Loan-for-Use Agreement for Business Premises – Pros and Cons

When starting a business, one of the entrepreneur’s first obligations is to indicate the company’s registered address. Many people — especially at the initial stage — choose what seems to be a cost-free solution: a loan-for-use agreement for business premises, often concluded between family members or friends. Although it may seem simple and cost-effective, in reality it involves specific legal, tax, and image-related consequences. It is worth understanding them well before making the final decision. In this article, we take a closer look at what a loan-for-use agreement for premises is, what its advantages and limitations are, and what alternatives are available. 

What exactly is a loan-for-use agreement for premises? Legal basics

A loan-for-use agreement for business premises is a form of free-of-charge provision of real estate for use over a specified period. Its legal basis is regulated by Articles 710–719 of the Polish Civil Code, which defines loan for use as an agreement in which one party — the lender — undertakes to allow the other party — the borrower — to use the item provided for this purpose free of charge, such as premises, for a fixed or indefinite period.

In the case of premises, this means that an entrepreneur may use a property — for example, their parents’ apartment, a room in a friend’s house, or commercial premises — without having to pay rent, provided that they exercise due care and return the premises in a non-deteriorated condition after the loan-for-use period ends. This lack of payment is the key difference between a loan-for-use agreement and a lease. 

As a rule, a loan-for-use agreement does not require written form — it can be concluded orally. In practice, however, especially when it concerns using premises for business activity, it is recommended to prepare the agreement in writing. This is necessary, among other things, when reporting the company address to CEIDG or the tax office, and for evidentiary purposes in the event of an inspection or potential dispute.

The parties to the agreement may be both natural persons, such as a father and son, and legal persons. In practice, the most common form is free-of-charge lending of premises to a family member — for example, a loan-for-use agreement for premises from parents, especially when setting up a sole proprietorship.

Loan of premises for business activity – advantages

Lending premises is a popular form of support when starting a company. It allows you to avoid high rental costs and is often based on trust in family or private relationships. For this reason, for many entrepreneurs it is a convenient solution at the start, when the budget is very limited.

No rent = significant savings at the start of the company

At the beginning of a business, every złoty matters — especially the one you do not have to spend. A loan-for-use agreement releases the entrepreneur from the obligation to pay regular rent, which generates real savings. The gains accumulated over the year can then be invested in company development — a website, equipment, or marketing. 

For many micro-entrepreneurs and freelancers, lending premises for business activity is therefore a solution that finally allows them to stop postponing the decision to start a business and begin working on their own account.

A popular solution in family relationships 

Lending premises is a common practice, especially among family members. In such cases, registering a business at the address of parents, in-laws, or siblings usually requires only consent and a simple agreement based largely on trust. 

Traps and disadvantages of a loan-for-use agreement in business 

Although a free-of-charge loan-for-use agreement for premises may be tempting because of its simplicity and the prospect of significant savings, in practice it is a solution full of nuances that are easy to overlook. When it concerns running a business, a number of problematic issues appear, such as tax matters, the risk of losing stability, and non-obvious obligations toward public offices. 

Tax issues – is it really “free”? Income on the borrower’s side

If you run a business in premises that have been lent to you for free, you need to know that this form of using real estate may be treated as income. Under the Polish Personal Income Tax Act, business income also includes free-of-charge benefits, such as the possibility to use an apartment or premises without payment.

The Act clearly defines how such income should be calculated. Its value corresponds to the market rental price of similar premises that the entrepreneur would have to pay if they rented the space on commercial terms. 

There are, however, certain exceptions. If the premises are made available by a close family member, from the so-called first or second tax group, such as a parent or sibling, then such a benefit may be exempt from taxation, in accordance with the PIT Act and the Inheritance and Donation Tax Act.

As you can see, a loan-for-use agreement is not always tax-neutral. Before registering your company in someone else’s premises, it is worth checking whether this decision may result in the obligation to pay tax.

Risk of instability – the lender may terminate the agreement early

One of the more serious risks connected with a loan-for-use agreement for business premises is the lack of guaranteed long-term stability. Even if the premises have been made available free of charge for an indefinite period, the lender has the right to terminate the agreement — in accordance with Article 365¹ of the Polish Civil Code. Since this is a continuous obligation with no fixed term, it may be terminated with contractual, statutory, or customary notice periods, and in their absence — even with immediate effect.

The risk increases when the reason for the loan-for-use ceases to exist. A typical example? A relationship that has ended — if living together was the basis for making the premises available, the other party may legally demand that the premises be vacated.

In the case of an agreement concluded for a fixed term, the situation may seem more predictable — but only seemingly. Even here, the regulations allow early termination if the borrower uses the premises contrary to the agreement or their purpose, transfers them to a third party without the lender’s consent, or if the premises become necessary for the owner for reasons that could not have been foreseen earlier.

For an entrepreneur, this is a real threat: sudden loss of the registered address, the need for a quick move, changes in CEIDG, and possible business downtime. If you plan to develop your company based on someone else’s premises — even family-owned ones — make sure you understand these provisions and have a backup plan.

Potential conflicts of interest when lending premises free of charge to a family member

Running a business in an apartment belonging to a close person may, over time, lead to tensions — even if everything works smoothly at the beginning. Different expectations regarding how the premises should be used, increased traffic, company correspondence, or signage on the door are sources of potential misunderstandings. 

A lack of precise provisions in the agreement and relying only on oral arrangements may turn into a conflict situation that makes running the company more difficult and affects family relationships.

Image issues – home address versus professional company address

In today’s business environment, a company address works like a business card — it appears in CEIDG, email footers, invoices, on the website, and in social media. When it is a home address, it may raise certain doubts about the company’s professionalism, credibility, and scale of operations. 

By contrast, a prestigious address in the center of a large city or in an office building sends the client a signal: this is a serious business. 

The registered address influences how your brand is perceived, especially if you operate in the B2B sector, serve larger companies, or start with a premium offer. Remember: a professional image begins with details, and the address is one of them.

Obligations related to maintaining the premises and operating costs

Free-of-charge lending of premises does not mean that the entrepreneur uses them entirely without obligations. Although they do not pay rent, they are responsible for taking care of the premises, keeping them in proper condition, and often covering operating costs — such as utilities, electricity, water, internet, or waste disposal. 

A lack of precise provisions in the agreement may lead to disputes about money, misunderstandings, and even problems with the tax office. That is why, if you decide to use a loan-for-use agreement for premises, make sure you define and document who covers operating costs and to what extent the premises are used for business activity.

Loan-for-use agreement and taxes – what should an entrepreneur know?

Although, as a rule, free-of-charge lending of premises is not subject to VAT, in some cases it may be treated in the same way as paid provision of services and therefore become subject to taxation.

Under Article 8 section 2 of the Polish VAT Act, paid provision of services also includes free-of-charge transfer of goods or services for purposes unrelated to business activity — for example, for the personal purposes of the taxpayer, their employees, or partners. This means that if premises forming part of an enterprise are lent for a purpose unrelated to business activity, this may result in the obligation to calculate and pay VAT.

The purpose of the loan-for-use is crucial here. If the benefit is provided for private purposes, for example to a family member who does not run a business, or if the premises serve only personal purposes, it may be treated as a paid service.

Virtual office as an alternative to a loan-for-use agreement

In a world where mobility, flexibility, and a professional image matter, more and more entrepreneurs are giving up home addresses or loan-for-use agreements in favor of virtual offices. This solution makes it possible to register a company at a prestigious address without the need to be physically present at that location.

Comparison of virtual office fees with free lending and its hidden costs

At first glance, a loan-for-use agreement seems like an ideal solution: no fees, no formalities, no obligations. However, the hidden costs of such an agreement often appear only over time. They include, among others:

• tax obligation – as mentioned above, in many cases free use of premises must be reported as income and taxed;
• operating costs – bills for utilities, internet, cleaning, and similar expenses;
• lack of professional service – receiving correspondence or accessing a meeting room must be organized separately.

A virtual office, on the other hand, means a fixed, predictable monthly fee, where the entrepreneur receives:

• a virtual address for company registration in a prestigious location;
• correspondence handling and notifications about deliveries;
• the possibility to use conference rooms and coworking offices on flexible terms;
• full compliance with regulations; 
• a greater sense of security and continuity of business operations. 

For many people, this fixed expense replaces many small hidden costs, while also helping avoid unnecessary formal and legal risks. In practice, therefore, free lending of premises may turn out to be much more expensive than a professionally run virtual office.

Prestigious address versus home address – impact on company image

A home company address may sometimes raise doubts, suggesting a micro-company without facilities or with a limited scope of activity. For some clients, this may be an important discouraging factor when deciding whether to contact the company. That is why a virtual office with a reputable location becomes real support in building a brand and effectively acquiring contractors. 

Full service versus your own effort under a loan-for-use agreement

A loan-for-use agreement in practice means that you do everything yourself: you receive letters, sort correspondence, take care of formalities, and often organize a place for meetings on your own, covering related costs — if you have such a possibility at all. 

By using a virtual office at IdeaPlace, however, you gain not only a registration address, but also full administrative service: receiving and scanning correspondence, delivery notifications, access to conference rooms, and professional reception support. As a result, you do not waste time on things you can delegate. Instead, you focus on running your business, without wasting time and energy on office logistics. 

Flexibility and scalability of virtual office services

A virtual office can grow together with your company. Need only an address? No problem. Want to additionally rent a meeting room or temporary desk access? You choose the package that matches your needs — and you can change it at any time. 

A virtual office at IdeaPlace is a solution that adapts to the stage of your business development — without the need to change location or sign long-term agreements. When your company grows, the virtual office does not limit you, but gives you space to scale it effectively. 

Legal and tax security – avoiding the traps of a loan-for-use agreement

A virtual office also means peace of mind in formal matters. When choosing this solution, you do not have to worry about hidden income from free-of-charge benefits, tax interpretations, or the risk of sudden agreement termination. All obligations are clearly defined, and the company can be sure that by using a virtual office, it operates fully legally and safely from a tax perspective. This is particularly important in the event of an inspection or when cooperating with larger contractors who carefully verify registration data and partner credibility. 

A conscious choice of address for your company with IdeaPlace

Choosing an address for company registration is a strategic decision — it affects image, formalities, taxes, and overall comfort of running a business. 

IdeaPlace is more than an address in the center of Wrocław. It is a space where we bring people from different industries together, creating an inspiring atmosphere for action and supporting networking. With us, you do not have to worry about administrative details — you can focus on what really matters: building your company on solid foundations. 

Instead of improvising, choose consciously. Contact us and see how a virtual office at IdeaPlace can make your start, growth, and everyday business operations easier!