Setting up your first company: you have to take this into account
Most Dutch people who go into business start a sole proprietorship. Nice and simple, because you only have to go to the Chamber of Commerce and your company is a fact. But in many cases, a sole proprietorship is not optimal at all. Many entrepreneurs therefore, over time, make the logical switch to a private limited company: a BV.
An important part of Dutch entrepreneurs does not even set up a sole proprietorship at all, but starts immediately with a BV. But what does a BV actually mean, what do you have to take into account when you set up one, and also not unimportant: what is allowed? cost?
What is an example?
The abbreviation bv stands for private limited company. It is one of the most commonly used legal forms in the Netherlands. Unlike other legal forms such as the foundation or association, the BV is primarily intended to trade and thus earn money. A BV has one or more directors who can act on behalf of the BV. So the bv is a legal person, who – although represented by a director or authorized representative – can itself perform acts, enter into agreements, et cetera.
E.g. or sole proprietorship? The main differences
This brings us directly to one of the main differences with the simple sole proprietorship. A sole proprietor is always, in legal terms, jointly and severally liable for all acts of that sole proprietorship. If your sole proprietorship goes bankrupt, you will have to pay for the malaise privately. This is different with the BV: if the BV goes bankrupt, you will in principle become did not get into your private assets. There are some ifs and buts to this. If, for example, you actually go bankrupt, it will always be examined whether the requirements have been met, again in legal terms, the general principles of good administration. To put it simply, they are investigating whether you have also acted recklessly or excessively. If you are demonstrably guilty of the bankruptcy of your company, you can still be held jointly and severally liable. In short, you have to manage yourself properly.
There is a second common limitation on the advantage that an owner of a BV is not jointly and severally liable. You notice this limitation especially if you are just setting up a private limited company and need money to be able to invest. In such a case, a bank will generally only want to grant you a loan if you personal guarantor state. In this way, at least in the early years of your company, you are somewhat jointly and severally liable.
In addition to joint and several liability, there are many more differences between a BV and a sole proprietorship. What is important for entrepreneurs who doubt between a BV and a sole proprietorship: the BV traditionally radiates authority and commercial trust from. BVs are professional companies and not hobbyists. The status of eg gives customers the signal that a company is serious, can be trusted and will not just leave with the northern sun. In short: this can, in principle, be traded.
Another advantage that you have as the owner of a BV is that you shares and thus transfer the entire company to someone else. The company can therefore easily be transferred from father to son, for example. You can also issue shares to family members, friends or relations with whom you have a good relationship, to accumulate wealth and let them get a piece of the company's proceeds. All this is impossible with the sole proprietorship.
'the tipping point for going from a sole proprietorship to a private limited company is around one and a half tons'
Finally, the status of eg has far-reaching (often positive) tax consequences. For example, with a BV you are subject to corporate tax, and no longer to income tax. If you make a lot of profit – the tipping point is around one and a half tons – then you will have much more left over with a BV than with a sole proprietorship. So is business with a sole proprietorship going well? Then be wise and go quickly e.g. set up.
This video from the Chamber of Commerce further explains how to choose the right legal form for your company:
Eg setting up: how do you do that?
Fair is fair: setting up a BV (and eventually also a eg cancel) is more work than a sole proprietorship. You can arrange a sole proprietorship in an hour at the Chamber of Commerce. You can even use your private bank account if you want. Everything works differently in a BV.
In order to set up a BV, you must first notify a civil-law notary. The notary will memorandum of association making up. This indicates that a company is being started. As soon as the BV has been established by the notary, you will have to deposit capital and your BV must register in the Trade Register. For that you go to the Chamber of Commerce. This must be done within a week after you have visited the notary.
That capital contribution can sometimes cause confusion. In the past (before 2012) it was the case that 18,000 euros had to be deposited, either in money or in possessions (such as a property). However, this threshold has been lifted since 2012, and in principle a deposit of one cent is sufficient. So you can decide for yourself how much capital you deposit in your company.
It may be that you already want to arrange things on behalf of your company, while the incorporation is not yet fully completed. In that case, you can act on behalf of a eg under incorporation (io). You let business relations know that you are acting on behalf of a future BV. In such cases you are fully personally liable for obligations entered into, but you do not have to sit still. For example, you can already claim a website domain or rent a property.
How much does it cost to set up a limited company?
The capital contribution is therefore not a serious, mandatory cost item for setting up your company. The visit to the notary is of course: take into account a few hundred euros in fee.
Also take into account the mandatory audit of legal entities such as the BV two of the following three conditions, you will have to engage an accountant:
- The balance sheet total is greater than € 4,400,000
- The net turnover is greater than € 8,800,000
- There are 50 or more employees
And registration at the Chamber of Commerce of your bv now costs €50. Furthermore, there are actually no mandatory costs, but most costs will be in business expenses. Think of the purchase of machines, hiring staff, arranging a company building or car and other costs that have to do with the actual business.
Setting up a BV has therefore become a lot easier and cheaper since the mandatory deposit of 18,000 euros was removed in 2012. With a few hundred euros you will come a long way, although in practice you will often need more, especially if you have to make real investments. Because as every entrepreneur knows: in order to make money, you first have to spend money.