Foreign entrepreneurs looking to expand their operations beyond their country, including Poland, face the question of whether to establish a branch or a new company.
Key differences between a company branch and a separate company (LLC) in Poland
The main difference between a branch and a newly established company lies in their legal forms. A branch is not a separate legal entity; all rights and obligations are attributed to the main company. This means that the branch is not liable for its own activities; the full liability lies with the parent company.
On the other hand, a new LLC company, called "spółka z ograniczoną odpowiedzialnością" (sp. z o.o.), is a separate legal entity that acquires rights and assumes obligations in its own name and is responsible for its own activities. The entire responsibility lies with the company, specifically with its management board members according to the provisions of the Commercial Companies Code.
Nuances related to a branch
- A branch is not a separate legal entity. It is a division of the parent company, and the parent company is responsible for all its activities, obligations and liabilities.
- The profits generated by the branch are subject to taxation in Poland. The branch is not a VAT payer; it is the responsibility of the parent company.
- The branch must maintain accounting records according to Polish laws, in the Polish language.
- The registration of a branch takes 2-6 weeks. This is the usual timeframe, but it cannot be guaranteed as it depends on the workload of the National Court Register (KRS).
- A branch can engage in activities no broader than those of the parent company (the articles of association of the newly established company can include any codes of activities).
- A person responsible for the branch in Poland (representative of the foreign company) is required. This person must have a contact address in Poland.
- The name of the branch is the name of the parent company + "oddział w Polsce" (branch in Poland).
- The parent company must inform Polish authorities about any legal and factual changes related to bankruptcy or loss of the right to conduct business activities, according to the provisions of the Commercial Companies Code.
What else should you know before making a decision whether to open a branch or new company
A branch does not have its own separate capital. The minimum share capital of a sp. z o.o. company is 5000 Polish zlotys.
Regarding employees, it is not necessary to employ any workers in the company, as a Polish company requires at least one person appointed to the management board. This person does not necessarily need to receive remuneration for their function, but it is recommended. A representative must be appointed for the branch, but remuneration is not necessary.
The branch's financial reporting must be prepared according to Polish laws. The branch's report must be attached to the parent company's report, and the consolidated report must comply with the laws of the parent company's country. In any case, whether conducting activities through a branch or a newly established company, the representative must submit financial statements to the National Court Register according to Polish laws. It is important to monitor the relevant deadlines.
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