Legal form and fiscal structure
One of the first and most important things you do when starting a company is to choose a legal form. The chosen legal form has consequences for your liability and tax obligations. Of course, you can also adjust the legal form at a later stage, but that is a fairly complicated and expensive matter. It is therefore advisable to choose a legal form that suits you and your company even before the actual start.
Our advisors are happy to discuss the options with you so that together we can make the best choice for you and your company.
Which legal form suits your company?
- Sole proprietorship
- General partnership (unlimited liability)
- Professional partnership (limited liability)
- Private Limited Company (Ltd.)
- Limited partnership (mixed liability)
- Public limited company (PLC)
- Association
- Foundation
- Cooperative/Collective and Mutual Society
Can we support you in determining the right legal form for your company? Then contact us.
Sole proprietorship
Many starters choose the sole proprietorship as their legal form. A sole proprietorship is a business owned by one person. That does not mean that by definition only one person works in the company. If you want to hire staff immediately or at a later stage, you can also opt for a sole proprietorship. There are no foundation requirements for the sole proprietorship. No deed needs to be drawn up. However, registration of the sole proprietorship in the Trade Register of the Chamber of Commerce is mandatory.
From a legal point of view, there is no distinction in a sole proprietorship between private assets and business assets: this can be an important risk. Because if things go wrong with your company, chances are that you will also lose your own home and inventory to the creditors. If you are married or getting married, it may therefore be wise to have a prenuptial agreement drawn up.
General partnership (unlimited liability)
The general partnership (vof) has several owners (the partners). These owners can be natural persons, but also legal entities such as private limited liability companies (BV). Similar to a sole proprietorship, no special requirements are imposed on the establishment of a general partnership. Although it is not mandatory to draw up a partnership agreement, it is advisable to have arrangements on responsibilities, powers, and profit distribution recorded in writing. You can request the help of a notary for this. The general partnership must be registered in the Trade Register of the Chamber of Commerce.
The partners within a general partnership are jointly and severally liable. This means that if the partnership fails to fulfil its obligations, each partner is 100 percent liable with his or her private assets, even if these debts have been incurred by another partner within the partnership. As with the sole proprietorship, it may therefore be wise to have a prenuptial agreement drawn up here.
Professional partnership (limited liability)
A professional partnership (maatschap) is a form of cooperation between two or more persons -partners- who practice a profession under a common name. This form of partnership is common among (dental) doctors, architects, attorneys, and physiotherapists. Each partner contributes something, for example, labour, money, or goods. The benefit from this is shared.
Professional partnerships have been required to register in the Trade Register since 2008. This does not apply to partnerships that do not act externally – so-called silent partnerships (stille maatschap), such as cost-sharing partnerships (kostenmaatschap).
It is not mandatory to draw up a deed when establishing a partnership. It is advisable to have mutual agreements recorded by a notary to avoid disagreements between the partners. For example, it would be wise to record the contribution of the partners, how profit distribution takes place, how the powers are allocated, and what will happen if the partnership is terminated.
All partners are liable for equal shares: an important difference between a partnership and a general partnership, where each partner is 100 percent liable.
Private Limited Company (Ltd.)
The private limited company, in Dutch often simply abbreviated to “BV”, is a widely used legal entity, where the capital is divided into shares and the risks of joint and liabilities are limited. These shares are owned by shareholders but cannot be freely traded. An important advantage of the private limited company is that it is a legal entity. This means that in many cases not you, but the private limited company is liable for any debts. Please note: if the debts have arisen due to mismanagement, you can be personally held responsible for this. As a director, you are employed by the company.
A private limited company can be founded by one or more persons. In the past, a capital of eighteen thousand euros (in the form of money or in kind, such as real estate) had to be paid in upon establishment of the private limited company. That is no longer the case. Since 1 October 2012, the new BV legislation has come into effect. The legislation regarding the private limited company has changed considerably since then. Our advisors can tell you all about this.
Limited partnership (mixed liability)
A limited partnership (CV) is a special form of a general partnership. It is a form of cooperation between two or more persons (the partners). There are two types of partners regarding the limited partnership: managing and silent (limited) partners. The silent partners are only financially involved. They may not act on behalf of the limited partnership.
The establishment of a limited partnership is free of form: there are no formal requirements. However, it is recommended to draw up a written deed in which you record what exactly has been agreed between the partners. It is mandatory to register the limited partnership in the Trade Register. Should the company no longer be able to fulfil its obligations, the managing partners are jointly and severally liable for 100 percent. This does not apply to limited partners. They are only liable for the amount they have contributed.
Public limited company (PLC)
Few starters will choose a public limited company (NV) when setting up their business. This is a company whose capital is divided into shares, but unlike the private limited company (BV), the shares of a public limited company are freely transferable. The requirements for setting up an NV and BV are reasonably similar. An essential difference, however, is that at the time of establishment of an NV, you must have a minimum capital of € 45,000. This is not mandatory when establishing a BV.
Both public- and private limited companies must draw up an annual report and submit this to the Chamber of Commerce. How this should be done depends on the size of the company. The same rules apply to the liability, taxes, social security, and continuity of the NV as for a BV. The same rules apply to an NV in formation as to a BV in formation.
Association
An association is a form of cooperation between two or more persons (members) with a common goal. An important condition is that making a profit to be distributed among the members must not be a goal. It is allowed to make a profit, but it must then benefit the common goal. The highest power in an association lies with the General Assembly of Members, where in principle all members have one vote. This assembly usually appoints the board (which is in charge of the daily affairs) from among its members. All associations have legal personality. A distinction is made between associations with limited legal capacity and associations with full legal capacity.
Foundation
A foundation is intended to achieve a specific goal with the help of assets. This goal is described in the articles of association. A foundation can run a business and make a profit. However, that profit must benefit an idealistic or social cause. A foundation has no members and is established by notarial deed or a will. A foundation can be set up by one or more persons. These can be natural persons, but also legal entities (such as a private limited company). The articles of association of the foundation are described in the notarial deed. The articles of association contain, among other things, the name of the foundation, but also the purpose and the manner of appointment and dismissal of directors.
A foundation must be registered in the Trade Register. As long as this has not happened, every director is personally liable. The foundation is a legal entity and therefore an independent bearer of rights and obligations, just like a natural person. The directors of a foundation are not liable for debts of the foundation. If the foundation is subject to corporate income tax, anti-abuse legislation applies and directors may be held liable under certain circumstances.
Cooperative/Collective and Mutual Society
The cooperative and the mutual society are special and therefore rare legal forms. A cooperative stands for the material interests of its members by entering into agreements with them. Profits may be distributed to members. A mutual society is an association of entrepreneurs engaged in insurance. The mutual society concludes insurance contracts with the members in the insurance business that the association conducts. Virtually the same rules apply to this legal form as to a cooperative.
A distinction is made between three types of cooperatives:
- business cooperatives, in which the members run the business and the cooperative provides the purchase, sales, and/or certain services;
- consumer cooperatives, in which the members purchase goods from the cooperative, which it has purchased jointly for the members;
- product or service cooperatives, where the members are simultaneously employees of the cooperative.
A cooperative is founded by a minimum of two people. The establishment takes place by notarial deed. The cooperative must be registered in the Trade Register and is obliged to prepare and publish an annual report every year.
