Accounting Manager at RSM Poland
When providing accounting and tax compliance services to national and international entities, I often see how difficult it is for an entrepreneur, especially a foreigner, to go through the company registration process and comply with all the associated formalities.
I have heard from a number of investors how much they appreciate our – the accountants' – assistance, especially at this early stage of company operation. There are problems and surprises waiting for the shareholders or board members from the very first day of the company's existence, long before the start of their operational activities.
Therefore, I would like to share with you my observations and indicate the typical situations that arouse the amazement and sometimes also indignation of our customers. It is worth preparing for them in advance and use a specialists' support. Comprehensive advisory services, including the preparation of relevant agreements and contacts with a notary public, sworn translator, or bank, and the preparation and submission of all registration documents to the appropriate authorities, can save a lot of time and... nerves.
Let's deal with the first formalities...
From the date of signing the notarial deed until the registration of the company in the National Court Register (KRS), there exists a company in the process of formation that can bear costs and act on its own account.
Most often, immediately upon signing the notarial deed, the company submits the applications for registration in the National Court Register (KRS No.), for a Tax Registration Number (NIP) and a National Business Registry No. (REGON), and pays for those documents. It is often believed that as long as the company does not issue invoices, it does not operate. We hear from entrepreneurs – "but we are still not operating" or "we will start selling next year". It should be noted that since the very first economic event having financial or material effects, the company is obliged to establish and keep accounting ledgers.
The capital stipulated in the founding act should be immediately paid to the company's account.
Then the moment of first consternation comes when it turns out that one of the conditions for company's registration is making a written statement by its board members that the contributions to the share capital have been paid in full. We hear – "we haven't contributed", "we want to pay, we want to play fair"... Unfortunately, in practice, there is no place to put this capital. To open a bank account of a new entity, most banks require the company to have at least the KRS number, and sometimes the confirmations of having a NIP and REGON numbers assigned.
Currently, the average waiting time for the entry in the National Court Register is 3-4 weeks. Those who are lucky can have it done a bit earlier, but those not so lucky will wait even twice as long, if, for example, it will be the holiday season in court...
Having obtained the decision on the registration in the National Court Register, within 21 days, the entrepreneur is required to prepare a NIP update document containing:
- assigned REGON number,
- assigned NIP number,
- assigned KRS number,
- name of the company, already without the annotation "in the process of formation"
When finally the bank account is opened, it is good to ask the bank to issue a confirmation document. At this stage, the company already may expect its first contacts with the tax office as part of the so-called NIP update audit activities. It will be necessary then to present the confirmation of opening bank accounts.
Within 7 days from the date of opening a bank account, the NIP-8 data update form should be prepared and submitted to the tax office. I would like to draw your attention to the fact that entrepreneurs, in addition to their basic bank account, are granted even a few extra foreign currency accounts in a package from the bank. The obligation to inform the tax office concerns all accounts possessed, even those that would never be used.
Organisational issues continued...
Once a shareholder knows where the company capital should be transferred, more surprises are to come. I have seen situations when one of the company partners pays for everyone, or pays more, adding to the first expenditures of the company. There are also payments made in foreign currency, which, due to exchange rate differences, may eventually result in the underpayment of the company's share capital.
Another problem is the company's office location. For some clients, renting office space at the very beginning is unnecessary; sometimes, due to the type of their business, they will not need an office at all.
In such a situation, you should think about using an address sublease service and concluding a locating agreement. In such case, the company is registered, e.g. at the address of its accounting firm
and any correspondence addressed to the company is delivered there. Administration employees and accountants take care of the deadlines of responses to official letters, providing all the necessary information to appropriate persons.
It should be emphasised that any other additional place where business is carried out (leased office space, shop, warehouse, etc.) should also be stipulated in the NIP-8 data update form submitted to the tax office, within 7 days from the date of the event.
I have to add at this point, although it is not strictly related to the start of the business, that many doubts stem from the distinction between the company address and registered office. The registered office is entered in the Company's Articles of Association and it is usually the city/town (and not a specific street/address). Changing the company's registered office means that the Company's Articles of Association need to be changed accordingly before a notary. The entry in the National Court Register is constitutive, so it is only after making the entry that the company may use the new address (resulting from the change of the company's registered office).
The change of address is made in the Board resolution and it enters into force on the date specified in the resolution (not necessarily the date of the resolution itself, but the date specified in the resolution; the dates may be the same). The entry is merely declaratory.
In addition, I have recently noticed that most of the frustration of not only board members or people organising the company, but also us, accountants, is caused by the company VAT registration application. But it is a topic for another post on the RSM Poland blog...