Partnership vs LLC
Tax comparison for 2026

Key Differences Between Partnership and LLC

Partnership (Komandytowa)

A partnership consists of:

• General partner(s) — liable for all company debts with personal property
• Limited partner(s) — liable only up to contribution amount
• General partner manages the company
• Limited partners are passive investors

Limited Liability Company (LLC)

All members (owners) are equal:

• All members liable only up to contribution
• No personal property at risk
• Members can share management or appoint directors
• More flexibility in member composition

Tax Treatment Since 2021 — When Partnership Became Taxpayer

From May 1, 2021: Major Change for Partnerships

Before 2021, partnerships were "transparent" entities — income was taxed at partner level only. Since May 1, 2021, partnerships became CIT taxpayers.

Current taxation (2026):

Entity Type	CIT Rate	Additional Taxes
Partnership	19% or 9%	Income tax on distributions to partners
LLC	19% or 9%	Income tax on dividends (if distributed)

Both entities now pay CIT on company profit. However, partners in a partnership have a special deduction mechanism.

The General Partner Deduction Mechanism

How it works:

The general partner can deduct from their PIT a portion of the CIT paid by the partnership. This creates the following tax scenarios:

Scenario 1: Partnership with 19% CIT

Company profit: 100,000 PLN

• Partnership pays: 19,000 PLN CIT
• General partner deducts: 19,000 PLN from PIT
• Effective partner taxation: 0%
• Result: The general partner pays zero tax on profit retained in company

Scenario 2: Partnership with 9% CIT (small taxpayer)

Company profit: 100,000 PLN

• Partnership pays: 9,000 PLN CIT
• Limited partners pay: ~18% PIT on distributions
• Effective taxation: ~18% + reduced deduction = ~17.3%

Detailed Cost Comparison: 100,000 PLN Profit

Partnership Structure (19% CIT)

Item	General Partner	Limited Partner
Company profit	100,000 PLN
CIT (19%)	-19,000 PLN
Profit after CIT	81,000 PLN
Distribution to general partner	81,000 PLN	—
CIT deduction (PIT reduction)	19,000 PLN	—
PIT on distribution (18%)	0 (fully covered by deduction)	—
Net to partner	81,000 PLN (0% effective tax)	Variable by distribution

LLC Structure (19% CIT)

Item	Amount
Company profit	100,000 PLN
CIT (19%)	-19,000 PLN
Profit after CIT	81,000 PLN
Dividend distribution (if paid)	81,000 PLN
PIT on dividend (19%)	-15,390 PLN
Net to member	65,610 PLN (effective: 34.4%)

Key difference: Partnership general partner receives 81,000 PLN (no additional tax). LLC member receives 65,610 PLN (dividend tax applies).

Social Insurance (ZUS) Requirements

Partnership:

• Both general and limited partners must pay ZUS
• Full social and health contribution (~33.52%)
• Mandatory for all partners

LLC:

• Members not required to pay ZUS
• Director/manager (if external) pays ZUS if working
• Significant savings if members don't work in company

Liability and Risk Exposure

Partnership Risks:

General partner:

• Unlimited personal liability for all company debts
• Personal property at risk (home, car, savings)
• Higher risk if partnership fails

Limited partners:

• Liability limited to contribution only
• Protected from company creditors
• Cannot manage company

LLC Advantages:

• All members have limited liability
• No personal property at risk
• Separates personal and business finances clearly
• More suitable for higher-risk businesses

When to Choose Partnership?

• You want 0% effective tax on retained profits (with 19% CIT)
• General partner can utilize the deduction fully
• Lower risk business where general partner comfortable with liability
• Partnership has multiple limited partners who want passive investment
• You prefer simpler structure with one active manager

When to Choose LLC?

• You want complete liability protection for all owners
• Members don't want ZUS obligations
• You plan to distribute profit regularly (dividends)
• Higher-risk business requiring asset protection
• Multiple owners with equal decision-making rights preferred
• Professional services (law, accounting) benefit from LLC structure

Estonian CIT Option for Both

Both partnerships and LLCs can opt for Estonian CIT (tax on profit distribution only, not accrual). This changes the calculation significantly:

• No CIT if profit is retained
• Tax only when distributing profit to owners
• Effectively lower burden if reinvesting profits
• Applies equally to both structures

Practical Example: Three-Year Comparison

Scenario: Growing tech startup, 500,000 PLN annual profit

Year	Partnership (19% CIT)	LLC (19% CIT)	Difference
Year 1 (retain 100%)	500,000 - 95,000 = 405,000	500,000 - 95,000 = 405,000	Equal
Year 2 (distribute 50%)	GP gets: 202,500 (0% tax)	Member gets: 169,925 (dividend tax)	Partnership +32,575 PLN
Year 3 (distribute 100%)	GP gets: 405,000 (0% tax)	Member gets: 339,850 (dividend tax)	Partnership +65,150 PLN

FAQ: Which Structure Should You Choose?

I'm the sole owner and active manager — partnership or LLC?

If liability protection is important: LLC. If you plan to reinvest profits: Partnership (with yourself as general partner). If you want to avoid ZUS: LLC.

I have silent investors — which is better?

Partnership is ideal. Your silent investors become limited partners with protected investment while you (general partner) manage and benefit from deduction.

What if I need to close the company?

LLC is simpler to dissolve. Partnership requires proper documentation for limited partner interests. Consult with legal counsel.

Can I switch from LLC to Partnership later?

Yes, but it's complex and has tax consequences. Better to decide at formation. Consult a tax advisor.