Choosing a legal form for your business

What is a legal form?

A legal form is the legal structure you choose for your company. When youregister with the Chamber of Commerce, you must specify this type of company. Among other things, it determines the (private) liability for debts and tax obligations.

Consider the composition of your company

If you are working alone, a sole proprietorship or private limited company (bv) is often the best option. Make a list of the risks you face and think carefully about them.You can reducemanyrisks with insurance and good contracts. If you are doing business with several people, you can choose fromseveral legal forms.

Determine how you want to be liable

In the case of a sole proprietorship or general partnership (VOF), you are liable for any debts incurred by your business with your private assets. Creditors can then seize your private possessions, for example. This also applies toyour partner's possessions if you have not made any arrangements to the contrary. In the case of a legal entity, such as a private limited company (BV), you are only personally liable for your company's debtsin exceptional cases.

Determine what is most favorable from a tax perspective

As the owner of a sole proprietorship or general partnership, you payincome tax on the profits. As the owner of a sole proprietorship or partner in a general partnership, you are often entitled toadditional tax benefits , such as the self-employed person's allowance. Especially in the start-up phase, when your business is making relatively little profit, you are usually better off fiscally with a sole proprietorship or general partnership.

A private limited company payscorporate income tax and, where applicable,dividend tax. The director-major shareholder (DMS) also pays income tax on his salary and on thedividend paid out. On average, the tax burden on a private limited company is lower than on a sole proprietorship or general partnership, but the costs are higher. This is partly due toannual accounting obligations and accountant's fees. A director-major shareholder is not entitled to self-employed tax deduction.

Legal form for start-ups

Most start-ups opt for a sole proprietorship. Are there multiple owners? Then they often choose a general partnership (VOF) or private limited company (BV).

Requirements for incorporation by legal form

There are no incorporation requirements or capital requirements for sole proprietorships and general partnerships. A private limited company (legal entity) must be incorporated by a notary and requires a minimum capital contribution of 1 euro cent.

Freelancer and self-employed person

Self-employed persons (without employees) and freelancers are not legal entities. Even asa self-employed person or freelancer, you must choose a legal entity. For example, a sole proprietorship.

What legal forms are there?

There are legal forms with legal personality and legal forms without legal personality. With a legal form without legal personality, you are liable for your company's debts with your private assets. This is usually not the case with a legal form with legal personality.

Legal forms without legal personality

Sole proprietorship

Most entrepreneurs start asole proprietorship. It is easy to set up. With a sole proprietorship, you usually have more tax advantages in the beginning than with a private limited company, for example.

General partnership (vof)

Are you starting a business with others? Then you can set up ageneral partnership(, vof). Each person who participates becomes a partner and contributes something. It is advisable to draw up a partnership agreement.

Partnership

In apartnership, two or more people carry out their profession under a common name. Each participant contributes something, such as labor, money, or goods. The profits are shared.

Limited partnership

Alimited partnership(, cv) is an interesting option if you do not have enough money to start up. A cv has managing and silent partners. The managing partner is responsible for the day-to-day management of the company. Silent partners are only financiers.

Legal forms with legal personality

Private limited company (bv)

Aprivate limited company(bv) is a legal entity, an independent entity. This means that in most cases, the bv is liable for any debts. The capital of a bv is divided into shares, which are owned by the shareholders. The highest authority lies with these shareholders.

Public limited company (PLC)

Apublic limited company(, NV) also has shareholders. An NV also has shares that are freely tradable on the stock exchange. There is a mandatory minimum start-up capital of €45,000. Both BVs and NVs must prepare annual reports and submit them to the Chamber of Commerce.

Cooperative association

Acooperative and mutual insurance association(, or in full: coöperatieve vereniging) is a special association that focuses on cooperation and enters into agreements with and on behalf of its members.

Foundation

Would you like to achieve a specific social, societal, or ideological goal, such as nature conservation, helping others, or promoting culture? And do you have the funds available to do so? If so, you can choose thefoundationas your legal form.

Association

Do you have a wish or goal and would you like to collaborate with others to achieve it, such as a sports club or interest group? Then you can choose theassociationas your legal form.

Overview of all legal forms

Would you like to know exactly what the characteristics of each legal form are? Take a look ata handy overview of all legal forms. Including capital requirements, taxes, and social security per legal form.

Video Choosing a legal form for your company

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Most common legal forms in the Netherlands

The graph shows the number of companies with the three most common legal forms in the Netherlands. The number of sole proprietorships is increasing almost continuously.