“Almost" Single-Member Companies

Hi there! Today, let's take a look at limited liability companies with 99% ownership by one partner in Poland, specifically focusing on how the Social Insurance Institution (ZUS) treats such arrangements.

In previous jurisprudence, such a large disparity in ownership was considered illusory due to the dominant position of one partner—solely intended to circumvent the law for tax benefits. In a verdict dated August 3, 2011 (case no. I UK 8/11), the Supreme Court even went a step further, referring to such a partner as "almost" the sole partner of the limited liability company. This article won't engage in a debate over judicial creativity; however, it's worth considering where mathematics meets grammar, when there's a construction of being "almost" the only person among a larger group of others. Is it like 1.5 persons? Or 1.01 (uwazam ze to powinno byc tak a nie 1.001 jesli to sa procenty ale moze sie myle?) persons, since the second partner holds 1% ownership? It is not only the Lord that works in mysterious ways.

Such an interpretation brought about several unfavorable consequences for potential partners, including the fact that such a majority shareholder was treated as an employee under Article 8(6)(4) of the Social Insurance System Act, resulting in an obligation to pay ZUS contributions.

After years of such interpretation, we were quite surprised by the resolution of the Supreme Court dated February 21, 2024 (case no. III UZP 8/23), which responded to the question: ​Does a partner in a two-person limited liability company with 99 percent ownership, which enables them to freely shape resolutions at the general meeting of partners and make decisions concerning the company's activities, fall under social insurance based on Article 6(1)(5) in connection with Article 8(6)(4) of the Act of October 13, 1998, on the Social Insurance System? The Court indicated that: 

​A partner in a two-person limited liability company with 99 percent ownership does not fall under social insurance based on Article 6(1)(5) in connection with Article 8(6)(4) of the Act of October 13, 1998, on the Social Insurance System (consolidated text: Journal of Laws of 2023, item 1230). 

Does this signify the end of stretching the law by ZUS for its own purposes? Such optimism in Poland is perhaps naïveté ;) However, the resolution will certainly be helpful to individuals who are in the process of, or facing disputes with ZUS. Of course, given the variability of jurisprudence in our country, it's always necessary to stay abreast of developments. And in case of any doubts, it's worth consulting professionals to avoid troubles as much as possible.🚀