In what situation can you suspend your business?
In theory, you can pause your business at any time – whenever you think it’s beneficial. However, there is one, quite serious, exception: you cannot hire employees.
So, if your company has contracted employees, and you want to suspend your business, you must first terminate your employees’ contracts. Take into account, however, that if you plan to make redundancies, you must inform the District Labor Office in advance. Also be prepared for the need to motivate the move.
However, if you do not employ anyone, suspending your business does not involve many formalities. What’s more, you can suspend your business as many times as you want and indefinitely. Remember, however, that the suspension cannot last less than 30 days.
How to suspend and resume a business?
In fact, the only action necessary to suspend the business is to report this intention to the Central Register and Information on Business Activity. You can, of course, do so online using the form available at business.gov.pl. If you prefer traditional solutions, you can also send a letter or handle the matter in person, at the relevant city, municipal or district office.
In the application you must include the date from which the suspension of the activity takes place (you can enter a retroactive, current or later date). The day of resumption does not have to be specified, as from 2018 the suspension can be indefinite.
Resumption of business activity is done the same way – just submit the appropriate application to CEIDG.
All suspension activities are free of charge, unless you use an attorney. Then you will pay PLN 17 on this account.
Important!
If you run a civil partnership, the process is a bit more complex – you must first report the suspension to the CSO and REGON. The next step is to fill out the NIP-2 form and send it to the tax office. Only after doing this can you confirm the suspension in CEIDG – you will do this after the day the company was suspended.
Business suspension and employees
If you hire employees on a contract or contract for work, this does not in any way affect your ability to suspend your business. However, if your company has entered into an employment contract with at least one person, or employs employees by appointment, election or appointment, you must first terminate all contracts.
Also, remember to cross off the insurance records of all laid-off employees. You must do this no later than 7 days after the employment relationship has ended.
Important!
If the person you employ is currently on:
- maternity leave,
- leave on maternity leave conditions,
- parental leave,
- parental leave,
you can deactivate the activity.
Also consider the need to file a notice of the reasons for the mass layoffs with the district labor office with jurisdiction over your company. The notice should specify:
- reasons for dismissal,
- The number of employees employed,
- professional groups of employees hired and those designated for dismissal,
- the date of the planned release,
- The order of dismissal of employees,
- intentions regarding the termination of the employment relationship in connection with the layoff (whether the company plans severance payments, on what basis it is laying off employees, whether the employment relationship is to cease immediately, etc.).
Suspended activity – what about contributions?
A key benefit of suspending a business is not having to pay Social Security contributions. This happens automatically – you don’t have to contact Social Security – the information from CEIDG will go to the Department directly after your application is received.
Monitoring and controlling risks
Once corrective actions have been implemented, regular and detailed monitoring of risks is necessary. It is necessary to check whether the activated safeguards are fulfilling their functions and whether the probability of risk realization is increasing or rather decreasing.
Important!
If your company had employees prior to the suspension of your business, you must deregister them from Social Security within 7 days of the cessation of employment. To do so, use the ZUZ ZWUA form. Remember to include as the date of deregistration a date one day later than the date of termination of employment. So if the employment relationship ends on May 16, the employee should be deregistered from contributions as of May 17.
Also, make sure you remember to deregister all family members of your employees from Social Security. This should be done on a separate form – ZUS ZCNA.
No premiums also means no health insurance – so if you intend to remain eligible for health benefits while your business is suspended, you must sign up for NHF insurance voluntarily, unless you have insurance from another title.
At what point is it best to suspend operations?
Although you can stop your business at any time, keep in mind that if you do so – for example – in the middle of the month, you will pay the health premium for the entire month. The situation is different with the Social Security contribution – this one you will pay only for the days when the activity was still active.
Example
Ms. Teresa runs a seasonal business, which she usually suspends between November and March. If Ms. Teresa reports a cessation of business from November 10 to March 10 of the following year, she will have to pay health premiums for all of November and all of March.
It will definitely be more advantageous for her to suspend her business with the last day of October – this way she will avoid paying premiums for November.
What activities can you perform while your business is suspended?
Suspension of your business means that you can’t operate your business or earn income from it. However, this does not mean that you can no longer perform any activities related to your company.
What can you do during the suspension?
- accept receivables that arose before the date of cessation of operations,
- earn income related to the performance of services or the supply of products that took place before the suspension,
- Sell equipment and fixed assets, companies,
- Pay obligations incurred before the suspension,
- secure sources of revenue,
- appoint or dismiss a successor administrator.
What’s more – suspending your business does not exempt you from all activities – there are still quite a few that remain your responsibility. So be prepared that while the company is dormant, you will have to participate in possible audits, file annual financial statements, keep accounts, pay public and legal dues (e.g., vehicle or property taxes) and participate in proceedings concerning your company.
What else is worth remembering?
Finally, we will describe a few more things to consider if you are planning to stop your business. Find out what the suspension means in terms of taxes, accounting or depreciation.
PIT, CIT, VAT taxes
During the period of business suspension, the entrepreneur does not pay income tax – regardless of whether he settles on the general basis, flat tax or lump sum on registered income.
Of course, if the obligation to pay advance income tax or a lump sum arises before the suspension of the business, tax must be paid according to standard rules.
Entrepreneurs, using the tax card, do not pay tax during the suspension, but if the beginning of the suspension period is later than 1. day of the month, and the end earlier than the last day of the month, the remaining amount of tax must be paid, in proportion to the number of days in which the activity was active.
Example
Mr. Hubert settles his tax card, and his monthly tax is PLN 420. The entrepreneur suspended his business on October 15, which means he must pay tax for the first 14 days of October. To do so, he must deduct from the full tax amount 1/30 of the amount due for each day the business was not active.
Since the full monthly tax is PLN 420, the amount of PLN 14 should be taken as 1/30 of the amount due. Mr. Hubert must therefore subtract 238 zlotys (14×17) from 420 zlotys, making the amount owed equal to 182 zlotys.
In the context of VAT, the matter is simpler – when the company is suspended, you don’t have to file JPK_V7M or JPK _V7K returns. Remember, however, that the exemption applies to full accounting periods – so you still have to file a return that takes into account the month or quarter in which the company operated – even if it was only one day. This is another reason why it is most beneficial to suspend operations on the first day of a new month or quarter.
Accounting
Suspension does not exempt you from bookkeeping. So if you earn income during this period – for example, from the sale of your own fixed assets or from receivables that arose before the suspension, you must record this income.
Your business, although operating under suspension, may incur expenses aimed at securing a source of income, avoiding a loss or covering financial obligations incurred while the business was active. We are talking about costs such as rents, property taxes, server or domain fees, vehicle payments, insurance or lease payments.
Even entrepreneurs, using a lump sum of registered income, must keep accounts during the suspension. Admittedly, they do not include deductible expenses, but they should record revenue from receivables and asset sales.
Annual settlement
If your business is still suspended at the end of the year, this does not change the fact that you are required to file an annual return, according to the standard deadlines:
- For taxpayers, using the tax scale or flat tax: PIT-36 or PIT-36L must be filed by April 30,
- For taxpayers, accounting for lump sum: PIT-28 must be filed by the last day of February,
- For tax card users: the PIT-16A form should be submitted by January 31.
Important!
An annual settlement must be filed even if your business has not generated any revenue for the entire year.
Depreciation
If you suspend your business, you will lose the ability to depreciate assets because they will cease to be used for business purposes during the suspension period.
Example
Ms. Matilda suspended her business – a small confectionery – in April. As part of her business, Ms. Matilda depreciates the passenger car she used to deliver cakes, pies and desserts to customers.
The last depreciation write-off will take place in April. If Ms. Matilda decides to resume operations, she will be able to continue to realize depreciation deductions from the month following the month in which the business is activated.
Summary
Suspending your business itself is a relatively simple process, but it requires adequate preparation – especially if you have contracted employees. By suspending your business, you will avoid the costs associated with running your business during a period when you can’t or won’t provide services or products.
Suspending your business is a good solution to get you through a difficult period, prepare for a change in your business profile or focus on expanding your competence. The suspension will also help you avoid a lot of the paperwork involved in setting up a business. Resuming business activity is faster and simpler than starting a new company – all you have to do is submit a business resumption application to CEIDG.
