Single-member limited liability company – full control, minimal risk?

How is a one-man limited company formed?

A one-person limited liability company may be established from scratch by a single shareholder or be created as a result of the acquisition of all shares by a single person.

It is worth remembering, however, that another one-person limited liability company cannot independently create such a structure – this is prohibited by Article 151 § 2 of the Code of Commercial Partnerships and Companies (KSH).

This means that it is not possible to build a chain of one-person companies in which each successive one is established by another one-person company.

Organisational stage

Once the articles of incorporation have been signed, the company functions as a company in organisation until it is entered in the National Court Register (KRS).

During this time, its sole shareholder cannot represent it in legal transactions – only a proxy or a member of the management board may do so.

The only exception to this is the filing of an application for company registration.

Special requirements for a one-person limited liability company.

A one-person limited liability company is subject to certain special regulations that do not apply to multi-member limited liability companies:

• Any legal act between a partner and the company must be in writing under pain of nullity (Article 173 § 1 CCC).

• For example, if a shareholder enters into a contract with the company, the contract must be written down and signed.

• If the sole shareholder is also the sole member of the management board, any legal act between him and the company requires the form of a notarial deed (Article 210 § 2 of the Companies Act).

• This means that, for example, a loan agreement between him and the company must be concluded before a notary public.

Role of the sole shareholder

The sole shareholder of a sole proprietorship limited liability company fulfils the role of the shareholders’ meeting and takes all decisions that normally require resolutions of the shareholders’ meeting.

However, such decisions should be minuted to ensure transparency and compliance.

Tax and Social Security (ZUS) implications

A person operating a one-person limited liability company is subject to compulsory ZUS contributions as a sole trader (Article 6(1)(5) of the Social Security Act).

This means that he or she must pay contributions in the same way as sole traders running a sole proprietorship.

On the other hand, it is risky for a sole shareholder to enter into an employment contract with his or her own company, as the courts often declare such contracts invalid due to a lack of employee subordination.

Conclusion

A one-person limited liability company is an attractive legal form for entrepreneurs who want to limit their liability and run their business in a more structured manner.

However, it is worth bearing in mind the specific regulations concerning legal actions, representation and tax consequences.

Proper management of such a company requires legal awareness and attention to paperwork to avoid potential legal and financial problems.