Limited partnership vs. limited liability company. - what are the main differences
Table of contents
A limited partnership and a limited liability company are two different forms of business that offer different opportunities and levels of liability for partners. A limited liability company provides greater security—partners are not liable for the company's debts with their private assets. In a limited partnership, on the other hand, the general partner bears full liability, while limited partners only risk up to the amount of their contributions.
The differences also apply to the establishment process: a limited liability company can be established online (if it is simple), while a limited partnership can only be established at a notary public. A limited liability company is better suited to more complex structures and projects requiring risk mitigation. A limited partnership may be more advantageous from a tax perspective, but requires greater caution in management. In this article, we discuss in detail how these companies differ and which one will be better for your business.
Setting up a company – professionally and without mistakes
We will prepare all the documents and guide you through the process of registering your company in the National Court Register step by step. Start your business without the risk of formal mistakes and delays.
Set up a company with our support →The main types of companies in Poland
A company can be run in Poland as a sole proprietorship and in the form of various companies.
Partnership
One form of business is a partnership. In it, two or more persons undertake activities for a specific purpose. Profits and losses in a civil partnership are divided among the partners in proportion to their shares.
Liability for the company's obligations is borne personally and jointly and severally by all partners. At the same time, this liability is not limited by the amount of the contribution. They are liable with all their assets.
Capital companies
Capital companies are characterized by the fact that their founders contribute to the share capital. They can do so in cash or in kind. Their liability for any failure is limited to the amount of their contributions.
The most common types of capital companies in Poland are the joint-stock company and the limited liability company. In a joint-stock company, shareholders are the holders of shares. In a limited liability company, these are shares.
Profits in limited liability companies are distributed to shareholders in proportion to their contributions.
Partnerships
Partnerships are a form of business for partners unwilling or unable to establish a corporation. In partnerships, profits and losses are shared among partners in proportion to their shares in the company. Liability for the obligations of such companies is not limited. The partners or part of them are liable with all their assets.
Such companies include: general partnerships, partnerships and limited partnerships.
Comparison of a limited partnership and a limited liability company
So what are the differences between limited partnerships and limited liability companies. We will describe it from different aspects.
Legal form and subjectivity of limited partnership and limited liability company.
Both a limited partnership and a limited liability company have legal entity.
A limited partnership is a partnership formed by two or more persons to conduct business. A limited liability company is a corporation. This is the main difference between the two legal forms.
Liability for debts
In the case of a limited liability company, its partners are not personally liable for debts. The company itself is responsible for them, but only up to the amount of the initial capital.
In a limited partnership, the issue of liability for debts is more complicated. The person who manages the partnership, i.e. the general partner, is liable for its debts to the full extent of his assets.
The general partner or general partners are in a better position, because there may be many of them. They are only liable up to the amount of their contribution.
Payments and contributions in limited partnerships and limited liability companies.
The general partner usually puts the largest amount of money or the largest contribution in kind into the company. The resulting company is like "his project" and his contribution is collateral. Limited partners put their money or stuff into the project to have a stake in the venture.
In a limited liability company, shareholders make their contribution in cash or in kind, and this makes up the share capital.
Management in companies
In a limited partnership, the general partner is in charge of management. In a limited liability company, a board of directors appointed by the owners is responsible for management. It can be one or more persons.
Distribution of profits and losses in a limited partnership and a limited liability company.
In a limited partnership, the distribution of profits is specified in the contract. Usually it is determined in proportion to the partnership's shares, but it can be divided differently. The general partner may have a fixed amount specified in the contract, but it can also be a percentage of profits.
In a limited liability company, the distribution of profits is also in accordance with the articles of association. It can be proportional to the shares in the share capital. Profit may also not be distributed only for investment.
Limited partnership vs. limited liability company. - incorporation process
In order to establish a limited partnership, it is necessary to have a notary before whom the shareholders must sign the partnership agreement. A limited partnership cannot be established online.
In the case of setting up a limited liability company. this can be done online if it is a simple company. In other cases, you need to go to a notary public and sign the partnership agreement there.
Further steps for both companies are virtually the same: registration with the National Court Register, payment of capital, obtaining NIP and REGON, reporting to the Social Security. And, of course, the necessary permits or licenses if the company will operate in such a regulated market.
Costs associated with running companies
The main external costs in setting up a company are paying for a notary and registration with the National Court Register. The cost of the notary will depend on the complexity of the partnership agreement. The cost of the KRS in both cases is 600 zlotys.
Every company must keep its accounts either by hiring its own accountant or by paying for accounting services at an outside firm.
In the case of a limited partnership, an additional cost is the annual audit. There is no such obligation in the case of a limited liability company.
Is it possible to convert a limited partnership and a limited liability company?
Conversion of a limited partnership into a limited liability company is possible under Polish law. Converting a limited liability company into a limited partnership is also possible. In both cases, it is a complicated process and requires consultation with a lawyer.
Which legal form is better for your business - a limited partnership or a limited liability company?
Both Ltd. and sp. k have their advantages, disadvantages and limitations. When setting up a company, it is worth thinking carefully about which legal form to choose. Changing it can be quite complicated and expensive.
Our experienced specialists can advise you on making the right choice. We can also help you with company registration in Warsaw or in another location. We can, after recognizing your needs, arrange all the formalities ourselves. The future entrepreneur will only need to be present when signing the documents.
We also offer ready-made limited liability companies. At sale of companies almost all formalities can be done remotely. It is only necessary to sign the documents at the notary, but we do not have to meet there at the same time.
Register a limited partnership with the help of Biznes Spot! By using our limited partnership registration and accounting outsourcing services for your company, you can be sure that this area will run smoothly and seamlessly.
