Sp. z o.o. or sole proprietorship (JDG) in Poland: which to choose

A sp. z o.o. separates the business’s assets from your private ones, but it costs more, requires full accounting, and paying out profit is taxed twice. A JDG (jednoosobowa działalność gospodarcza), the Polish sole proprietorship, is cheaper and simpler, but the owner is liable for the business’s debts with all their assets. So a sp. z o.o. makes sense above all when the risk is high, partners come on board or profits stay in the business, and a JDG when you start alone and with low risk.

The choice depends on the industry, scale and plans, so there is no single right answer for everyone. We show you the differences, figures and typical situations, and the decision is yours. For clarity: VKANCELARIA does not register sole proprietorships. We handle sp. z o.o. registration and ready-made companies, and describe the JDG here as the form worth comparing a company with.

Sp. z o.o. versus sole proprietorship: the key differences

Liability for debts: the main reason to choose a company

In a JDG, the business and you are the same person. If a customer wins a dispute over faulty goods and the business has no money, the creditor can enforce against your private assets. That includes savings, a car or a flat.

A sp. z o.o. is liable for its own debts, and the shareholders are not liable for them (art. 151 § 4 KSH, in Polish). As a rule, you lose what you contributed to the company. That does not mean there is no risk at all, though. The management board is liable: if enforcement against the company proves ineffective, board members are jointly liable for its obligations unless they show one of the grounds in art. 299 § 2 KSH, for example that a bankruptcy petition was filed in good time. Similar rules apply to tax arrears (art. 116 of the Tax Ordinance, in Polish).

In a small business the owner is usually also the president, so the company does not take all the liability off them. It does, however, make a significant difference when the business is healthy, a problem appears suddenly and the board reacts in time. Banks and business partners also often demand a personal guarantee, and then you are liable under that guarantee whatever the form of the business.

Taxes: sp. z o.o. or sole proprietorship

A JDG pays PIT once. The owner chooses the tax scale of 12% and 32% with a PLN 120,000 threshold, flat-rate 19% tax or a lump-sum tax on revenue. A company pays CIT on its income: 9% when it is a small taxpayer or in its first year of business and its revenue in the year does not exceed the equivalent of EUR 2,000,000, and 19% otherwise (art. 19(1)(2) of the CIT Act, in Polish). When a shareholder takes the profit as a dividend, they pay a further 19% PIT (art. 30a(1)(4) of the PIT Act, in Polish).

Here is a simplified example for PLN 200,000 of annual income, assuming all the profit goes to the owner.

The conclusion is simple. If the owner wants to pay out all the profit, the company in this example pays noticeably more. If the profit stays in the business and is invested, the tax at that stage is PLN 18,000 instead of PLN 36,400. The difference shifts to the moment of payout. There are also other ways of paying the owner, such as a board salary, so calculate the real result with an accountant using your own figures.

The 9% rate also has a restriction for people moving an existing business. A company formed by transforming a JDG cannot apply it in the year it starts operating and the following year, and the same applies when a business or assets worth more than the equivalent of EUR 10,000 are contributed to a new company (art. 19(1a) of the CIT Act).

ZUS in a sp. z o.o. and in a sole proprietorship

Here the difference depends on the number of shareholders. The company itself does not pay ZUS for its shareholders, but a sole shareholder is treated like a person running a business (art. 8(6)(4) of the Social Insurance System Act, in Polish). They pay on a base of PLN 5,652, which in 2026 means PLN 1,788.29 of social security contributions without sickness insurance and PLN 830.58 of health contribution, PLN 2,618.87 per month in total. There is no start-up relief, preferential base or Small ZUS Plus for them, because these apply to people running a business as entrepreneurs (art. 18a and 18c of that Act).

A JDG has reliefs at the start. For 6 months you can use the start-up relief and pay only the health contribution. Then for 24 months you can pay social security contributions on a base of PLN 1,441.80, which is 30% of the minimum wage. Later, with low revenue, you can switch to Small ZUS Plus. Full social security contributions without sickness insurance are the same as for a sole shareholder, but the health contribution depends on income or revenue rather than being fixed.

With two shareholders, holding shares in the company does not in itself give rise to ZUS contributions, even when one of them has a large majority. We describe the details, including the latest Supreme Court rulings, in our article on contributions in a single-member sp. z o.o.

Accounting and formalities

A sp. z o.o. always keeps full accounting records, even when it has no invoices at all (art. 2(1)(1) of the Accounting Act, in Polish). Every year it prepares financial statements, approves them and files them with the KRS. Every change of board, address or shareholders means paperwork, and often an application to the court with a fee of PLN 200 on the S24 resolution template or PLN 250 outside S24. A JDG records its revenue and costs in a simpler ledger or records, and only keeps full accounts once its revenue reaches the equivalent of EUR 2,500,000 a year (art. 2(1)(2)).

This is reflected in the accounting firm’s price. At VKSIĘGOWOŚĆ, the accounting firm of our group, simplified accounting with 1–10 documents a month costs PLN 250 net, and full accounting for a company PLN 500 net. The scope and other rates are on our company accounting page. It is also worth remembering that the company’s money is not the shareholder’s money. In a JDG you can take funds whenever you like, while in a company you need a legal basis, such as a dividend after the results are approved, or a salary.

When a sole proprietorship, and when a sp. z o.o.

These descriptions are not a rule, but they help frame your conversation with an accountant. A JDG is usually enough when you work alone, do not take on large obligations and want to test an idea at low cost. It is a common choice for services provided to a few regular clients.

A sp. z o.o. is worth considering in the following situations.

• You run a business with higher risk, for example large contracts, services with liability for damage, or employing people.
• You are setting up a business with someone else. The company clearly sets out shares, votes, profit sharing and how a shareholder exits.
• You want to keep profit in the business rather than pay it out as you go.
• You plan to sell the business or bring in an investor. Shares can be sold, and the business then gets a new owner without changing the entity itself.
• You run the business with a second shareholder. Holding shares in such a company does not in itself give rise to ZUS contributions, although each of you may have a different basis for insurance.

Remember the entry cost. Besides the PLN 274 of fees, the share capital is at least PLN 5,000. It is not a fee, because the money belongs to the company and it can use it, but you need to have it. We break down the details in our article on the cost of registering a company.

Can you start with a sole proprietorship and move to a company

Yes, and there are three ways to do it. You can transform the JDG into a company (art. 551 § 5 KSH). It is a process with a transformation plan and a notarial deed, and the former entrepreneur remains jointly liable with the company for the business’s earlier debts for three years (art. 584¹³ KSH). You can also set up a new company and simply start selling through it, but then the contracts, numbers and registrations are new. The third way is to buy a ready-made company that is already entered in the KRS, has EU VAT and has not traded. We describe how to set up a company from scratch in how to register a company in Poland.