Partner liability in your business
You and your partner have a business. And you do not want your partner to be liable for company debts. Is that possible? It depends on your official relationship status. And on your legal structure. For example, an eenmanszaak (sole proprietorship) or vof (general partnership) brings with it more liability than a bv (private limited company).
Liability depends on legal structure
Your partner's liability depends on your legal business structure. There are legal structures with and without legal personality.
Legal structures with legal personality (legal entities)
In this case, you and your partner are not personally liable for business debts. Legal structures with legal personality are:
There are exceptions. For example, if you mismanage the company and this can be proven, you are personally liable.
Legal structures without legal personality
Here there is no distinction between your private and business assets. Debtors can make a claim on your private assets if you fail to pay business debts. And on your partner's private assets, unless you have made arrangements to prevent it. Legal structures without legal personality are:
Liability depends on marital status
Do you have a legal structure without legal personality? Then you are privately liable for your company's debts. Your partner may also be privately liable. This depends on the legal status of your relationship. There are 3 ways to legalise your relationship:
- cohabitation contract
- marriage or registered partnership with community of property
- marriage or registered partnership with a prenuptial agreement or partnership contract
Your partner's liability depends on the marital status you choose.
Do you live together? Then your assets and debts are separate. Your company is your property. Your partner is not liable for your company’s debts.
Is your partner co-owner of the company? Then you are jointly liable for the company’s debts.
If you got married or registered your partnership before 1 January 2018 without a prenuptial agreement, you are married with community of property. You share all the assets and debts you acquire during the marriage, but also all the assets and debts you had before you got married.
Married after 2018: limited community of property
Did you get married or register your partnership after 1 January 2018 without a prenuptial agreement? Then limited community of property applies. This means that everything you acquire from the moment you are married, belongs to you and your partner jointly . If you start a business after you marry, your business is part of the community of property. You and your partner are jointly liable for debts.
Everything you had before you were married remains your personal property. Did you start a business before you married? Then your business is also your personal property. Your partner is not liable for the company’s debts. Income from your business is also yours alone. However, within a marriage both partners are required by law to contribute to joint household expenses. Read more about the limited community of property.
You can safeguard your partner from personal liability for business debts by drawing up a in your prenuptial agreement or partnership contract. You use a notary to do this. You discuss with the notary what your wishes are and which prenuptial agreement best suits you and your partner. These arrangements are registered in the court huwelijksgoederenregister (matrimonial property register). This register is public. Do you start a business after marrying with a prenuptial agreement? Check your prenuptial agreement to see what arrangements are in place now and whether you want to adjust them.
From community of property to a prenuptial agreement
You are married, or have a registered partnership with community of property. Then you decide to start a business. You can still draw up a prenuptial agreement or partnership contract. To do so, you use a notary. The notary draws up a deed for the prenuptial agreement or partnership contract and a deed of distribution. That way, it is clear which possessions and debts belong to which partner.
From a prenuptial agreement to community of property
Did you draw up a prenuptial agreement to protect your partner from liability for business debts? And are you selling or ending your business, or retiring? Then discuss with your partner and your notary whether the prenuptial agreement is still necessary. Sometimes your heirs will pay less inheritance tax when you or your partner dies if you have converted your prenuptial agreement to community of property.
Separate your private and business bank accounts
It is sensible to always keep your private and business cash flows separate. That way you can see what belongs to you and/or your partner and what belongs to your business. Also, there are certain costs that you cannot deduct from your tax assessment, unless you have paid them from a business bank account. For example, fuel costs for a business vehicle.
Liability for partner’s debts
With a prenuptial agreement, you can reduce not only the risk to your partner, but also the risk to your business. For example, if your partner has debts. If you are married in community of property, your business belongs to you together. Your partner's creditors can then also claim your partner's share of your business. With prenuptial agreements you protect your business from possible creditors of your partner.
Questions relating to this article?
Please contact the Netherlands Chamber of Commerce, KVK