Issue: Employment Form and Contribution Duties for KATA Entrepreneurs Managing Single-Member Ltds
A KATA entrepreneur who is also the managing director of a single-member limited liability company (Ltd) and performs the management duties under a commission contract faces specific questions regarding how to fulfill these roles and what social contribution obligations arise.
Why This Matters
The Civil Code (Polgári Törvénykönyv, Ptk.) states that a company’s managing officer may also be employed under a labor contract, without distinguishing between single-member and multiple-member Ltds. This legal framework means that the sole member of a single-member Ltd can also hold an employment relationship with their company, including part-time employment.
This distinction is critical because the legal form of the engagement influences the entrepreneur’s social security contribution obligations as well as how they can invoice for their services.
Applicable Examples
- The managing director of a single-member Ltd can be employed under a part-time labor contract, provided that the working hours do not reach 36 hours per week; the exact measure is at the managing director’s discretion.
- In the examined case, the contractual relationship between the Ltd and managing director is in proper order.
- A KATA entrepreneur may not perform work under the KATA contract towards the Ltd because KATA entrepreneurs can only issue invoices to private individuals, not companies.
- If the entrepreneur’s two business entities become connected companies, this could lead to undesired consequences, an important factor to monitor.
Solutions and Legal Obligations
Given that the managing director qualifies as a corporate entrepreneur under Tbj. 4. § 21, they must pay social contribution based on at least the current minimum wage, according to Tbj. 39. §.
Thus, KATA entrepreneurs serving as managing directors of their single-member Ltd must carefully select the form of legal relationship (employment vs. commission contract) and ensure compliance with social contribution regulations to avoid legal and financial pitfalls.