Guide · Starting a business
Updated: · 8 min read · By Agnieszka Saladra, Certified Accountant
Choosing between a sole proprietorship and a limited liability company is one of the more important decisions when starting a business. Each form has different rules on liability, taxation and accounting obligations. In this guide we compare both options for 2026 so that you can make an informed choice of a model matched to the scale of your business.
In short
A sole proprietorship (JDG) and a limited liability company are two completely different legal constructs. In a JDG, you and your firm are legally one - you operate under your own first and last name. A limited liability company is a separate entity (a legal person) with its own assets, NIP (tax identification number) and liability.
This difference carries over into everything: from what you risk if problems arise, through the method of taxation, to the cost and scope of accounting. Below we discuss each of these areas separately.
Sole proprietorship vs. limited liability company - a comparison
| Feature | Sole proprietorship (JDG) | Limited liability company (sp. z o.o.) |
|---|---|---|
| Liability for obligations | With all private assets | In principle only the company's assets; the management board is liable in exceptional cases (Article 299 of the Commercial Companies Code) |
| Income tax | PIT once: tax scale (12%/32%), flat 19% or lump-sum tax | CIT 9% (small taxpayer and current-year revenue up to EUR 2 million) or 19%; or Estonian CIT |
| ZUS contributions | Always mandatory | Multi-member usually without ZUS; single-member - full ZUS |
| Double taxation | None - you pay tax once | Yes: CIT, and on profit distribution an additional 19% on the dividend |
| Accounting | Simplified - KPiR ledger or lump-sum tax records | Always full accounting books and financial statements |
| Cost and method of setting up | Free at CEIDG, also online; right away | Notarial deed or the S24 system; court fees and PCC (tax on civil-law transactions) |
| ZUS on profit | Contributions independent of profit - you pay even at a loss | Dividend distribution is not subject to ZUS contributions |
This is often the main argument in favour of a company. In a JDG you are liable for the firm's obligations with all of your private assets - savings, your car, and in extreme situations even your home. If you run a high-risk business (large contracts, goods bought on trade credit, liability towards clients), this is a real threat.
In a limited liability company the shareholders in principle are not liable for the company's debts with their own assets - the risk is limited to the capital contributed. You do, however, need to remember the exceptions: members of the management board may be personally liable if they fail to file a timely bankruptcy petition for an insolvent company (Article 299 of the Commercial Companies Code). The company form alone therefore does not relieve you from responsible management.
In a JDG you pay income tax only once and choose one of three forms:
A limited liability company works differently, and here double taxation appears. First the company pays CIT: 19%, or 9% on revenue other than from capital gains. The 9% rate requires two conditions to be met at the same time - small taxpayer status, that is, sales revenue including VAT for the previous year of up to the equivalent of EUR 2 million (PLN 8,517,000 in 2026), and current-year revenue not exceeding the equivalent of EUR 2 million (PLN 8,431,000 in 2026); once that second limit is exceeded, the company goes back to 19% in the same year. Then, when you want to distribute the profit as a dividend, a 19% tax on the dividend is added. In practice the combined burden on distributed profit is higher than the CIT alone.
Estonian CIT is a solution that defers tax until the moment profit is distributed from the company. As long as the profit stays in the firm and is reinvested, you do not pay CIT. The rate is 10% for a small taxpayer or an entity starting activity and 20% for the rest, and a mechanism that deducts part of the CIT from the shareholder's tax lowers the combined effective burden on a distribution. Deferring tax matters above all for companies that invest in growth. We covered the details in a separate guide on Estonian CIT.
In a JDG, ZUS contributions are mandatory and independent of whether the firm earns anything. On top of this comes the health contribution, the amount of which depends on the form of taxation. In 2026 the minimum health contribution on the tax scale and flat tax is PLN 432.54 per month, while on the lump-sum tax it is a flat amount in three brackets: PLN 498.35, PLN 830.58 and PLN 1,495.04 - depending on annual revenue.
In a limited liability company the situation depends on the number of shareholders:
For years ZUS treated a dominant shareholder in a two-member limited liability company (holding, for example, 99% of the shares) like the shareholder of a single-member company and demanded contributions from them. In its resolution of 21 February 2024 (III UZP 8/23) the Supreme Court settled that such a shareholder is not subject to social insurance under Article 6(1)(5) in conjunction with Article 8(6)(4) of the Social Insurance System Act. If ZUS has questioned your insurance title, we will review the state of the case together with an accountant.
A JDG may keep simplified accounting - the Tax Revenue and Expense Ledger (KPiR) or revenue records under the lump-sum tax. This is a simpler and cheaper solution. A limited liability company always keeps full accounting books, prepares financial statements and is subject to more extensive reporting.
The difference is also visible in service costs. At Luno-Group, accounting for a JDG starts from PLN 99 net per month as a starting rate (from PLN 240 as standard), and full accounting for a company from PLN 750 net per month - the rate depends on the number of documents and the scope of the service, and the full ranges are given in our price list. That is why efficient online accounting matters even more in a company than in a JDG.
At Luno-Group we handle both forms. An experienced accountant looks after every firm, and we keep all documents in an online accounting model, so you have constant insight into your finances and waste no time on commuting.
There is no single income threshold above which a company always wins - the result depends on the form of taxation, the level of costs, investment plans and how you want to take out money. It is, however, possible to point to signals that it is worth calculating the cost-effectiveness of a company:
On the other hand, if you are just starting out, have irregular revenue and value simplicity, bear in mind that a JDG means simplified accounting and lower service costs. The switch to a company can be made later - including by converting a JDG into a limited liability company, which preserves the continuity of the firm. It is best to precede the decision with an individual calculation, performed by an experienced accountant.
In principle yes - a shareholder is not liable for the company's debts with their own assets. An exception is the liability of management board members, among others when they fail to file a timely bankruptcy petition for an insolvent company. The form alone therefore does not relieve you from responsible management.
The classic model is CIT (9% or 19%) plus 19% on the dividend when profit is distributed. You can, however, choose Estonian CIT, which defers tax until distribution and allows part of the CIT to be deducted from the shareholder's tax. The choice depends on the company's plans.
In a multi-member limited liability company a shareholder usually does not pay ZUS for holding shares. A single-member limited liability company, however, is a title to ZUS - the sole shareholder pays full contributions, similarly to a person running a business.
Yes. A limited liability company always keeps full accounting books and prepares financial statements - regardless of scale. A JDG may use simplified accounting, that is, the KPiR ledger or revenue records under the lump-sum tax, which is simpler and cheaper.
There is no single universal threshold. The result depends on whether the benefit from no ZUS or from Estonian CIT outweighs the higher service costs of a company. It is best to commission an individual calculation from an accountant.
Yes. A JDG can be converted into a limited liability company while preserving the continuity of the firm, its NIP and its contracts and permits. There is then no need to set up a new company and transfer the business. It is worth carrying out the process with an accounting office.