Growing revenue, the risk of being liable with all your assets, investment plans — these are typical reasons to turn a sole proprietorship into a company. We show you how the conversion works.
A sole proprietorship (JDG) is simple at the start, but as the business grows it begins to pinch: the entrepreneur is liable for the business's debts with all their private assets, the health insurance contribution rises with income, and bringing in a partner or investor is practically impossible. That is when it is worth considering a limited liability company (sp. z o.o.).
Conversion or a new company?
There are two routes. Conversion (under the Commercial Companies Code, KSH) means that the company by operation of law takes over all the rights and obligations of the entrepreneur — contracts, concessions, permits, accounts. Setting up a new company and transferring the business to it is quicker, but some contracts and permits have to be transferred separately. The choice depends on how many contracts and licences the business holds.
Conversion step by step
- A conversion plan with a valuation of the business's assets and financial statements prepared as at a day in the month preceding the preparation of the plan.
- Examination of the plan by a statutory auditor.
- A conversion declaration and the company's articles of association in the form of a notarial deed.
- Application to the KRS (National Court Register) — the conversion date is the date the company is entered in the register.
- After registration: filing with the CRBR (Central Register of Beneficial Owners), updating details with the bank, with business partners and in KSeF (the National e-Invoicing System).
What to remember about taxes
Moving from the revenue and expense ledger (KPiR) to full accounting requires closing the books of the JDG and opening the company's books, and the stocktake and fixed asset settlement must be prepared in advance. It is also worth checking straight away whether Estonian CIT would pay off for the company.
We help you through the whole process — from choosing the legal form, through working with the notary and the auditor, to the company's first months of accounting.
