Legal form of enterprises
Going into business for yourself is not a decision to be made lightly. Before you start, you’ll want to be sure you’re as prepared as possible. Behind the scenes of your business plan, investor search, and survey of the market you think you’ll be able to conquer, there are so many practical matters you have to take care of.
What legal form do you choose?
So you’re going into business: what legal form do you choose? And why? Do you really know the differences between all the options? The legal form you choose will have a huge impact on how you set up your organization for tax and accounting purposes. And many other things as well, like potential liability for debts. That’s why you want the support of a specialist. Weller can tell you the differences between all your choices and help you decide on the best option for you. Or have you already chosen a legal form and you’re not sure if you made the right choice? Are you wondering about the consequences your choice will have on your organization and yourself? Talk to one of our experts right away. Weller makes it all clear!
Incorporating a private limited liability company
Sole trader, limited partnership, or limited liability company? Maybe in combination with a personal holding? Weller can advise you on the best legal structure for your business. Contact Weller now for advice.
Legal forms without legal personality
For many people starting out in business, a sole proprietorship (also known as the “sole trader”) is the way to go. Setting one up is as easy as registering with the Chamber of Commerce. As a small business, the sole proprietorship will generally give you more tax advantages in the Netherlands than starting a private limited liability company (certainly initially); this is due to a few generous tax deductions like the new business tax credit, self-employed person’s tax credit, and SME exemption. But a disadvantage of this form is that you remain liable for the debts of the enterprise, and this extends to your private assets.
Limited partnership (Vennootschap onder firma)
If you are going into business in the Netherlands with a few other entrepreneurs, you can consider the Dutch form of the limited partnership, the vennootschap onder firma. All the participating persons become a partner and contribute labour, money or physical assets in exchange for a share of the profits. The partners are jointly and severally liable for the debts of the partnership, meaning that each of them is potentially liable for the full amount of the debts. In this situation, it is strongly advisable to sign a partnership contract. Weller can help.
In a professional partnership, two or more persons practice a profession; this is often seen in law firms and consulting firms. A professional partnership is very similar to a limited partnership, the most significant distinction being that in a professional partnership each partner is only liable for an equal portion of the partnership’s debts.
A general partnership (in the Netherlands, a commanditaire vennootschap or cv) is a special type of limited partnership. A general partnership has two types of partners, general partners and silent partners. The general partner is involved in the day-to-day management of the partnership and is liable for the partnership’s debts with his or her private assets. Silent partners are, strictly speaking, only financiers of the partnership, and their liability is limited to the amount that they invest. An important condition here is that the silent partners are not authorized to act in the name of the partnership. If they do, then they become liable for all debts of the partnership, just like the general partners.
Legal forms with legal personality
Private company with limited liability
A private company with limited liability is an independent entity with legal personality; In the Netherlands, this is the besloten vennootschap (bv). The bv contracts agreements independently. The executive board and the shareholders are not liable for the company’s debts, excepting in cases of mismanagement, in which case the executive board can be held liable. You should be aware that mismanagement can be assumed more readily than you might expect. If your accounting is not in order, or if you fail to file your wage tax or turnover tax on time, these will be seen as contributing factors to a determination of mismanagement. All the more reason to stay on top of your accounting!
A cooperative and mutual assurance society (also known as the cooperative association) is a special type of association, set up with the object of achieving advantages for its members through cooperation, for which it enters into contracts with and for its members.
Are your activities in the pursuit of a social, societal or idealistic goal? Like nature conservation, helping people or promoting cultural heritage? If so, the foundation (stichting) may be the right form for you. In most cases, you will want to register your foundation as an institution for the public good. This makes donations tax-deductible and exempt from gift tax.
Weller wants to help you make the right choices, and can provide you with all the information you need.
Requirements of establishment for each legal form
There are no requirements of establishment for sole proprietorships, partnerships and limited partnerships. Partnerships and limited partnerships can even be based on an oral agreement. A private limited liability company must be incorporated by deed before a civil-law notary, and requires a minimum capital injection of at least one eurocent. Whatever legal form you choose, you must also register it with the Chamber of Commerce.