Sole proprietorship (JDG) is the most commonly chosen form of running a business in Poland, particularly among beginner entrepreneurs. In the guide below, you will find key information, which will help you understand how to set up and run a business.
What is a JDG?
A sole proprietorship is a form of running a business in which the entrepreneur operates independently, without having to establish a company. It is a simple, flexible and accessible solution – ideal for freelancers, craftspeople and people offering services on a small scale. By running a JDG, you are liable for the company’s obligations with all your private assets; however, the formalities connected with registering and running the business are kept to a minimum compared with other legal forms.
How to set up a JDG?
Setting up a sole proprietorship is a relatively simple and quick process. You only need to submit an application for entry in the Central Register and Information on Business Activity (CEIDG). You can do this online using a trusted profile or an electronic signature. In the CEIDG-1 application, you must provide basic information about the business, such as its name, address and PKD code (that is, the type of business activity), as well as choose a form of taxation, such as the flat-rate tax, the tax scale or the registered lump-sum tax. After submitting the form, you will receive a NIP and REGON number, if you did not have them previously. It is worth carefully considering your choice of taxation, as it will directly affect how you settle accounts with the tax office.
Costs of running a JDG
Running a sole proprietorship involves the obligation to bear fixed costs, the most important of which are ZUS contributions. Beginner entrepreneurs can use the so-called start-up relief, which exempts them from paying social insurance contributions for the first six months. After this period, preferential ZUS is available: reduced social contributions are paid for the next 24 months, and after the preferential period – if revenues do not exceed a specified threshold – lower contributions calculated based on actual income may be available. Regardless of the stage, every entrepreneur is required to pay the JDG health insurance contribution, the amount of which depends on the chosen form of taxation and the income earned.
JDG and retirement
The retirement benefit depends on the total social insurance contributions paid. The higher the contributions, the greater the potential benefit in the future. It is worth bearing in mind that paying contributions at the minimum amount may result in a very low pension. For this reason, many entrepreneurs choose additional forms of saving, such as IKE or IKZE. Retirement is an issue worth considering already when setting up a JDG, so that you can consciously build your financial future.
Advantages and challenges of a JDG
A sole proprietorship has many advantages. These include low start-up costs, simplified formalities and complete freedom in making business decisions. However, a JDG also presents certain challenges – above all, full personal liability for the company’s obligations and the need to handle accounting and tax matters independently. It is therefore worth considering working with an accounting office, which can help with settlements and provide advice on tax optimisation, as well as choosing a simple-to-use programme for issuing invoices online.