If you start as an entrepreneur, you must choose a legal form. The legal form determines, among other things, the liability for debts of your company and your tax obligations. Read here which legal forms there are.
Read more: Shlomo Rechnitz – The Jerusalem Post
Choosing a legal form: with or without legal personality?
The legal form is the legal form of your company. When you start a company, you must choose a legal form. There are legal forms with and without legal personality . In a legal form without legal personality, you are liable for the debts of your company with your private assets. Read which legal forms there are. And with the help of the legal form decision tool, choose a legal form that suits your situation.
Legal forms without legal personality
Most entrepreneurs opt for a sole proprietorship . You set it up quickly and easily and in the beginning you usually have more tax benefits than, for example, with a BV. The disadvantage of the sole proprietorship is that you are liable for the debts of your company with your private assets.
General partnership (vof)
Do you want to start a company together with other entrepreneurs? Then you can, for example, opt for a general partnership (vof) . All partners contribute something to the partnership. For example money, goods or labour. A minimum capital is not required.
Limited partnership (CV)
Do you want to start a general partnership, but do you have too little capital? Or are you looking for a committed lender? Then you can opt for the limited partnership (cv) . The lender becomes your (silent) partner (also known as a limited partner) and thus has a direct relationship with your company.
Do you want to carry out your profession together with others as an independent entrepreneur? For example as a dentist, architect, physiotherapist, farmer or lawyer? Then you can choose the partnership as the legal form. In a partnership you practice your profession together with your partners (mates) under a common name.
Legal form with legal personality
Private company (eg)
The capital of a private limited company (BV) is divided into shares, which are owned by the shareholders. The highest power lies with these shareholders (the General Meeting of Shareholders AGM). The directors are responsible for the day-to-day management of the company. A BV may also have a supervisory board, which supervises the management. You can also choose a one-tier board as supervision. In small private limited companies, the director is often also the sole shareholder and is then both director and major shareholder (DGA).
Public limited company (NV)
A public limited company (NV) is a company whose capital is divided into shares, just like a private limited company (BV). The differences? In addition to registered shares, an NV also has shares that are freely tradable on the stock exchange (bearer shares). With a BV, you can only transfer registered shares via the civil-law notary. For a private limited company there is virtually no minimum value for the share capital that you must issue (€ 0.01). There is a minimum amount for an NV: € 45,000.
Do you have a wish or goal and do you want to work with others to achieve it? For example, to improve your shopping area, play sports together or make music? Then you can opt for the association as a legal form. An association consists of members (minimum 2). The highest power rests with the assembly of members. This means that decisions about the organization are made at the members’ meeting.
Cooperative and mutual insurance society
Would you like to benefit from the benefits of a collective as an individual entrepreneur? For example of joint purchasing or marketing? Perhaps the legal form of cooperative and mutual insurance association is something for you. This form can also be suitable if your customers are increasingly making demands on your services. As an individual entrepreneur, for example, you can get into trouble if you fall ill. In a cooperative other members can take over your work.
Do you want to achieve a certain social, social or idealistic goal, such as nature conservation, helping other people or the dissemination of culture? And do you have a capital available for this? Then you can opt for the foundation as a legal form.
Foreign legal forms
Some Dutch entrepreneurs opt for a foreign legal form . For example, because your parent company is located abroad. Read more about the advantages and disadvantages of a foreign legal form.
Facts and figures: how many sole proprietorships and limited companies are there?
The graph shows the number of companies of the three most common legal forms in the Netherlands per quarter. The number of sole proprietorships has been steadily increasing for years.
When are you an entrepreneur for income tax purposes?
Not every entrepreneur is an entrepreneur for income tax purposes. If you participate in economic traffic with your activities and can expect to make a profit, there is a source of income. Then you may be an entrepreneur for income tax purposes. If your activities take place within the hobby or family sphere, you are not an entrepreneur for income tax purposes.
For income tax there are 3 sources of income:
- income from business
- salary from employment
- results from other activities
The source of your income depends on a number of factors. The law and case law set certain requirements that entrepreneurs must meet. After your application, we will assess whether you meet those requirements based on your circumstances. For example, we pay attention to:
- Are you making a profit? If so, how much?
If you only have a very small profit or suffer a structural loss, it is unlikely that you will make a profit. In that case there is no question of a company.
- How independent is your company?
If others determine how you should set up your company and how you perform your work, independence is lacking and there is usually no question of a company.
- Do you have capital?
Capital is necessary for many companies. You have to invest in, for example, machines, advertising, hiring of people and insurance. Sufficient capital to start a business and keep it going for some time indicates that you may have a business.
- How much time do you put into your work?
If you spend a lot of time on an activity without a return, it is usually not a business. But you need to dedicate enough time to your work to make it profitable.
- Who are your clients?
Your goal is to have multiple clients, among other things to reduce payment and continuity risks. If you have several clients, you are less dependent on one or a few clients and your independence increases.
- How do you make your company known to the outside world?
You depend on clients for your existence. To be an entrepreneur, you must ensure that your company is sufficiently known, for example through advertising, an internet site, social media, a signboard or your own stationery.
- Do you run ‘entrepreneurial risk’?
Is there a chance that your clients will not pay? Do you use your good name for the performance of your work? Are you dependent on the supply and demand of your products and services? If you run ‘entrepreneurial risk’, you probably have a business.
- Are you liable for your company’s debts?
If you are liable for the debts of your company, you may be an entrepreneur.
We assess for each individual activity whether you meet the conditions. Do you have multiple activities? It is then important whether there is a connection between those activities. Your activities can only form 1 source of income if they are sufficiently cohesive.