In one of our recent articles, we answered the most frequently asked questions from entrepreneurs regarding a limited liability company.
The topic has not been exhausted, so as promised, today we address the second part of the questions faced by both shareholders and management board members of this type of company.
If, after reading the first part, you have not found a solution to your issue and still have doubts, we invite you to read the article below.
Can a limited liability company be a single-member company?
Yes, a limited liability company can have a sole shareholder. A single-member limited liability company is established in the same way as any other company of this type. However, one important restriction must be kept in mind.
Important! A single-member limited liability company can become the sole shareholder of another single-member limited liability company (e.g., after acquiring the shares of the remaining shareholders). However, it cannot itself incorporate such a company.
Can a limited liability company grant a loan to a shareholder or a management board member?
Yes, this is possible. A loan may be granted both by a limited liability company to a shareholder and by a shareholder to the company.
Attention! In the case of a loan agreement with a management board member, the approval of the shareholders’ meeting is required for such an agreement to be concluded. Additionally, the shareholders’ meeting must appoint an attorney to execute the agreement on behalf of the company with the management board member. We have dedicated one of our articles to the issue of this type of power of attorney.
Who bears liability in a limited liability company?
The company itself is responsible for its debts, and the personal assets of its shareholders are protected from its creditors.
To a certain extent, members of the management board may also be liable for the company’s debts. However, under certain conditions, they may be released from this liability. We encourage you to read our article, in which we discuss in detail the issue of management board members’ liability for the obligations of a limited liability company.
Similar liability to that of the management board members is also borne by the company’s liquidators. However, this does not apply to liquidators appointed by the court.
For obligations of a limited liability company in organization, liability is borne jointly and severally by the company itself and all persons who acted on its behalf during this period. The liability of these individuals ceases once the shareholders’ meeting approves, by resolution, the actions taken on behalf of the company in organization.
How to Distribute Profit to Shareholders of a Limited Liability Company?
The method of distributing profit to shareholders of a limited liability company is through dividends. However, the payment of dividends is contingent upon the company generating a profit in a given financial year. If the company has made a profit, the shareholders’ meeting approves the company’s annual financial statements and decides on the distribution of the generated profit.
Although dividends are paid once a year, shareholders do not have to wait that long, as the company may pay them an advance on the anticipated dividend.
What is the Right of Supervision Granted to a Shareholder of a Limited Liability Company?
The right of supervision means that every shareholder of a limited liability company may review the company’s books and documents at any time. They may also prepare a balance sheet for their own use and request explanations from the management board.
If a shareholder is denied explanations or access to documents or company books, they may submit a motion to the court to oblige the management board to perform these actions.
How Often Must a Shareholders’ Meeting Be Held in a Limited Liability Company?
Shareholders’ meetings in a limited liability company can be categorized as ordinary and extraordinary. The distinction lies in the matters discussed and the resolutions adopted during these meetings. Certain resolutions must be adopted at an ordinary shareholders’ meeting.
An ordinary shareholders’ meeting must be held at least once a year.
For an extraordinary shareholders’ meeting, however, there is no minimum or maximum required frequency. It may be convened as often as necessary to meet the needs of the company.
Limited Liability Company Limited Partnership – Who Represents a Limited Partnership?
It is common to encounter companies structured as limited liability company limited partnership (e.g., ABC limited liability company limited partnership). This type of entity is essentially a limited partnership, in which a limited liability company (LLC) acts as the general partner (komplementariusz).
A limited partnership is represented by its general partners. If the general partner is a limited liability company, then in practice, the limited partnership is represented by the individuals serving as management board members of the limited liability company.
Is a Limited Liability Company Required to Maintain Full Accounting Records?
Yes, every limited liability company is required to maintain full accounting records in accordance with the provisions of the Accounting Act. This legislation regulates, among other things, the rules for keeping accounting books and preparing financial statements.
Is a Limited Liability Company Required to File Financial Statements?
Yes, the Accounting Act requires all limited liability companies to submit annual financial statements. We encourage you to read our article, where we explain what a financial statement is and outline the procedure for its preparation, approval, and submission.
What Taxes Must a Limited Liability Company Pay?
Primarily, a limited liability company is subject to corporate income tax (CIT) on its generated profit. Additionally, any profit distributed to shareholders in the form of dividends is subject to personal income tax (PIT). This results in what is known as double taxation.
As a general rule, a limited liability company is also required to pay value-added tax (VAT).
Does a Limited Liability Company Pay Social Security Contributions (ZUS)?
Limited liability companies with two or more shareholders are not required to pay contributions to the Social Insurance Institution (ZUS). However, the situation differs in the case of a single-member company. The sole shareholder of such a company is treated as a person conducting non-agricultural economic activity and is subject to mandatory insurance contributions.
It is also important to note that a limited liability company must pay social security contributions if it employs its shareholders or management board members (e.g., under an employment contract).
Where Can a Limited Liability Company Be Verified?
All limited liability companies are subject to mandatory registration in the National Court Register (Krajowy Rejestr Sądowy, KRS). This register is public and allows verification of any registered entity, including limited liability companies. We encourage you to read our article, where we explain what the National Court Register is.
Is a Limited Liability Company Required to Conduct Business Activity?
No, a limited liability company may be established for any legally permissible purpose. This means that it may, for example, operate exclusively for charitable, scientific, or cultural activities.
How to Report a Change in Company Data to the National Court Register?
A change in the data of a limited liability company requires submitting an application to the National Court Register (KRS). Such an application is filed electronically via: The Court Register Portal (Portal Rejestrów Sądowych) – for companies incorporated through a notary, or the S24 system – for companies established electronically.
We invite you to read our article, where we provide a detailed explanation of the procedure for reporting changes to the National Court Register.
Summary
The efficient and trouble-free management of a limited liability company requires not only continuous expansion of knowledge but also support from experienced professionals.
We hope that the above answers clarify any doubts you may have regarding limited liability companies and help you avoid problems when setting up or running one.
However, if you still have questions or need assistance with another matter, we invite you to contact our team of lawyers.
