Transformation of a sole proprietorship into a limited liability company - legal support
A natural person running a sole proprietorship may transform the form of business activity only into a sole proprietorship company. If you intend to take this step, our law firm will guide you through the entire process.
An entrepreneur who wants to transform a sole proprietorship into a company has two options to choose from.
- Limited liability company;
- Joint-stock company;
At some point, transforming a sole proprietorship becomes a necessary solution due to issues of liability for liabilities, inheritance planning and obtaining capital for further development.
Transforming a sole proprietorship into another legal form may have many benefits for the entrepreneur. First, changing the legal structure can significantly impact responsibilities, which can be particularly important as the company grows and is subject to greater risks. A restatement can also facilitate estate planning by ensuring consistency in the inheritance of the business by descendants or other heirs.
In addition, transformation may make it easier to obtain external capital, which may be necessary to finance the further development of the company. The new legal form may attract investors who are interested in participating in the company, which may allow the implementation of ambitious development plans.
However, it is worth remembering that each transformation has its consequences and requires a thorough analysis of the situation, including legal, financial and operational aspects.
In this context, it is worth consulting the National Court Register Office to make the best decision for the further development of the company.
Przekształcenie J.D.G w spółkę — jak przebiega?Transformation of a sole proprietorship into a company – how it is carried out?
First of all, it should be noted that in the case of a sole proprietorship, the entrepreneur is liable with all his assets for the obligations incurred as part of the business activity. Therefore, in order to secure personal assets, it is necessary to transform into a limited liability company. In this respect, the liability of a company shareholder is limited to the economic risk of loss of assets contributed in exchange for the acquired shares in the company.
Secondly, running a business as a sole proprietorship makes it impossible to raise new capital in the form of funds contributed by new investors, while in the case of transformation into a limited liability company, its legal structure makes it possible to easily raise capital by increasing the share capital and issuing new shares and issuing them to partners.
Thirdly after the transformation of a sole proprietorship into a limited liability company, the sale of the enterprise is much easier and requires only the sale of shares in the company, unlike in the case of the sale of a sole proprietorship enterprise, which often requires a complicated procedure for transferring rights and obligations from contracts, which is very often combined with the need for consent from third parties, as well as the lack of transfer of decisions and licenses.
Transformation of a sole proprietorship into a limited liability company and estate planning
Finally, one of the most important aspects related to transformation is the issue of succession planning. In the event of the death of a sole proprietor, there is often a complicated process of assuming all the rights and obligations of the testator, fragmenting the assets among several heirs, and, consequently, paralyzing the company’s operations. After transformation into a limited liability company, the company agreement may directly specify the rules for the entry of heirs to the company, and the assets accumulated in the enterprise run by the company are not dispersed, and thus the continuation of the business is not at risk.
Kancelaria provides comprehensive legal assistance related to the entire transformation process. This includes planning the transformation process, preparing all necessary documents, including preparing a company agreement in which legal solutions will be optimal for the business, its size, inheritance issues and the possibility of obtaining new capital.