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One of the first choices you have to make when starting a business and registering at the Chamber of Commerce, is the legal form of your business. This depends on your specific situation and preferences. Different forms have different consequences and arrangements for, among other things, liability (who is financially responsible in case of debts) and tax obligations.
In this article, we’ll shortly explain the main differences between the most common business structures and legal forms: sole proprietorship (eenmanszaak), private limited company (BV), and public limited company (NV).
If you have more questions, feel free to contact us and we are happy to help!
There are two types of legal forms: legal forms with and without legal personality. The difference lies in the liability. In a legal form without legal personality, you are personally liable for any debts, also with your private assets. This is usually not the case with a legal form with legal personality. All legal forms must be registered in the commercial register of the Chamber of Commerce and Industry.
Legal forms without legal personality:
Legal forms with legal personality (legal entities):
The sole proprietorship is a popular legal form. Most starting entrepreneurs and self-employed people start out as sole proprietorships. The name says it all: only one person is the owner of such a company. There may be several people working in the company. For example, you can start on your own, but might hire staff over time.
Setting up a sole proprietorship
There are no incorporation requirements for a sole proprietorship. This means you do not need to have to go by a civil notary to have a deed drawn up. This makes this form one of the most accessible ones. Like all other legal forms, you are obliged to register the company in the commercial register of the Chamber of Commerce and also a business license (vestigingsvergunning) is required. Opening a business bank account is not mandatory for a sole proprietorship.
Legally, in a sole proprietorship, no distinction is made between your private and business assets. Therefore, all profits are yours, but at the same time, you are personally liable for any debts, claims or damages that your business be held accountable for.
Every business needs to have a CRIB number. For sole proprietorships, you can use your personal CRIB number. You will have to pay income tax over the profit your business makes. The fee for income tax (for profit exceeding the tax-free threshold) in 2022 is 30,4%.
As a business you also have to pay ABB(Algemene Bestedingsbelasting) over the products or services you provide. Additionally, wage tax is applicable in case you have employees. Unlike other legal forms, a sole proprietorship is not obligated to present an annual statement. Contact your local tax office for more information about your legal obligations as a sole proprietorship and applicable tax rates.
The private limited liability company is, together with the sole proprietorship, one of the most popular legal forms. In this variant, the capital is divided into shares under shareholders (the board of directors). All shareholders together own the company. Depending on the type of shares, the shareholders can have the right to make decisions about the company (voting rights) or be entitled to a part of the profit (profit rights).
If you are starting a BV and you are the only director and shareholder (directeur grootaandeelhouder, DGA), naturally you can make the decisions yourself. Whatever the structure is, you are obliged to have it stated in the notarial deed and articles of association. A BV can have employees.
A BV has at least one board member (director) and one shareholder. This can be the same person, and can also be the same person as the founder. A board acts for and on behalf of the legal entity. This means that they can make binding agreements on behalf of the legal entity. Another legal entity (company) can also function as a director.
An important advantage of the BV is that it is an autonomous legal entity. This means that in many cases not you personally, but the BV is liable for any debts. Note that however, under certain circumstances the DGA can be held personally liable. For example in case of improper management. Also, when banks let you sign privately for business loans, this makes you personally liable for the repayment of those loans. If you are a sole shareholder, your liability is limited to the amount of your shares.
Setting up a BV
To set up a BV, you must go to the civil notary. The notary draws up the notarial deed containing the articles of association or by-laws. In the articles is, among other things, stated if and to what extent the shareholders have voting rights, profit rights, if they are authorized to sign contracts or perform other legal acts on behalf of the company.
All shareholders (the board of directors) must be registered in the commercial register. Another company can also be shareholder. You are obliged to be in possession of a business and/or operating license. Don’t forget to make shareholders agreements (in case of multiple shareholders) and employment contracts with all employees, even if that is only with yourself, the director.
To start a BV, you are required to open a business bank account.
Every business needs to have a CRIB number. Before you can send out your first invoice or pay your first salary, you have to acquire a CRIB number at the tax office specifically for your BV.
If you are the only director and major shareholder (directeur grootaandeelhouder, or DGA), you are the first employee of the BV. You can’t just withdraw money from your BV: you have to pay yourself a salary instead.
The salary of a DGA is subject to a certain minimum, called the compulsory salary. The salary tax payable is called the wage tax and is paid monthly by the BV to the tax office. The amount of the wage tax depends on the salary.
Your business will have to pay ABB (algemene bestedingsbelasting) over the products or services it provides. All shareholders pay personal income tax over the profit share or dividend that they receive from the business (there is a tax free threshold of $5.000 and $10.000 when you are married). The BV pays pays tax over these shares. Contact your local tax office for the current tax rates and an accountant for more information.
Lastly, your BV must prepare and present annual statements. An accountant can help you with that. The information you need to provide depends on the size of your company.
The NV is very similar to the BV. It is also a legal entity where the capital is divided into shares among shareholders. The liability also lies by the company and not the directors. The most important difference between a BV and a NV has to do with shares. In a NV these shares are freely transferable, without the intervention of a notary. This is not the case with a BV, because the shares are registered under the name of the shareholders. In a BV, the transfer of shares is done through the notary. Because shares in an NV are freely transferable, they can also be traded on the stock market (from a certain minimum amount of profit).
CLICK HERE for more information about these and other legal forms. If you wish to get advise on your specific situation, please contact us.