The choice of business structure can have a huge impact on your bookkeeping, tax and legal liability, so it’s fundamental to think about your options carefully when setting up a business in the Netherlands.
Dutch civil law provides a variety of legal forms that entrepreneurs can establish in the Netherlands. Which legal form is the most advantageous for your particular venture will depend upon the specific demands of your business. Read on to learn more about the different types of business entities in the Netherlands.
Similar to other regions of the world, the Netherlands allows business entities of the incorporated and unincorporated nature. Just the same, incorporated entities are established as legal entities or as a “legal person”. Incorporated entities are taxed differently from unincorporated entities and individuals, and protect the personal assets of the business owners.
When setting up legal business structures with legal personality, a notarial deed of incorporation is required, including your registration at the Netherlands Chamber of Commerce (KVK).
The Dutch Private Limited Company (BV)
Dutch: Besloten Vennootschap
The private limited company Dutch BV is commonly employed by entrepreneurs investing in the Netherlands (for example: to carry out a business, for direct investments, as holding company, IP licensing company, finance company, etc.). A private limited company’s equity is divided into shares that are owned by shareholders. Shareholders are only responsible for their own capital contribution. This legal business structure is similar to the German GmBH, the American LLC, or the English’s Ltd. For a Dutch limited liability company, an amount of €0.01 is sufficient for minimum capital requirement.
The Dutch Public Limited Company (NV)
Dutch: Naamloze Vennootschap
A public limited company Dutch NV is a company whose equity is divided into shares in a similar way to that of a private limited company (BV) for companies who may be listed in the public Stock Exchange. N.V. company must have a minimum issued and paid-in capital of € 45,000. This is not a common form of business structure in the Netherlands.
A foundation is considered a legal entity with no members and this legal business structure is often used by non-profit organizations. The intention to establish a foundation is to benefit a given social or not-for-profit cause.
Associations are usually established as non-profit entities that have voting members who are generally each allocated one vote. The money earned by the association must be used for the association goal and may not be distributed to members. With this legal business structure, profits are liable to taxation.
A cooperative is a special type of association that enters into specific agreements with and on behalf of its members. Cooperatives are characterized as associations which pay directly to the members. The Dutch cooperative was historically employed mainly in the agricultural industry and by certain banks and insurance companies. In the last decade, it has been reinvented as a holding company in international structures due to its flexibility from a Dutch legal and tax perspective.
Much like unincorporated entities in other regions of the world – in the Netherlands, unincorporated entities are usually small and/or personal ventures. This business form keeps business owners personally liable for debts incurred by their business.
A Sole Trader is a business owner who is the sole proprietor of business (though there may be employees). The Sole Trader structure is suitable for small-scale business operations or freelancers. This structure is beneficial for owners who set up a business for themselves without partners or (substantial) investors.
Dutch: Vennootschap Onder Firma, VOF
Creating a General Partnership allows you to go into business with other self-employed individuals and share income. General Partnership is a shared legal entity so you and your partners are liable for all debts and obligations of the business. A formal partnership agreement is common to draft and a civil-law notary is not required. For tax purposes, each partner is typically considered a self-employed entrepreneur, and tax is payable on profits.
Dutch: Commanditaire Vennootschap, CV
Similar to a General Partnership, a Limited Partnership is a legal business structure run by more than one person. To qualify as a Limited Partnership, you must have two types of partners: managing and limited partners.
Active partners generally run the day-to-day of the business, while the limited partner supports the business financially. For tax purposes, managing partners are considered freelancers who pay income tax on their share of the profits, while limited partners are usually only liable for their investment.
A Professional Partnership represents a cooperation of other professionals in the same field to share earned income and the incurred expense. This structure is useful for certain professions such as hairdressers, dentists, lawyers, architects or farmers. In this business structure, partners are considered more or less equal and contribute to the partnership personal assets, effort and/or capital.
It is possible to operate in the Netherlands without registering your business as a Dutch entity. In this case, your office in the Netherlands will be considered an extension of your head office – and it will be responsible for taking all necessary legal actions on behalf of the local office. It is still necessary to register your business at the Dutch Chamber of Commerce and your office in the Netherlands will be governed by the laws of both countries.
What can Octagon do for you?
Are you considering setting up your business in the Netherlands? Octagon would love to help you go through your options to work out the best structure when setting up your business in the Netherlands. We support companies with their international expansion, from corporations to startups, connecting you to our local partners, advising you on registering your company, real estate, banking, employment law and attracting local talent.
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