Obligations of a partner in a one-person limited liability company
According to Article 8(6)(4) of the Social Security Law, a partner in a one-person limited liability company. (who owns 100% of the shares) is treated on an equal footing with persons engaged in sole proprietorship activity. So he is is obligated to pay Social Security contributions including health, pension, disability, accident insurance and the possibility of voluntary sickness insurance.
A shareholder who owns 99% of the shares in a limited liability company
Many shareholders, in order not to pay contributions, involve a second shareholder who owns a small part of the shares, such as 1%, in the company. Then the company ceases to be a sole proprietorship and does not meet the requirements for the shareholder to be subject to Social Security contributions.
Is this really the case?
For several years, we have seen numerous disputes between entrepreneurs and the Social Security Office, as the authority has interpreted the aforementioned provision in different ways. In resolving the disputes in question, the courts used the concept of “illusory shareholder” or “almost sole shareholder,” ultimately imposing the obligation to pay Social Security contributions on the majority shareholder. This applied to shareholders holding as much as 92% of shares (judgment of the Court of Appeals in Katowice on 15 November 2018, ref. III AUa 916/18).
If the majority shareholder, by virtue of the number of shares, has the right to decide the results of the shareholders’ meeting on his own, in addition, he has an almost exclusive right to profit and an unlimited ability to decide on the day-to-day activities of the company, he should be treated as a sole shareholder. Accordingly, such a shareholder should be subject to social insurance as a person engaged in non-agricultural activity (so, among others, the Supreme Court in its judgment of 5 March 2020, ref. III UK 36/19). However, some courts believe that holding, for example, less than 10% of shares does not automatically mean that the shareholder is illusory. Thus, their positions are not unanimous.
What’s next?
Given the different positions of the courts, the majority shareholder faces a major challenge as to how to behave under the Social Security Act – to pay contributions or not. On this situation is worthwhile to apply for an individual interpretation to the Social Security Office, which, if positive for the shareholder, will protect him from different conclusions of the Social Security Office during the inspection.
Landmark resolution by the Supreme Court
According to the most recent Supreme Court resolution, which was passed on 21 February 2024 (ref. II UZP 8/23). A shareholder of a one-person limited liability company owning 99 percent of its shares is not subject to social insurance under Article 6(1)(5) in connection with Article 8(6)(4) of the Social Insurance Act.
There is a good chance that the authority will follow the resolution and not challenge the distribution of shares, but nevertheless it should be remembered that the resolution does not have the force of law, and therefore neither ZUS nor other courts have to apply it in the cases they consider.