There is no revenue threshold at which a sole proprietorship automatically stops making sense. Consider a limited liability company when business risk grows, a partner joins, or the company needs to retain profit for further growth. A desire to pay less tax is not enough on its own, because the result depends on how money is paid out and on each shareholder's circumstances.
Start by comparing three things: liability for obligations, the full cost of taxes and social insurance, and the additional administrative work. That comparison will show whether changing the legal form solves your actual problem.
What's the actual difference between a sole proprietorship and an LLC?
A Polish limited liability company is a separate legal entity and is liable for its obligations with all of its assets. Its shareholders are generally not liable for those obligations. A sole proprietor and the business are not separate legal persons, so the entrepreneur is personally liable for business obligations.
Limited liability is not unconditional. Personal liability may apply to management board members when enforcement against the company is ineffective and the statutory grounds that release them from liability do not apply. A bank or leasing company may also require a personal guarantee.
When is it actually worth switching to an LLC?
It's worth considering an LLC when the risk of your business is genuinely growing — you're taking on big contracts, hiring people, signing agreements with penalty clauses that could wipe you out financially. It's not worth changing your legal form just because "that's what you do after a certain point."
Concrete situations where it makes sense:
- You're taking on projects with material contractual penalties or other liability risks
- You're hiring a team and the risk of employment disputes or mistakes someone could sue the business over is growing
- You want to bring in a partner or an investor — an LLC is the natural structure for splitting ownership
- You want to separate the company's contracts and assets from private matters and accept the additional formalities
- You're planning an ownership change — shares in a company can be transferred, while the sole-proprietor registration itself cannot be sold; the enterprise or an organised part of it can be transferred instead
If none of that applies to you, and the LLC question only comes up because revenue looks nice on paper — stop right there. That's not a good enough reason.
What changes in day-to-day running of the business
Here's the part nobody talks about enthusiastically. Because an LLC isn't a sole proprietorship with a fancier name.
- A different tax model — under standard corporate income tax, the company pays tax on income and the shareholder pays tax on a distributed dividend. Other methods of taxation and payment exist, including Estonian CIT for eligible companies, so the comparison needs an individual calculation
- Full accounting is mandatory — no more simplified records, now it's balance sheets, profit and loss statements, financial reports. Accounting costs more and is more formalized
- A clear separation between company funds and shareholders' private funds — every payment from the company needs a legal basis and correct accounting treatment
- Formalities around every bigger decision — shareholder resolutions, minutes, sometimes a notary
- Social insurance depends on the ownership structure and remuneration method — the sole shareholder of a single-shareholder company is insured on rules similar to an entrepreneur, while board membership alone does not determine the treatment
None of this is a disaster. But it's a different level of complexity. If right now you handle your accounting yourself in half an hour a month, prepare for that half hour to turn into regular calls with your accountant, and paying them more.
How much does it cost to set up and run an LLC?
Setting up an LLC through the online S24 system is relatively cheap and fast, but the monthly upkeep — accounting, legal support, extra reporting obligations — costs noticeably more than running a sole proprietorship.
- The minimum share capital is 5,000 PLN — you have to contribute it, but you can then use it within the business, it's not a frozen sum
- Registering through the S24 system is cheaper than going through a notary, but you get less flexibility in the articles of association
- Monthly accounting for an LLC usually costs noticeably more than for a sole proprietorship — check current price lists with local accounting firms yourself, since this shifts year to year
- There is also tax on the articles of association and fees connected with registration; check their current amounts before filing
I'm not going to hand you a magic number like "an LLC costs X per month," because it depends on the city, the accounting firm, and the scale of your operations. Call two or three firms, ask for a specific quote for an LLC, and compare it with what you're paying now as a sole proprietor. Only then do you have a real number to decide with.
When to stay a sole proprietorship
If you work alone or with one or two collaborators, you're not taking on projects with financial risk exceeding your assets, and you want simplicity — stay a sole proprietorship. Seriously. Simplicity has a value that's easy to appreciate only once you've lost it.
Switching only because "that's what you do" at a certain revenue level can add costs without solving a specific problem. It is not a promotion but a change of tool, and it should have a calculated justification.
Either way, the choice of legal form is one of those things worth settling with a good accountant before you sign anything — same as with a client contract or when hiring your first employee. Paperwork tends to get its revenge if you rush it.
Frequently asked questions
Can I have a sole proprietorship and an LLC at the same time?
Yes. Contracts, accounting and money flows between the entities must be properly separated. Transactions between your sole proprietorship and your own company are particularly worth discussing with an accountant or tax adviser.
Does switching to an LLC release me from liability for old sole-proprietorship debts?
No. Obligations you took on as a sole proprietor stay yours personally, even after setting up an LLC. The company protects your assets from new obligations, it doesn't reach back in time.
Does a single-shareholder LLC give full protection of personal assets?
Largely yes, but not one hundred percent. As a board member you can be held personally liable for the company's obligations if, for example, you fail to file for bankruptcy in time when the company becomes insolvent. It's not an unconditional shield.
Is switching to an LLC worth it at low revenue?
Revenue alone does not answer that question. At a small scale and with low risk, the added cost of full accounting may outweigh the benefits, but margin, the way profits are paid out and contractual liability also matter.
How long does it take to set up an LLC?
Do not assume a fixed timeline. S24 simplifies signing the articles and filing the application, but registration time depends on the court and the correctness of the documents.
Your legal form is a tool, not a trophy. Don't change it to impress someone on a business card. Change it when the real risk you're taking on outgrows what a sole proprietorship can carry.
Before changing your legal form, ask an accountant to compare the annual cost of both options and a lawyer to assess your most important contracts and risks. A decision based on those two analyses is worth more than a universal revenue threshold found online.