One-man GmbH does not prevent bogus self-employment

The sole shareholder and managing director of a corporation may also be subject to social security contributions if the clients have only concluded their contracts with the company.

Pseudo-self-employment may also exist if clients conclude their contracts exclusively with a corporation and the work is then carried out by the sole shareholder and managing director. It therefore makes no sense to set up a GmbH or UG with the purpose of avoiding social security obligations. The Federal Social Court has ruled in three appeal proceedings that when determining the status of the managing director, only the specific factual circumstances of the activity are decisive for the existence of employment after an overall assessment. The distinction is based on the express agreements of the contracting parties and the practical implementation of the contract, but not on the designation or desired legal consequences chosen by the parties.