28.06.2021 Company law

Limited liability company vs. branch of a foreign company – business in Poland by foreigners

Foreign businesses entering the Polish market face a dilemma over which legal form of running a business to choose. In practice, they most often decide to set up a limited liability company or a branch.

Branch vs sp. z o.o. – legal form and liability

A legal form is the basic feature that distinguishes a limited liability company from a branch of a foreign business.

Unlike a limited liability company, a branch has no legal personality (it is an unicorporated body). It is a separate and organisationally independent part of the economic activity conducted by the business outside its seat. It is of great practical importance, because that is why the branch has neither legal capacity nor capacity for legal acts. 

The branch operates only as part of a foreign business, and all rights and obligations acquired in connection with the business activity conducted by the branch become, in fact, the rights and obligations of a foreign business. The main consequence of the lack of legal personality is the branch’s lack of liability for its activities. The full liability for its activities is borne by a foreign business.

In a limited liability company, in turn, the entire liability is borne by the company and, in accordance with certain provisions of the Commercial Companies Code, members of its governing bodies.

The liability of the shareholders of a limited liability company is excluded (except for activities performed during the formation of the company). If a foreign business intends to limit liability to assets within one entity (or state), it rather decides to establish a limited liability company. In this case, a foreign business creates a new legal entity separate from the foreign business, having a legal personality, and thus legal capacity and capacity for legal acts.

A limited liability company must have a minimum share capital of PLN 5,000 and its operations are subject to numerous Polish regulations, including in particular the Accounting Act, the Commercial Companies Code, bankruptcy law and restructuring law. These regulations not only regulate in detail the rules of conducting business by the company, but also aim to control the financial condition and ensure the safety of business transactions. Therefore, they impose numerous restrictions on the company and, after meeting certain conditions, they constitute the obligation to file a bankruptcy petition or initiate restructuring proceedings, to convene a meeting of shareholders in order to adopt a resolution on the company’s continued existence, or a prohibition to return to shareholders capital contributions they made to the company or statutory restrictions on dividend payments, including advances on dividends.

Financial and tax issues

In terms of taxation, the branch of a foreign business does not differ much from a limited liability company

Both entities are required to pay corporate income tax (CIT) and tax on income generated in the territory of Poland. Both the company and the branch are VAT payers. While separate accounting is kept for a branch of a foreign business, due to the fact that the branch does not have its own capital, its finances are recognized in the annual financial statements of the foreign business.

A foreign business is free to decide on the financial condition of a branch and the provisions protecting the security of economic transactions referred to above do not apply to a branch. This means that the branch may incur losses, and the foreign business will not be required to undertake any activities that would be required of a limited liability company.

Branch vs. sp. z o.o. – representation

As indicated above, there are bodies in a limited liability company with specific competences. These include the meeting of shareholders – a body composed of all shareholders which decides on the most important aspects of the company’s operations, the management board – a body authorized to represent and manage the company’s affairs, and, optionally, a supervisory board or an audit committee – a body that performs control activities in the company.

Unlike a limited liability company, a branch of a foreign business does not have separate formal governing bodies. The affairs of a branch are carried out by the governing bodies of the foreign business competent to represent and manage its affairs or – what is the most common practice – a representative appointed by this body: a branch manager.

See also: Companies in Poland – support in buying or selling


A business entity that decides to operate in the form of a branch is also significantly limited in terms of the objects of economic activity conducted in Poland. Its scope cannot go beyond the scope of the foreign business’ activity. It can only be the same or narrower. In the case of a limited liability company, the company’s objects may be chosen freely and do not have to be related to the activity of a foreign business at all.

Considerations when choosing a name

The name of a limited liability company may, in principle, be chosen freely, and the name of a branch must be the same as the name of a foreign business.

Each change of name by a foreign business results in an automatic change of the name of the branch, which means that the court’s decision to enter the new name of the branch in the business register of the National Court Register will be declaratory and the branch should use the current name of the main business even before the entry. The name of the branch must obligatorily include its legal form in Polish i.e. “oddział w Polsce”. The change of name of a limited liability company takes place when the new name is entered in the National Court Register (what requires an amendment to its articles of association before a notary). The name of a limited liability company must contain words “limited liability company” in Polish, with the possibility of using abbreviations: “sp. z o.o. ” or “spółka z o.o.”

How long does it take to register a limited liability company and a branch?

The time of registration and the moment of starting business activity work to the advantage of a limited liability company. A limited liability company may start running a business after the execution of the articles of association and before registration in the National Court Register as a company under organization, and the registration of the company in the fastest, electronic form, usually takes about 3 days.

Moreover, it is possible to buy a limited liability company that is ready to operate immediately. There is no such possibility in the case of a branch of a foreign business.

A foreign business may start operating as a branch only after being entered in the business register, and the registration of a branch takes about 2-3 months.

Both forms of activity have their practical advantages as well as imperfections. Before deciding on the choice of legal form, it is necessary to analyse the objectives of starting a business activity in Poland, as well as the accompanying risks and the organizational and competence resources held. It is worth seeking advice from an international law firm which will provide comprehensive advice and enable you to make an optimal business decision.  


Type of entity


Limited liability company

Branch of a foreign business

Legal personality



Legal capacity (possibility of acquiring rights and incurring obligations on one’s own behalf)



Assets of the entity are separate from the foreign business



Capacity to sue and be sued




Any name with an addition „spółka z ograniczoną odpowiedzialnością” or an abbreviation „sp. z o.o.”

The same as the name of foreign business with an addition of “branch in Poland” translated into Polish [“oddział w Polsce”]


Objects of activity

Stated in the articles of association

Cannot go beyond the scope of the foreign business’ activity


Share capital

Minimum of PLN 5,000

No requirement

Governing bodies

Meeting of shareholders, management board or, optionally, supervisory board or audit committee  

No separate governing bodies


Members of the management board, in accordance with the principles of representation set out in the articles of association


Bodies representing the foreign business or a representative appointed by those bodies –  a branch manager


When can it start operations?

Immediately after executing articles of association (as a company in organization)

Upon entry in the business register




If you wish to learn more about establishing a limited liability or a branch in Poland, explore the following:


Beata Ordowska
General Partner, Advocate
TGC Corporate Lawyers

Paweł Góra
TGC Corporate Lawyers

How can we help?

TGC Corporate Lawyers offers comprehensive support in the process of establishing, running and closing companies and branches of foreign businesses, including making strategic and legal decisions. We help clients operating in capital groups, but also small and medium-sized enterprises, public companies, non-governmental and non-profit organizations. We also have on offer the ready-made companies that can be used for business immediately after buying them.

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