Polish LLC as a partner in a limited partnership

Błażej Sarzalski        27 January 2016        Please comment!

LLC-LP hybrid in Poland? Why not!? Hovewer it is not a hybrid at all but creative mixture of the best from both worlds. The world of corporations and the world partnerships.

Since it is not possible to select tax clasification for companies in Poland (it is always default) and the fact that Polish limited liability companies are subject to coporate income tax at 19% rate and there is 19% witholding tax on dividends, a foreign investor may look for legal ways to avoid double taxation.

The simplest of strategies is to use marriage of a limited partnership (spółka komandytowa) and a limited liability company (spółka z ograniczoną odpowiedzialnością). A limited partnership consists of at least one general partner and at least one limited partner. The general partner(s) assumes unlimited liability while the limited partner(s) assume liability equal only to their investment. In this scenario we use LLC as general partner.

The limited partners would control, for example, a 90% interest in the LP. The remaining 10% would be controlled by the LLC. As the general partner, the LLC is responsible the daily operations and is responsible for all claims against the company. The limited partner would control the LLC, thus allowing him or her to manage the company through a partnership without losing the status as limited partner. Company assets are owned by the LP and in a case of any legal action that threats general partner and its managers it is easy to file for insolvency and thus not be held liable for any obligations arising from doing business through this vehicle.

One more advantage? 90% of LP’s profit is taxed with personal income tax at flat 19% rate. Does it sound good?

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