continue to retain all previous rights and obligations, and with the new NIP and REGON, we will have to pay PCC tax on the company agreement in the amount of 0.5% of the share capital value. Going further, our transformation does not result in the creation of taxable income, and the scope of social insurance where we, as a partner of a single-member limited liability company who is a natural person, will be treated as a person running a sole proprietorship! We will also have to keep accounting records, pay CIT or PIT.
Transforming a sole proprietorship into a company is a complex process that requires analyzing each case individually. However, the effort put into making the change seems to be worth the effort with the upcoming changes. It is worth considering whether the costs incurred are necessary for us and it may be better to find a virtual office service that maintains a virtual correspondence address for companies, a virtual assistant will provide information about incoming correspondence. Thanks to this, some of the duties will be delegated and the costs will be significantly reduced.
Virtual office Krakow offers a mailing address in Krakow, a company registration address, a mailing address for your company https://wb.krakow.pl/_s/
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