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Is it absolutely necessary to employ a managing partner in a limited liability company?
In most cases, the partners of a limited liability company (GmbH) are also actively involved in the start-up, either in the function of a managing director or they are working without an official board-function.
Due to the shortage of money at the early stage of a start-up, the partners want to stipulate their remunerations very variable, as in some phases (unfortunately) only low salaries can be paid to working founders.
However, this requirement conflicts with the rulings of Austrian social insurance law, which determines that the social insurance contributions must be paid in accordance with the so-called entitlement principle (according to the collective agreement) if an employment relationship exist.
Is there a possible solution?
If the position of a managing directors is not regulated in the applicable collective labour agreement (such as in the IT collective labour agreement), their remunerations can be agreed independently.
If a working partner has no management authority and owns up to 50 percent of the shares of a company subject to a trade licence, it is sometimes also possible to agree on freelance employment contracts (“Freie Dienstverträge”), thus without a minimum salary.
It’s easier for partners, who own 50 percent or more of the shares: In this case, there is generally no employment relationship according to the Austrian General Social Security Act. If the partner’s shareholding is between 25,01 and 49,09 percent, it is also possible to prevent General Social Security, if a so-called blocking minority exists (which may prevent important general meeting resolutions).
The legal situation concerning the flexibility of the salary payments (in the typical start up situation) could be more attractive in Austria. But, with the scenarios described above solutions within legal limits can be found…
Barbara Hölzl, Managing Director and Tax Advisor ECOVIS Austria & David Gloser, Partner, Chartered Accountant and Tax Advisor