More than a tax issue
Although management companies are almost exclusively discussed from a tax perspective, they also represent a particular way of organizing a professional relationship. Beyond the tax treatment of income, they may raise questions regarding the status of the individual performing the services.
In many cases, management companies serve legitimate purposes in terms of business structuring, governance, and entrepreneurial risk management. They also allow certain functions to be carried out through a dedicated corporate vehicle and, where the relationship is genuinely organized on an independent basis, offer greater flexibility as well as a different—and often more advantageous—legal and social framework than that applicable to employees.
It is precisely because the legal, social, and tax consequences of employment and self-employment differ significantly that questions of employment status and false self-employment remain relevant. False self-employment refers to situations where a relationship presented as independent is, in practice, performed under another party’s authority.
In the context of a management company, the analysis is generally different from that applicable where an individual provides services directly as a self-employed contractor. The contractual relationship is, in principle, entered into with the company. Since a company cannot, by definition, be party to an employment agreement, the starting point of the analysis differs from that applicable to a relationship entered into directly with an individual.
This does not mean, however, that the existence of an intermediary management company necessarily puts an end to the discussion. Where the relationship, in reality, reveals a direct relationship of authority between the client and the individual performing the services, and does not correspond to the agreed independent services arrangement, the authorities may look beyond the management company and focus on the actual substance of the relationship.
Should a requalification occur because the relationship is, in practice, performed under another party’s authority, the consequences can be significant, particularly from a tax and social security perspective. In that context, it may be advisable to include contractual mechanisms in agreements with management companies that, where appropriate, allocate all or part of those financial consequences to the manager or to the management company itself. Such arrangements are not possible in the context of a self-employed relationship with an individual acting in their own name.
Among the various situations encountered in practice, some may give rise to additional questions.
Consider, for example, an employee who terminates their employment agreement and subsequently continues to perform similar activities for the same company through a management company, as an independent contractor. Where the new arrangement largely mirrors the former employment relationship and the practical terms of the collaboration remain largely unchanged, questions may arise regarding the true nature of the relationship between the parties. As noted above, the use of a management company generally mitigates this type of risk, without eliminating it entirely. The more the new arrangement resembles the former employment relationship, and the fewer changes are made to the way the collaboration operates in practice, the more likely it is that questions regarding its qualification will arise.
It is important that the relationship be organized and carried out in a manner consistent with its independent nature. The absence of authority and control remains a key element of the analysis, particularly when assessing factors such as the freedom to organize working time, the freedom to organize the work itself, and the existence of hierarchical supervision. In this respect, the assessment is based on a combination of factors, with no single factor being decisive on its own. Relevant considerations may include:
- whether substantially similar functions continue to be performed;
- the number of clients actually served;
- the degree of autonomy in organizing the work;
- the level of integration within the client's organization;
- the existence of genuine entrepreneurial risk.
As is often the case in employment status matters, the assessment remains highly fact-specific and must be carried out on a case-by-case basis.