The number of requests for the closure of sole proprietorships has decreased by more than 3% from January to June this year, compared to the same period last year. Experts highlight that the start of 2023 was a particularly difficult time for entrepreneurs. Meanwhile, the number of requests to suspend sole proprietorships has increased year on year by over 3%. Experts believe that this change should not be a cause for concern. It’s an elastic solution, after all, and resuming operations is simple. There are also opinions that planned changes in the rules for setting health insurance premiums may influence future statistics concerning the liquidation of these businesses.
Slight decline in closures
According to data provided by the Ministry of Development and Technology, in the first half of 2024, the Central Economic Identification Number Register received 99.6 thousand applications to end sole proprietorships. That’s 3.4% less than in the same period in 2023, when there were 103.1 thousand such cases. Łukasz Goszczyński, a legal counselor and restructuring advisor from the GKPG law firm, believes this decline means little for the economy and the broadly defined market. Entrepreneurs are currently in a better condition than a year ago, which is why the situation is improving, other experts say similarly.
Łukasz Kozłowski, chief economist of the Federation of Polish Entrepreneurs (FPE), said: “The beginning of 2023 was particularly hard for entrepreneurs. We were dealing with a peak period of cost pressure, related primarily to high energy prices, combined with weak domestic demand. The Polish economy was in a recession, in Q1 2023 GDP decreased by 0.4% YoY. In Q2 2023, there was a decrease of 0.6%. Since then, the economic climate has improved noticeably. As a result, sole proprietorships’ ability to stay in the market may have also improved.”
Dawid Sułkowski from the Polish Economic Institute (PIE) stated that although the conditions for running a business are stable, they have somewhat worsened compared to last year. Entrepreneurs are more likely to suspend their sole proprietorships than to close them. Plus, Mr. Goszczyński adds, entrepreneurs who only see worsened business conditions often suspend their activities to wait out the difficult period.
“The reasons for closing sole proprietorships are complex and cannot be reduced to a single factor. Most closed operations can be observed in the construction, trade, and transport sectors. This is related to a range of barriers encountered in these sectors of the economy and the fact that there are many companies operating in them.” – adds the chief economist of FPE.
Suspensions on the rise.
According to ministry data, in the first half of 2024, there were 179.1 thousand applications to suspend sole proprietorships, 3.3% more than in 2023 when there were 173.5 thousand cases. Mr. Łukasz Goszczyński does not see this increase as worrying. It’s a natural succession of companies in the market, and it doesn’t significantly impact the economy as new entrepreneurs usually replace closed businesses.
“In my opinion, these figures should not cause concern. The institution of suspending sole proprietorships under current law is a very flexible tool that can be frequently and immediately used. Entrepreneurs opt for this solution to avoid bearing mandatory contributions at times when, due to seasonal downtime, their activity is not carried out. Resuming sole proprietorships is as simple as suspending them,” explains Łukasz Kozłowski.
Moreover, Dawid Sułkowski does not perceive the current scale of suspensions of sole proprietorships as ominous. The data in this area is very volatile, and not every case results from the economic situation of the company. As the PIE expert points out, some entrepreneurs, instead of resuming their sole proprietorships, choose to register a new company. It also happens that a suspended business never resumes. In practice, this has the same effect as deregistering the company, but we do not see it in statistics concerning ending activity.
“With a suspended business, the entrepreneur can try to recover their receivables and enforce them. The regulations allow for such activities that fall within the scope of the previously run business, even though the business is not active. In this way, the owner of the sole proprietorship avoids costs, mainly related to social insurance. Such an attitude may result from the need to carry out factual, not legal, restructuring. Entrepreneurs wait for the situation to continue, and in the event of its improvement, they will decide to resume operations,” Adrian Parol, a legal counselor and restructuring advisor explains.
It’s supposed to get better, but…
According to Łukasz Kozłowski, the number of applications for the closure of sole proprietorships should decrease at a moderate pace, by 2-4% year on year. Demand conditions on the market will continue to be a crucial factor, along with future regulations concerning public-law burdens, especially since sole proprietorships often form self-employment. In this context, future changes in the rules for setting health insurance premiums can be particularly important. If they are favorable for small businesses, the number of registered sole proprietorships may grow faster, and the scale of their liquidation – decrease.
“In my opinion, there will be fewer closures and suspensions of businesses than recently. The improving economic situation in the country will definitely contribute to this. In addition to this, a change in consumer attitudes in the market is already noticeable,” adds lawyer Adrian Parol.
Łukasz Goszczyński agrees, stating that the situation regarding the closing and suspension of sole proprietorships should improve in the second half of the year. However, nothing far-fetched can happen in the economy or politics for this to happen. If something does happen, the future may differ.
“An important issue, often somewhat overlooked in the context of sole proprietorships, in addition to the examples mentioned above, will be the situation concerning the health insurance premium. Such entrepreneurs are really waiting for new solutions and often condition the resumption of operations on the fact that if the aforementioned problem disappears, they will resume their activities. True, the current government promises changes in this area, but it still does not happen, and many entrepreneurs cannot afford to wait that long,” concludes Adrian Parol, a legal counselor, and restructuring advisor.
Source: https://ceo.com.pl/w-i-pol-2024-r-zlikwidowano-prawie-100-tys-jednoosobowych-firm-ponad-179-tys-zawieszono-97291
