Often, sole owners of small companies become their managers. In this regard, many questions arise. Is it legal to conclude an employment contract with the director of a company, who is its sole founder? Is it even possible to talk about the emergence of labor relations in this situation? Can payments in favor of the director – the sole founder – be taken into account as expenses for tax purposes? Do I need to accrue and submit information to the Pension Fund?
There must always be a director
Let's start with the fact that any legal entity, in accordance with Art. 53 of the Civil Code of the Russian Federation acquires civil rights and assumes civil responsibilities through its bodies. Small travel agencies are most often created in the form of an LLC, so it is appropriate to refer to Law No. 14-FZ, Art. 32 of which it is stated that the supreme body of the company is the general meeting of its participants. The competence of the general meeting includes the formation of the executive bodies of the company (Article 33 of Law No. 14-FZ). The executive body is necessary for the company to manage its current activities (clause 4 of article 32 of Law No. 14-FZ). From the contents of Art. 40 of Law No. 14-FZ it follows that the sole executive body of the company (president, etc.) can be elected both from among its participants and from a circle of third parties. In any case, an agreement is signed between the company and the person performing the functions of the sole executive body of the company (Law No. 14-FZ does not indicate that it is the employment contract that is being signed, although this is quite logical).
At the same time, in a company consisting of one participant, decisions on issues falling within the competence of the general meeting of company participants are made by its sole participant individually and are documented in writing (Article 39 of Law No. 14-FZ).
Here is a sample of the decision of the sole founder to assume the position of director.
About taking office
Based on the decision of the sole founder of Turservice LLC dated July 10, 2017 No. 1, Dmitry Mikhailovich Somov (passport 2213 No. 020406, issued on February 10, 2014 by the Department of Internal Affairs for the Zavolzhsky district of Tver, registered at the address: Tver, Kalinin St., 15, apt. 21), I will assume the duties of Director on July 10, 2017.
Due to the absence of an accountant (chief accountant) position on the staff, I temporarily assume the responsibility for maintaining accounting and reporting. All financial documents of the Company are signed with the sole signature of the sole executive body.
Director
Somov
/D. M. Somov/
Labor relations and contracts
Features of labor regulation of the head of the organization are prescribed in Chapter. 43 Labor Code of the Russian Federation. According to the definition contained in Art. 273 of the Labor Code of the Russian Federation, the head of an organization is an individual who, in accordance with the Labor Code of the Russian Federation, other laws and other regulatory legal acts, the constituent documents of the organization and its local regulations, manages the organization, including performing the functions of its sole executive body. The legal relationship between the director and the organization is formalized by an employment contract, and Art. 275 of the Labor Code of the Russian Federation establishes the specifics of its conclusion.
It is important that the provisions of Ch. 43 of the Labor Code of the Russian Federation do not apply to managers who are the only participants (founders) of organizations, members of organizations, owners of their property (Part 2 of Article 273 of the Labor Code of the Russian Federation). Therefore, the question arises: is there a place for labor relations in the case discussed in the article and should they be formalized in an employment contract? To answer, you need to remember the definition of labor relations. It is given in Art. 15 Labor Code of the Russian Federation:
Labor relations are relations based on an agreement between the employee and the employer on the personal performance by the employee for payment of a labor function (work according to the position in accordance with the staffing table, profession, specialty indicating qualifications; a specific type of work entrusted to the employee) in the interests, under management and control the employer, the employee’s subordination to the internal labor regulations while the employer provides working conditions provided for by labor legislation and other regulatory legal acts containing labor law norms, a collective agreement, agreements, local regulations, an employment contract.
In other words, the performance by an individual of a labor function corresponding to a certain position, the first - for a fee, the second - on the basis of an agreement, forms an employment relationship between him and the organization.
Another important conclusion follows from the above quote: the emergence of an employment relationship is always accompanied by the conclusion of an employment contract (agreement between the employee and the employer).
Options for interpreting the law
Next, we will present two polar points of view with corresponding arguments regarding whether labor relations arise (whether employment contracts are concluded) between the organization and its director, who is also the sole founder of the organization.
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Labor relations (employment contracts) |
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Option 1. Arise (conclude) |
Option 2. Do not arise (are not concluded) |
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There are court decisions (decrees of the FAS ZSO dated July 29, 2009 No. F04-4242/2009 (10610-A27-25)*, FAS SZO dated April 9, 2009 in case No. A21-6551/2008**), in which the arbitrators pay special attention : by virtue of Art. 16 of the Labor Code of the Russian Federation, relations that arose as a result of appointment to a position are characterized as “employment relations on the basis of an employment contract.” Appeal ruling of the Chelyabinsk Regional Court dated November 27, 2014 No. 11-12571/2014: the conclusion of an employment contract with oneself in the situation under consideration does not occur, since the contract is concluded between a legal entity (LLC) and an individual, the relationship between the organization and its head, who is the sole participant of this organization, formalized by an employment contract, this manager is subject to the general provisions of the Labor Code of the Russian Federation. Determination of the Perm Regional Court dated October 26, 2011 No. 33-10786: taking into account the provisions of Art. 11 and 273 of the Labor Code of the Russian Federation, a person appointed to the position of director of a company is its employee, and the relationship between the company and the director as an employee is regulated by labor law. At the same time, labor legislation does not contain norms prohibiting the application of the general provisions of the Labor Code of the Russian Federation to labor relations when the status of the employee and the employer coincides in one person |
Letters from Rostrud dated 03/06/2013 No. 177-6-1 and the Ministry of Health and Social Development of the Russian Federation dated 08/18/2009 No. 22-2-3199 indicate that the sole founder must assume management functions by his decision, which gives him the right to manage the organization without any conclusion. or a contract, including an employment contract. According to Art. 56 of the Labor Code of the Russian Federation, an employment contract is concluded between an employee and an employer. In this situation, there is no employer in relation to the director. That is, an employment contract is not concluded with the director as an employee. Signing an employment contract by the same person on behalf of the employee and on behalf of the employer, according to Rostrud, is not allowed. Thus, labor legislation does not apply to the relations of the sole participant of the company with the company founded by him. It is curious that the manager - the only founder - does not fall under the list of persons who are not covered by labor legislation contained in Art. 11 Labor Code of the Russian Federation. Therefore, the above interpretation of the norms of the Labor Code of the Russian Federation should be considered broad. It must be admitted that Rostrud is consistent in its judgments. Thus, in Letter dated September 4, 2015 No. 2065-6-1, it considered the question of whether it is possible to hold an organization liable under Art. 5.27 of the Code of Administrative Offenses of the Russian Federation for concluding an employment contract with a manager - the sole founder. This article establishes liability for violation of duties provided for by labor legislation and arising from the labor relations between the employee and the employer. Considering that, in the opinion of Rostrud, in the situation under consideration no labor relations arise, it must be assumed that violations under Art. 5.27 Code of Administrative Offenses of the Russian Federation also not |
* Left in force by the Determination of the Supreme Arbitration Court of the Russian Federation dated October 28, 2009 No. VAS-13626/09.
** By decision of the Supreme Arbitration Court of the Russian Federation dated June 3, 2009 No. 6597/09, the transfer of this case to the Presidium of the Supreme Arbitration Court for review in the order of supervision was refused.
There is also a third approach (the most profitable for replenishing the budget) - there are labor relations, but there are no employment contracts. It can be seen in the letters of the Ministry of Finance, which, although not vested with the right to give explanations on the application of labor legislation, nevertheless spoke out on the issue of interest to us. Thus, in Letter No. 03-11-11/14234 dated March 15, 2016, with reference to the Determination of the Supreme Arbitration Court of the Russian Federation dated June 5, 2009 No. VAS-6362/09, it states: “ If the head of the organization is its only founder, that is, one of the parties to the employment contract is absent, then the employment contract cannot be concluded. …employment relations with the director as an employee are formalized not by an employment contract, but by the decision of the sole participant».
Recognition in expenses of payments to the founding director
, that is, she believes that an employment relationship with the director - the sole founder arises; for her, the issue of concluding an employment contract is not idle, since in the absence of one, she may face additional difficulties in terms of recognizing expenses for the salary of the director - the sole founder.
As a general rule, expenses associated with the payment of wages to employees are taken into account when forming the taxable base for income tax (clause 1, article 255 of the Tax Code of the Russian Federation) and when applying the simplified tax system with the object “income minus expenses” (clause 6, clause 1, article 346.16 Tax Code of the Russian Federation).
However, remunerations accrued to both employees and managers, but not provided for in the employment contract, do not reduce taxable profit (clause 21, article 270 of the Tax Code of the Russian Federation). Therefore, in order to take into account payments in favor of the director - the sole founder - in expenses, they must be provided for in the employment contract (see Letter of the Ministry of Finance of the Russian Federation dated October 13, 2015 No. 03-03-06/1/58416).
Let us recall that, due to the position of financiers, an employment contract with the director - the sole founder - is not concluded due to the absence of a second party to such an agreement. This means that the head of the organization, who is its sole founder, cannot calculate and pay wages to himself. Consequently, the organization does not have the right to take into account for tax purposes expenses incurred by the director in the form of paying himself wages (see Letter of the Ministry of Finance of the Russian Federation dated February 19, 2015 No. 03-11-06/2/7790). The department extends this conclusion to both income tax payers and simplified tax payers.
However, as we have already found out, the courts allow the existence of labor relations between the company and the director - the sole founder, and the execution of an employment contract with him does not constitute an administrative offense. Moreover, if an employee is allowed to work, an employment relationship arises regardless of the execution of a written employment contract; the contract itself is still considered concluded. Its paper version must be drawn up no later than three working days from the date of the employee’s actual admission to work (Part 2 of Article 67 of the Labor Code of the Russian Federation).
When real labor relations take place, and the employment contract is considered concluded even before the written form is drawn up, there are grounds for applying clause 21 of Art. 270 of the Tax Code of the Russian Federation no.
Let us immediately make a reservation that such an approach may cause claims from regulatory authorities and its legality will have to be defended in court.
To document the fact that expenses have been incurred to pay salaries to the director, the organization can submit a decision on the appointment of the sole founder to the position of head of the organization, as well as pay slips, pay slips, and cash receipts that indicate the payment of salaries.
The fact that the presence of these documents will strengthen your position in court is confirmed by arbitration practice. Thus, the judges recognized the existence of labor relations, and therefore the legality of the expenses incurred if there were:
staffing table, payslips for wages (Resolution of the Federal Antimonopoly Service of the Northern Territory of October 11, 2007 No. A42-5270/2006);
salary certificates, cash receipts orders, pay slips (Resolution of the Federal Antimonopoly Service VSO dated 10.10.2007 No. A33-15270/06-F02-6504/07).
, that is, he believes that there is no labor relationship with the director - the sole founder; payments in his favor clearly fall under clause 21 of Art. 270 of the Tax Code of the Russian Federation and cannot be accepted for tax purposes.
Calculation of insurance premiums for payments to the founding director
If the organization adheres to option 1 , payments in favor of the head of the organization, who is the only participant (founder), are subject to insurance premiums.
The Ministry of Labor has always insisted on this (Letter No. 17-3/OOG-330 dated 05/05/2014): managers - the only founders - are recognized as insured persons under compulsory pension insurance, compulsory social insurance in case of temporary disability and in connection with maternity and compulsory health insurance. Consequently, for payments made in favor of the general director of the organization, who is its sole founder, insurance premiums are charged in the generally established manner.
Currently, the object of taxation of insurance premiums is defined in Art. 420 of the Tax Code of the Russian Federation and for employers it includes payments and other remuneration in favor of individuals subject to compulsory social insurance in accordance with federal laws on specific types of compulsory social insurance, made, in particular, within the framework of labor relations.
Attention: For the calculation of insurance premiums, the presence of an employment contract does not matter; the fact of the existence of an employment relationship is important.
As for judicial practice, arbitrators have more than once recognized the legality of payments to the director - the only founder of social benefits (resolutions of the FAS ZSO dated March 15, 2011 in case No. A45-16926/2010, dated November 9, 2010 in case No. A45-6721/2010, dated September 28. 2010 in case No. A45-3921/2010, FAS DVO dated October 19, 2010 No. F03-6886/2010 in case No. A73-2821/2010).
If the organization adheres to option 2 and does not consider the relationship with the founding director to be an employment relationship, then insurance premiums should not be charged for payments to the director, but at the same time the likelihood of claims from the tax authorities is very high.
There are also court decisions, in particular the Resolution of the FAS ZSO dated March 15, 2011 in case No. A45-16926/2010, where, after assessing the specific circumstances of the case, the judges deny benefits to the founding director due to the lack of economic need to appoint him to the position (there is no activity , the duties of the director are not fulfilled in reality).
Submission of information to the Pension Fund of the Russian Federation using the SZV-M form
The rules of clause 2.2 of Art. 11 of Federal Law No. 27-FZ establishes that the policyholder submits information on a monthly basis about each insured person working for him in the form SZV-M, approved by Resolution of the Board of the Pension Fund of the Russian Federation dated 01.02.2016 No. 83p (hereinafter referred to as Resolution No. 83p).
If the organization adheres to option 1 , recognizes the relationship with the founding director as labor and has an employment contract with him, then information about the director is clearly subject to reflection in reporting in the SZV-M form (clause 2.2, 4, article 11 of Federal Law No. 27-FZ, clause 1 of Resolution No. 83p, appendix to Resolution No. 83p, clause 1, article 7 of Federal Law No. 167-FZ).
According to the explanations given in letters of the Ministry of Labor of the Russian Federation dated July 7, 2016 No. 21-3/10/B-4587, Pension Fund of the Russian Federation dated July 13, 2016 No. LCH-08-26/9856, information in the SZV-M form is submitted in relation to insured persons working under an employment or civil law contract, including in relation to the head of the organization, who is its sole founder (participant). In the event that an employment contract has been concluded with these persons, this reporting is submitted to all working insured persons, regardless of the actual payment and other remuneration, as well as the payment of insurance premiums.
If the organization adheres to option 2 and denies the existence of an employment relationship with the founding director, then it is logical not to include information about him in the SZV-M form. From a literal reading of the norm of paragraph 1 of Art. 7 of Federal Law No. 167-FZ, it follows that only the head of the organization is recognized as the insured person - the only founder working in it under an employment contract. At the same time, the head of the organization is the only founder with whom there is no contract (labor, civil law) and is not mentioned as an insured person in the said article. The rules of Art. 8, clause 2.2, 4 art. 11 of Federal Law No. 27-FZ provides that information in the SZV-M form is presented only in relation to insured persons working for the insurer.
But we must remember that the Ministry of Labor and the Pension Fund of the Russian Federation have a different point of view on this matter. As stated above, the Ministry of Labor in Letter No. 17-3/OOG-330 dated May 5, 2014 named the heads of the organization, who are the only participants (founders), insured without an additional clause on the conclusion of an employment or civil law contract. As for the Pension Fund of Russia, in Letter No. 08-22/6356 dated May 6, 2016, it also included the manager - the only founder - among the insured persons in respect of whom this reporting is being submitted.
Let us express our own position regarding labor relations and employment contracts with the director - the sole founder. It is quite obvious that there is no universal answer to the question of whether or not an employment relationship arises with a director who is the owner of the organization. In our opinion, everything depends on the specific circumstances.
The director's job is not fiction
When the sole founder of a company, having appointed himself to the position of director, actually performs the corresponding labor function - manages the current activities of the organization, observes labor regulations, concludes transactions, makes business trips, conducts negotiations, etc., then the existence of labor relations between him and the company is denied it is forbidden. As for drawing up an employment contract, of course, signing it by one person on both the employer’s and the employee’s sides looks incorrect. However, this moment rather clearly illustrates the uniqueness of the situation under consideration, rather than indicating the impossibility of drawing up an agreement in principle. In our opinion, an employment contract should be drawn up and a very responsible approach should be taken to describing the manager’s responsibilities (bringing them as close as possible to the tasks actually performed), the amount of the manager’s remuneration and various additional payments. A properly drafted contract will make it easier to prove the validity of tax expenses in the form of payments to the director. Of course, in this case, the organization will have to calculate insurance premiums and submit information about the director using the SZV-M form.
The position of director is formal
If the sole founder of the company, having appointed himself to the position of director, does not actually perform his functions (this is especially noticeable when the organization does not operate at all (no movement on current accounts, no concluded contracts, no jobs, etc.)), then even when creating the necessary paperwork (drawing out an employment contract and other personnel documentation), the existence of labor relations between him and the company should be questioned. Most likely, when checked by the tax authority, the amounts of wages accrued to such a director will not be accepted for tax purposes. In turn, the inspectors will probably require payment of insurance premiums and submission of reports to the Pension Fund. The language of laws encourages these actions. For such a situation, our recommendation is as follows. The founder needs to limit himself to the decision to assume the duties of a director of the company. There is no need to draw up an employment contract, nor does it need to acknowledge the existence of an employment relationship between the company and the director. Then the non-accrual of wages in favor of the director will be completely justified and will not create disagreements with the tax authority and the Pension Fund.
Today there is no complete clarity on the issue of formalizing labor relations with the director - the sole founder. The courts recognize the relations that arose as a result of appointment to a position by the decision of the sole owner as labor relations. This solution allows you to manage an organization without concluding an employment contract. At the same time, the presence of an employment relationship in the absence of an employment contract makes it difficult for an organization to recognize payments to the director when calculating taxes. The calculation of insurance premiums and the submission of reports to the Pension Fund also depends on the recognition of the relationship with the director as an employment relationship, and the director himself as an insured person.
Russian legislation is quite confusing. Therefore, sometimes it can be very difficult to find an answer to clearly posed questions. Moreover, situations often arise when different supervisory authorities begin to interpret the provisions of certain articles differently. Most recently, the Ministry of Finance published a document according to which the director of an LLC cannot pay his own wages. The issue of this position in very small companies is extremely confusing and requires detailed study.
Can a director work without an employment contract?
For a limited liability company, there is no difference between individuals, be it an ordinary employee or a founder. If the owner of the company also acts as its director, from the point of view of labor standards it is accepted as an employee. And since he has all the functions of an employee, he has a range of rights and responsibilities.
The Labor Code clearly defines the list of persons who fall under its scope. It states that the relationship between the director of the LLC and the employer arises as a result of his election. It directly follows from this that he must carry out his activities under an employment contract.
In an organization that was opened by one citizen, and he is also its director, an employment agreement can be signed by him both on the part of the employer and on the part of the employee. There is nothing illegal or wrong in this situation.
It is important to understand that the director of an LLC cannot work without an employment contract. That is why it is important for the agreement to be signed by one person on both sides. If you do this, you can be completely sure that the company will not be afraid of inspection by the prosecutor’s office or labor inspectorate.
Payment of wages
When opening an LLC, many people are concerned about the question: if the only founder is the director, is it necessary to accrue salary? You will have to pay wages in any case, since this is directly stated in the Labor Code. Moreover, you will also have to ensure that the level of this very board is not less than the minimum size. However, the maximum limit is not established by law. In the constituent entities of the Russian Federation, the size of such a fee may differ, so you will also need to pay attention to this.
It is necessary to charge fees in order not to receive a fine and not to be brought to administrative liability under the relevant article of the Code of Administrative Offences. Even if things are going badly, the work has just started or has stopped altogether, this in no way relieves you of the above obligation.
However, there are options when the answer to the question: the director is the only founder, is it possible not to pay salaries, will be positive. In fact, you can pay less than the minimum wage. How to do this without breaking laws? In order to pay wages less than the stipulated level, it is enough to transfer the director to part-time work.
Moreover, you can formally leave the director-founder of the LLC without paying a salary. How to make it legal? To do this, it is enough to send him on leave without pay. The duration of such a period of time is not limited in any way by legislators. This way you can rest for a very long time. While this period is in effect, wages will not need to be paid.
Most often, directors are sent on leave without pay in the following cases:
- the company is registered, but activities have not yet begun, there is no profit;
- the operation of the LLC has been suspended for any reason, and no funds are expected to be received into the account or cash register;
- The activity has been terminated and the procedure for closing the LLC is underway.
With the resumption of activities, the appearance of profits and money in circulation, the director can again be returned to perform his official duties.
At the first stages, when the company has just received a certificate of registration and the work of making a profit has not yet actually started, the employment contract may not even be drawn up or left lying on the table unsigned and not entered into force. However, if such a situation is left to chance for too long, supervisory authorities may begin to ask questions and conduct checks on compliance with applicable laws.
It should be remembered that for violation of one or another rule of the Labor Code of the Russian Federation, liability is provided, which is specified in the Code of Administrative Offenses. The size can be significant, especially for a newly opened and young office.
How this article will help: You will be able to choose the form of relationship with the founding director that is most convenient for the company.
What it will protect you from: From unpleasant surprises during a tax audit in the form of additional charges and fines.
If your company is “simplified”
The founder of the company assumes the position of CEO. If he is not the sole owner of the business, nothing prevents you from concluding an employment contract with him. Then the contract on behalf of the employer will be signed by another co-owner of the company (see letter of Rostrud dated December 19, 2007 No. 5205-6-0).
If the company has only one founder and he will be the director, then the question arises: is it possible to conclude an employment contract with the director? There is no clear answer in the legislation. Therefore, in practice, two opposing approaches have emerged.
According to the first, the director is hired under a regular employment contract, which he signs “with himself.” Accordingly, he receives a salary and pays taxes on it. This position seems simpler and more logical, but federal officials believe that this cannot be done.
In the second approach, an employment contract is not concluded. This is exactly what experts from the Ministry of Health and Social Development and the Ministry of Finance of Russia recommend doing. And the Federal Tax Service of Russia supports them. From this point of view, this option (without an employment contract) is safer.
The director works without an employment contract
The Russian Ministry of Finance not long ago issued a letter in response to a private request: is it necessary to accrue unified social tax and pension contributions for payments to the founding director. According to officials, this is not necessary if an employment contract has not been drawn up with the manager (letter dated September 7, 2009 No. 03-04-07-02/13). The Ministry of Finance of Russia does not undertake to decide whether or not such an agreement can be concluded, but refers this issue to the Ministry of Health and Social Development of Russia. In turn, the Ministry of Health and Social Development of the Russian Federation makes it clear: it is impossible to conclude an employment contract with a director who is the sole founder (letter dated August 18, 2009 No. 22-2-3199). Previously, Rostrud expressed a similar position (in letter dated December 28, 2006 No. 2262-6-1).
Officials argue their position as follows. Article 273 of the Labor Code of the Russian Federation states: the norms of Chapter 43 do not apply to managers - the only founders. And Chapter 43 of the Labor Code of the Russian Federation establishes the labor rules of company managers - the procedure for concluding and terminating an employment contract, liability and guarantees. Therefore, officials believe: since the labor standards of founding directors are not regulated in any way by the Labor Code of the Russian Federation, it means that it is impossible to conclude an employment contract in this case. Another argument: an employment contract cannot have the same signature on the part of the employee and on the part of the employer.
Carefully!
Officials of the Ministry of Health and Social Development believe that one person cannot sign an employment contract on both sides.
Letters from the Ministry of Finance of Russia No. 03-04-07-02/13 and the Ministry of Health and Social Development of Russia No. 22-2-3199 have already been brought to the attention of inspectors (see letter of the Federal Tax Service of Russia dated September 16, 2009 No. ShS-17-3/168 @ ). Consequently, tax authorities will be guided by this logic during audits.
If the company has decided not to argue with officials, then the only document that will confirm the powers of the founding director is his own decision to assume the functions of the sole executive body. In this case, all powers of the founder must be enshrined in the charter.
There is no need to pay “salary” taxes on the income that the founding director will receive for his work. But it will not be possible to take this amount into account when calculating income tax. After all, this payment is not provided for in the employment contract.
Note that this option cannot be called convenient and completely safe. Firstly, problems may arise with banks, which almost always require an employment contract with the founding director when opening a current account. And this is despite the fact that the founder, in principle, has the right to open accounts - his powers to represent the interests of the company are enshrined in the charter.
And secondly, the company can be fined by inspectors who do not always adhere to the official position (see sidebar “The ban on concluding an employment contract infringes on the rights of the sole founder” on page 57). After all, if the founder directly manages the company, that means he works for it, and the absence of an employment contract with the employee is unacceptable. For this, an administrative fine is imposed: for officials - from 1000 to 5000 rubles; for legal entities - from 30,000 to 50,000 rubles. or administrative suspension of activities for up to 90 days. This punishment is provided for in Article 5.27 of the Code of the Russian Federation on Administrative Offenses.
In addition, working without an employment contract is disadvantageous for the manager himself. After all, since the company does not pay the unified social tax on his income, he is deprived of all social benefits (sick leave, maternity leave, etc.).
An employment contract is drawn up for the founding director
Today, most companies, despite the point of view of officials, issue an employment contract for the founding director. After that, they draw up an order for employment in Form No. T-1, make a corresponding entry in the work book and create a personal card for the manager. Next, the manager begins to receive a salary, which can be written off as expenses in accordance with Article 255 of the Tax Code of the Russian Federation. For this payment, the organization accrues unified social tax and contributions to extra-budgetary funds. Accordingly, the manager receives the right to all social benefits.
About how not to make a mistake when filling out an employment order using Form No. T-1.
However, due to the latest official clarifications, which we wrote about above, this course of action can become dangerous. The main threat will come from tax inspectors. Of course, they will not return “salary” taxes from the budget, but they will willingly charge additional income taxes. The reason is the invalidity of the employment contract. Inspectors can refer to paragraph 21 of Article 270 of the Tax Code of the Russian Federation, according to which remuneration not provided for in the employment contract does not reduce taxable profit.
In addition, problems with the FSS of Russia cannot be avoided. For many years, fund officials have refused to reimburse sick leave and maternity leave paid to the sole founder, who works as a director. They are guided by the same position: the employment contract with the founding director is illegal. And an employee who is not in an employment relationship with the enterprise cannot receive sick leave, maternity leave and child care benefits.
Thus, we believe that concluding an employment contract with the founding director only makes sense if it is important for the manager to receive social benefits and the company is ready for disputes with officials.
What arguments will help defend the legality of the employment contract with the founding director?
If the company decides to draw up an employment contract, then you can argue with the tax authorities and officials of the Federal Social Insurance Fund of Russia using the following arguments.
The first and most important argument: current legislation does not prohibit the signing of an agreement by the employer and employee by the same person.
Argument two: the norms of the laws on LLCs and JSCs also do not prohibit the appointment of the sole founder of the company to the position of director.
Thus, Article 39 of Federal Law No. 14-FZ of February 8, 1998 states: the sole founder of an LLC performs the functions of a general meeting of participants. And one of these functions is precisely the election of the sole executive body: general director, president, etc. (Clause 1, Article 40 of Federal Law No. 14-FZ). The same rules apply to joint stock companies. The sole shareholder resolves issues within the competence of the general meeting of shareholders (clause 3 of article 47 of the Federal Law of December 26, 1995 No. 208-FZ). This also includes questions about the creation of a board of directors to which the head of the company is accountable. Thus, the sole founder has every right to appoint himself to the position of manager.
Argument three: in this case, the employment contract is concluded as a result of the election (appointment) of a director to the position. Such a basis for concluding a contract is expressly provided for in Article 16 of the Labor Code of the Russian Federation. This article refers to Chapter 2 of the code. Consequently, the provision of Article 273, which prohibits the use of Chapter 43 in this situation and which officials actively refer to, does not work in this case.
Let us note once again that not all local officials today agree with the official point of view (see box on page 57). In addition, the company has a great chance of challenging it - if not during the inspection, then in court. In any case, arbitration practice on the issue of compensation for benefits to founding directors has already developed in favor of organizations (see resolutions of the FAS of the West Siberian District dated August 26, 2009 No. F04-4142/2009 (10417-A45-34) and the FAS of the Volga District dated June 8, 2009 No. A65-16522/2008). The Supreme Arbitration Court of the Russian Federation also expressed its point of view. The judges of the Supreme Arbitration Court of the Russian Federation, in their ruling dated February 26, 2009 No. 1535/09, indicated: an employment contract can be concluded even if the director and the employer are the same person.
The ban on concluding an employment contract infringes on the rights of the sole founder
The Russian Ministry of Finance and Rostrud are confident that an employment contract with the director, the sole founder of the company, cannot be concluded, since there are no labor relations. However, the Russian Ministry of Health and Social Development, foundations and judges have a different opinion.
As a rule, an employment contract with the head of a company does not cause difficulties. Moreover, Chapter 43 of the Labor Code is dedicated to it.
However, everything is not so simple if the company has a single participant and he also becomes the director. It's all about a clause in the Labor Code. It says that the norms of Chapter 43 “Features of labor regulation of the head of an organization” do not apply to cases when the head of the company is the only participant (founder), member of the organization, owner of its property (Article 273 of the Labor Code of the Russian Federation). From this we can conclude that the relationship between the company and its director, the only participant, is not labor.
An employment contract is not concluded if the relationship is not employment
This unchanged position was taken by Rostrud (letters of Rostrud dated 03/06/2013 No. 177-6-1, dated 12/28/2006 No. 2262-6-1). He pointed out that it is impossible to conclude an agreement with oneself, since the signing of an employment contract by the same person on behalf of the employee and on behalf of the employer is not allowed. It was also stated that the parties to the labor relationship are the employee and the employer. An employee is an individual who has entered into an employment relationship with an employer. An employer is an individual or legal entity (organization) that has entered into an employment relationship with an employee.An employment contract is an agreement between an employer and an employee, that is, a bilateral act. If one of the parties to the employment contract is absent, it cannot be concluded. Thus, labor legislation does not apply to the relations of the sole participant of the company with the company established by him. As Rostrud points out, the only participant in the company in this situation must, by his decision, assume the functions of the sole executive body - director, general director, president, etc. Management activities in this case are carried out without concluding any contract, including an employment contract.
Other departments were not so categorical and changed their position over time.
Thus, the Ministry of Health and Social Development of Russia in its letter (letter of the Ministry of Health and Social Development of Russia dated August 18, 2009 No. 22-2-3199) fully shares the above point of view of Rostrud.
She was also supported by the Social Insurance Fund of the Russian Federation, pointing out that cases when the head of an organization is the sole owner of its property are not regulated by labor legislation ().
However, both departments subsequently took the opposite position.
An employment contract can be concluded if the employment relationship
Changing their position, employees of the FSS of Russia and the Ministry of Health and Social Development of Russia cited the following arguments (letter of the FSS of Russia dated December 21, 2009 No. 02-09/07-2598P; order of the Ministry of Health and Social Development of Russia dated June 8, 2010 No. 428n). The Labor Code does not contain rules prohibiting the application of its general provisions to labor relations when the employee and the employer are one person. Labor relations that arise as a result of election, appointment to a position or confirmation in a position are characterized as labor relations on the basis of an employment contract (Article 16 of the Labor Code of the Russian Federation). The relationship of the manager with the organization, where he is the only participant, meets all the characteristics of labor relations (Article 15 of the Labor Code of the Russian Federation):- are based on an agreement between the employee and the employer;
- the employee personally performs his or her job function;
- work is carried out for a fee;
- the employee has a specific specialty or profession according to the staffing table;
- The parties to the agreement are subject to labor regulations.
It should be noted that the departments changed their point of view under the influence of uniform judicial practice, which is steadily developing in favor of the fact that it is necessary to conclude an employment contract with the director - the only participant (determination of the Supreme Arbitration Court of the Russian Federation dated 06/05/2009 No. 6362/09 in case No. A51-6093 /2008,20-161; resolution of the Eighteenth AAS dated March 18, 2014 No. 18AP-1388/14 in case No. A76-15808/2013 (by decision of the RF Armed Forces dated November 28, 2014 No. 309-KG14-4819, the transfer for review was denied), Ninth AAS dated 05/26/2010 No. 09AP-10226/2010, AS DVO dated 12/09/2014 No. F03-5420/14, FAS DVO dated 10/19/2010 No. F03-6886/2010; appeal rulings of the Krasnoyarsk Regional Court dated 08/20/2014 on the case. No. 33-8058/2014, Moscow Regional Court dated 02/07/2013 in case No. 33-2788/2013).
An interesting point of view was expressed by the Supreme Court of the Russian Federation (determination of the Supreme Court of the Russian Federation of February 28, 2014 No. 41-KG13-37): if between a company and its manager, who is the only participant (founder) of this organization and the owner of its property, the relationship is formalized by an employment contract, for the specified manager is subject to the general provisions of the Labor Code.
That is, the form in this case determines the content: if an employment contract is concluded, it means that the employment relationship has developed.
The relationship is labor, but formalized by the decision of the participant
It would seem that there has been some clarity on this issue. Rostrud remained in the minority. The courts, the Federal Social Insurance Fund of Russia and the Ministry of Health and Social Development of Russia support the idea of the necessity and legality of an employment contract.And then the Russian Ministry of Finance unexpectedly issued a letter (), where it fully reproduced the position of Rostrud, which is as follows: The Labor Code stipulates that an employment contract involves two parties: the employee and the employer. If one of the parties to the employment contract is absent, it cannot be concluded. If the head of the organization is its only founder, that is, one of the parties to the employment contract is absent, the employment contract cannot be concluded. In this regard, employees of the financial department proposed to accrue dividends quarterly, subject to personal income tax.
The opinion seems to the author controversial from a legal point of view, since in this case it is absolutely groundless to talk about the absence of one of the parties to the employment contract. Both sides are present: on the employer’s side - the company, that is, a legal entity, on the employee’s side - an individual.
It is also quite obvious to the author that it is impossible to equate an LLC, consisting of a single participant - an individual, and this individual himself. These are different persons from the point of view of law, they have different legal status, rights and obligations, legal capacity, taxation. This is evidenced by the norms of the Civil Code, the Tax Code and judicial practice. For example, when considering one of the cases, the judges (appeal ruling of the Chelyabinsk Regional Court dated November 27, 2014 in case No. 11-12571/2014) rightly indicated that concluding an employment contract with oneself in this situation does not occur, since the contract is concluded between a legal entity and an individual, that is, different subjects of legal relations.
Excluding the possibility of applying the general provisions of labor legislation to the relationship between a legal entity and its director, who is the only participant in the company, violates the rights provided for by the Constitution of the Russian Federation: to freely dispose of one’s ability to work, to choose the type of activity and profession, the right to remuneration for work and paid annual leave, and also for social security by age (Articles 37, 39 of the Constitution of the Russian Federation).
What is especially strange is that the Ministry of Finance of Russia in its letter (letter of the Ministry of Finance of Russia dated March 15, 2016 No. 03-11-11/14234) referred to the ruling of the Supreme Arbitration Court of the Russian Federation (determination of the Supreme Arbitration Court of the Russian Federation dated June 5, 2009 No. 6362/09 in case No. A51- 6093/2008, 20-161). However, in this judicial act, although the court came to the conclusion that an employment contract with the director - the sole founder may not be concluded, it also indicated that the relationship in this case is labor, the director is an employee in relation to the company, and therefore it is subject to the norms of the Labor Code and compulsory insurance. And most importantly, the definition does not prohibit the conclusion of an employment contract in the case we are considering. Although the court came to the conclusion that labor relations in this situation are formalized by the participant’s decision to appoint a director (Article 39 of Federal Law No. 14-FZ of 02/08/1998).
If local tax authorities perceive the letter from the Russian Ministry of Finance as a direct guide to action and consider only the payment of dividends, but not the calculation of salaries to the director, to be legal in this situation, then we may encounter tax authorities refusing to recognize the salary of the director - the only participant - as a legal and justified expense.
At the same time, the author believes that this situation is still unlikely, since taxation remains the same: it doesn’t matter whether the payment is quarterly or monthly, 13 percent of personal income tax is still paid on it (Articles 210, 214, paragraph 1 of Article 224 of the Tax Code of the Russian Federation) .
And if wages are paid, the budget not only did not suffer, but also received personal income tax earlier than if you follow the position of the Russian Ministry of Finance. At the same time, the dividend option proposed by the financial department can be used, because the participant has the right to dividends, and they are also not subject to insurance contributions. When paying dividends to a company participant, such amounts will not be related to the existence of labor relations with the company or relations within the framework of civil contracts, the subject of which is, among other things, the performance of work or the provision of services, which means that these amounts will not be subject to insurance contributions ( Part 1 of Article 7 of the Federal Law of July 24, 2009 No. 212-FZ; Clause 1 of Article 20.1 of the Federal Law of July 24, 1998 No. 125-FZ; 16893, dated November 17, 2011 No. 14-03-11/08-13985). At the same time, only paying dividends without paying salaries can also be dangerous, since funds may consider this a way to avoid contributions and reclassify these payments as wages.
Lack of an employment contract is punishable by a fine
If in the described situation you do not conclude an employment contract, the state labor inspectorate may consider this an administrative offense and prosecute you for violating labor legislation (Article 5.27 of the Code of Administrative Offenses of the Russian Federation). Responsibility may be as follows: a warning or the imposition of an administrative fine on officials in the amount of 1,000 to 5,000 rubles, a fine on legal entities - from 30,000 to 50,000 rubles.And the courts confirm this, pointing out that from the Labor Code (Article 11, 273 of the Labor Code of the Russian Federation) it follows that the person appointed to the position of director of the company is its employee, and the relationship between the company and the director as an employee is regulated by labor law. At the same time, the Labor Code does not contain rules prohibiting the application of the general provisions of the Code to labor relations when there is a coincidence of an employee and an employer in one person (decision of the Primorsky Regional Court of September 22, 2015 in case No. 21-1087/2015).
The absence of an employment contract will increase income tax
The organization has the right to take into account expenses associated with the payment of wages to employees when forming the tax base (clause 1 of Article 255 of the Tax Code of the Russian Federation). However, remunerations accrued to managers and employees, but not provided for in the employment contract, do not reduce taxable profit (clause 21, article 270 of the Tax Code of the Russian Federation). Therefore, in order to take into account payments in favor of the sole founder, they must be provided for in the employment contract. Formally, the legality of accounting for wage expenses can be confirmed even if the employment contract is not concluded in writing. After all, as the author has already pointed out, as a result of the appointment to the position of a manager, labor relations arise between him and the organization. At the same time, this approach may cause claims from tax authorities during an audit, and its legality will have to be defended in court.What can be recommended to the director - the only participant in such a confusing situation among conflicting opinions? Since it is obvious that the advantages of having an employment contract in the situation under consideration are much greater than the disadvantages, in the author’s opinion, the following options are possible:
- draw up an employment contract, calculate and pay wages based on the fact that all judicial practice, the Ministry of Health and Social Development of Russia, the Federal Social Insurance Fund of Russia and the labor inspectorate support this option;
- draw up an employment contract and receive part of the funds as wages, as well as accrue and pay dividends to yourself as a member of the company. Both of these options are reasonable, legal and justified. In addition, they will help you save on insurance premiums.
The Russian Ministry of Finance believes that if the head of an organization is its only founder, that is, one of the parties to the employment contract is absent, the employment contract cannot be concluded.
The question of the need/possibility of concluding an employment contract with a director who is a (participant) of the organization has not received a single official answer for several years now.
Moreover, the Ministry of Finance, Rostrud, off-budget funds and courts argue opposing points of view, citing legislation, which does not prevent them from changing their opinion after some time. We decided to help you dot the i’s and give arguments in defense of both one and the other point of view.
What to do if the founder-manager wants to enter into an employment contract with himself
The main reasons why a founder may be interested in concluding an employment contract with his organization are the following:
- social guarantees - the opportunity to go on vacation, sick leave, maternity leave;
- pension insurance experience - work experience as a director is included in the total length of service for calculating a pension;
- the opportunity to receive income from the business in the form of a monthly salary, and not once a quarter (and even then, if there is a profit).
Since 2015, the tax rate on dividends for individuals increased from 9% to 13% and equaled what is withheld from an employee’s salary in the form of personal income tax, so there is no longer any economic sense in receiving profit from a business in the form of dividends. As for the organization’s expenses for insurance premiums from the director’s salary, they amount to a significant amount - 30% of the accruals. According to current legislation, insurance premiums are credited to the personal account of the insured person, but it is difficult to say whether the entire amount of contributions will be returned in the form of a pension.
Officials, disputing the possibility of concluding an employment contract for the founder with himself as a director, argue that since this requires two parties (employee and employer), signing an employment contract is impossible.
From the letter of Rostrud dated March 6, 2013 No. 177-6-1: “The basis of this norm is the impossibility of concluding an agreement with oneself, since signing an employment contract by the same person on behalf of the employee and on behalf of the employer is not allowed. An employment contract is an agreement between an employer and an employee, i.e. bilateral act. If one of the parties to the employment contract is absent, it cannot be concluded.”
The Ministry of Finance adheres to the same point of view (letter dated February 19, 2015 No. 03-11-06/2/7790): “Consequently, the head of an organization, who is its sole founder and member of the organization, cannot calculate and pay wages to himself.” At the same time, the Ministry of Finance went even further and prohibited the inclusion of salaries and fees for directors in expenses.
As another argument refuting the possibility of concluding an agreement with the founding director, the provisions of Chapter 43 of the Labor Code of the Russian Federation are cited, which considers labor relations with the director. Article 273 of the Labor Code of the Russian Federation states that the provisions of this chapter do not apply to managers who are the only participants (founders) of their organizations. From this, officials draw a controversial conclusion that the very possibility of concluding an employment contract with the founding director is unacceptable.
So, how can you refute this point of view if you want to enter into an employment contract with yourself as a director, being the sole founder of your organization?
- In this case, the employment contract is concluded with the participation not one person, but two, one of which is physical (director), and the second is legal (organization). It is known that a legal entity has its own legal capacity and acts in legal relations on its own behalf, and not on behalf of its founders.
- Chapter 43 of the Labor Code of the Russian Federation regulates labor relations with a manager who is not a founder, but the Labor Code nowhere does not contain a ban the possibility of concluding an employment contract with the director - the sole founder. The list of persons who are not covered by labor legislation is given in Article 11 of the Labor Code of the Russian Federation, and the manager, who is the only participant in organizations, does not appear on this list.
- Laws on insurance premiums (No. 255-FZ dated December 29, 2006 and No. 167-FZ dated December 15, 2001) directly indicate the need for payments for pension and social insurance of all employees, making a special reservation about the heads of organizations who are the only participants (founders).
- Among the expenses that cannot be taken into account when calculating the tax base for profits, the Tax Code of the Russian Federation indicates any remuneration to managers, except under an employment contract (Clause 21, Article 270 of the Tax Code of the Russian Federation), which means that expenses for the director’s salary can be written off. Prohibition on accounting for such expenses in relation to the founding director tax legislation does not contain.
As for the letters from the Ministry of Finance and Rostrud, they, unlike laws, are not normative legal acts, do not have legal force and contain only explanations and opinions of these departments. In addition, there is extensive arbitration practice in which courts confirm the director’s right to enter into an employment contract with an organization if he is its only participant.
What to do if the founder-manager does not want to enter into an employment contract
Let's consider the opposite situation - when the founder assumes management functions, but does not want to enter into an employment contract. Most often, such reluctance arises at the start of a business, when the LLC is not yet properly operating, there is no profit, and the founder agrees with this state of affairs.
He is ready to invest a year or even more in the development of his business, and the existence of an employment contract with him as a manager obliges the organization to pay a salary not lower than the regional minimum plus insurance premiums. In addition, quarterly HR reporting for employees (even with one director) is quite complex, and without the involvement of specialists it will not be easy to submit.
Since we have just refuted the arguments of the Ministry of Finance and Rostrud that it is impossible to conclude an employment contract in this case, we will not refer to the above letters. Then on what basis can a founder manage his organization if an employment contract is not concluded?
This is where civil law comes into force. The provisions of Article 53 of the Civil Code of the Russian Federation, Articles 32,33, 40 of the Law “On LLC” indicate that the director is the sole executive body of the company and carries out the current management of the LLC’s activities.
The sole founder receives his managerial powers from the moment when he, by his decision, assumes the functions of the sole executive body. In this case, management activities are carried out without concluding any contract, including an employment contract.
By the way, indirectly, the fact that the managerial powers of the executive body is not the same as the labor duties of the director is evidenced by the fact that a director working on the basis of an employment contract is not deprived of his managerial functions while on vacation. A director on vacation still has the right to sign documents on behalf of the company within his competence and perform other functions assigned to him by law and the charter. It should be noted, however, that in such a situation there is a risk of disputes with the tax authorities, so the safest thing to do would be to recall the director working under an employment contract from vacation to sign documents.
Thus, the only founder who wants to manage his organization himself has the right how to conclude an employment contract, and how to do without it. Rostrud cannot oblige him to conclude an employment contract with himself, because his official position contradicts this.
