Case Studies: social status process, self-employment

This week we had two cases regarding the obligation to pay social contributions for a shareholder working in his company, but not as a managing director:

In the first case the client was asking for damages from their tax advisor because he had falsely advised the client on the obligation to pay social contributions. This only came out after years within the scope of a company audit when the German Pension Fund determined the shareholder as an employee. Due to the advice of the tax advisor the client assumed for years to be self-employed and did not deduct any social contributions. The German Pension Fund now retroactively determined the obligation to pay social contributions retroactively for 3 years; on top, the company is facing penalties. Unfortunately, the damages due to the false advice cannot be easily proven because social benefits may set off the social contributions and you need to prove the alternative causality. Only penalties and interest payments on credits may be easily claimed; the client will likely have to bear the brunt while encountering liquidity problems.

In the second case the company also faces years of claims of social contributions. The client switched after a status determination as self-employed from management into employment. As a 50% shareholder this changed his social status. While he used to be self-employed as managing director, now he became obligated to pay social contributions. For only as a managing director was he able to act independently and block any instructions by the shareholders. No longer a manager, he was now subject to the instructions of the managing directors and could not counter them by issuing a shareholders’ resolution because he did not have the majority in the shareholders’ meeting.

If the clients had consulted us prior to resigning as managing director and starting as an employee respectively, we could have acted contractually and by changing the company bylaws. Processwise, we could have gained clarity from day one by initiating a(nother) status determination process with the German Pension Fund and - if need be - reacted accordingly or filed suit in time. In another case we won a suit at the social court of Berlin against the German Pension Fund, in which the court ruled that our client, a shareholder working for the company, was self-employed, which saved the company a six-figure amount of social contributions.

The two cases show how important it is to seek advice early in social contribution matters and to approach a law firm that has expertise in labour law and employment law, ideally with experience in front of the social courts. When looking for a company lawyer you should in general look for a broad basis in many areas of law. Feel free to send us an email to hi@streiff.law for an informal get to know meeting.

Published on 26.07.2025