Katarzyna Perez, Ph.D., Hab., Professor of Institute of Finance, Poznań University of Economics and Business, Al. Niepodleglosci, 10, Poznań, 61-875, Poland, e-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.
Marta Kluzek, Ph.D., Hab., Professor of Institute of Finance, Poznań University of Economics and Business, Al. Niepodleglosci, 10, Poznań, 61-875, Poland, e-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.
Marcin Bielicki, Ph.D., Professor of Institute of Finance, Poznań University of Economics and Business, Al. Niepodleglosci, 10, Poznań, 61-875, Poland, e-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.
Katarzyna Schmidt-Jessa, Ph.D., Professor of Institute of Finance, Poznań University of Economics and Business, Al. Niepodleglosci, 10, Poznań, 61-875, Poland, e-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.
Tomasz Gabrusewicz, Ph.D., Professor of Institute of Finance, Poznań University of Economics and Business, Al. Niepodleglosci, 10, Poznań, 61-875, Poland, e-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Abstract

PURPOSE: While the factors influencing entrepreneurs’ choice and change of legal form for their businesses are widely recognized, their relative importance remains unclear. This study aims to systematically examine and hierarchize these factors, providing a dynamic understanding of entrepreneurs’ decision-making across the business lifecycle. Using Poland – a post-transition economy with EU-driven modernization yet path-dependent business structures – as the research setting, we explore how legal form decisions evolve beyond the static, one-time decision commonly presented in existing literature. METHODOLOGY: This study employs a mixed-method approach comprising three components. First, we conducted semi-structured in-depth interviews with 34 entrepreneurs strategically selected from three groups: sole proprietors, company shareholders, and former sole proprietors who transitioned to corporate structures, capturing decision-making at different business stages. Second, participants completed a criteria ranking survey of factors identified in the literature or by themselves. Third, we applied the Analytical Hierarchy Process (AHP) to quantitatively assess and prioritize the relative importance of each factor. FINDINGS: Entrepreneurs’ decisions regarding legal form are iterative rather than one-time choices, shaped by a complex interplay of business and personal factors. Ultimately, business considerations prevail, with fiscal efficiency, fund disposition flexibility, liability limitation, legal conditions, and business continuity emerging as the top determinants. Entrepreneurs typically start with simpler legal forms before transitioning to limited liability companies as their businesses grow and mature. IMPLICATIONS: This study offers valuable insights for entrepreneurs, policymakers, and scholars. Entrepreneurs gain a structured understanding of key decision-making factors, allowing for more informed legal form choices. Policymakers can design regulatory frameworks that better support business growth and transition. Scholars can refine existing theories by incorporating the fluid nature of legal form decisions in transitioning economies. ORIGINALITY AND VALUE: The study makes three distinctive contributions. First, it breaks from the fragmented perspective in existing literature by examining how entrepreneurs holistically assess both tax and non-tax factors when making legal form decisions. Second, it challenges the static view of legal form selection by empirically investigating the dynamic nature of these decisions over the business lifecycle. Third, by focusing on Poland’s unique economic context, it extends entrepreneurship theory beyond Western market assumptions, offering novel insights into how institutional settings in post-transition economies shape entrepreneurial decision-making processes.

Keywords: SME legal form choice, entrepreneurial decision making, Analytical Hierarchy Process, business lifecycle, post-transition economy, SDG 9: Industry, innovation, infrastructure, dynamic legal form selection, fiscal efficiency, liability limitation, institutional context