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November 21, 2023
The issue of suspension of business activity by a sole trader is regulated in Article 22 et seq. of the Act on Entrepreneurs of 6 March 2018. While this series is not about quoting provisions and using the language of law, below we describe, in a plain manner, the possibility of suspending business activity.
CAN I SUSPEND MY BUSINESS ACTIVITY?
As a rule, any sole trader can take advantage of a temporary suspension of own business, which does not bring the same drastic consequences as termination of business. The most frequent reasons of exercising this entitlement are financial problems, health problems, a trip abroad or the seasonality of the activity in question. However, it is not necessary to indicate the reasons for taking such a step; this entitlement can be exercised as many times as need be.
SUSPENSION OR TERMINATION?
After taking a look at the aforementioned reasons, one can immediately draw the conclusion that suspension is advantageous in terms of finance.
During the suspension of the business, the entrepreneur is not obliged to pay advance payments of income tax or social security contributions. Obviously, the lack of payment of the latter is associated with the loss of the right to health benefits 30 days after the last contribution has been paid. Another drawback is that the period of suspension is not included in the years of service entitling to a pension.
However, let us return to the prerequisites that are to be met to proceed with the suspension of such activity. A sole trader may suspend own business activity when they:
The period of suspension of business activity depends on the entrepreneur, but cannot be shorter than 30 days.
HOW TO SUSPEND BUSINESS IN PRACTICE?
In order to exercise this right, you must:
It is up to the entrepreneur to determine the starting date of the suspension of business activity; it may be the date of submission of the application, or an earlier or later date.
WHAT ONE CAN AND CANNOT DO, DESPITE SUSPENSION
Obviously, while your business is suspended, you cannot operate it or generate ongoing income from it.
WHAT MAY BE DONE VS. WHAT MUST BE DONE
However, the law defines the activities that a sole trader may and must carry out despite the suspension. During this period, the entrepreneur may collect receivables arising prior to the suspension, generate financial revenue from pre-suspension activities, dispose of his own fixed assets and equipment, settle obligations arising prior to the suspension, perform activities necessary to preserve revenue, secure sources of revenue, as well as appoint or dismiss a successor administrator. On the other hand, the entrepreneur's obligations during this period include participation in all proceedings (administrative, judicial, tax, which concern the company in question), performance of duties prescribed by law, participation in inspections, submission of annual financial statements, bookkeeping, payment of public and legal dues (e.g. real estate tax, tax on means of transport, environmental fees).
CAN I CHANGE MY MIND?
If a date of resuming business activity has been specified in the application for suspension, this happens automatically. If no date has been specified, a separate application must be submitted. Business can also be resumed when a successor administrator has been appointed.
The issue of taxation during the suspension of business activity is a broad topic that will not be discussed in detail now.
We invite you to read the next article, which will deal with the successor administrator.