Business structures in the Netherlands: overview
In the Netherlands, you need to choose a legal structure when you start a business. You cannot operate without choosing a business structure and be an entrepreneur. You choose a business structure when you register at the Netherlands Chamber of Commerce (KVK). Your choice will help determine such aspects as liability and tax obligations.
Self-employed or freelancer?
If you want to work as a self-employed professional (zzp-er in Dutch) or freelancer, you need to be aware that neither of these are legal structures. You will still have to choose a legal structure when you register at the Netherlands Chamber of Commerce. Most self-employed professionals act as sole proprietors or have a private limited company.Which corporate structure suits your company?
There are many possible business structures, as listed on this page. Which one suits you best depends on your circumstances. To help you choose, we have compiled the most common considerations in the paragraph Help in choosing a legal structure, further on in this article.
Types of legal structures
There are business structures with and without corporate (legal) personality.
Business structures without corporate (legal) personality are:
- Sole proprietor or sole trader (eenmanszaak)
- General partnership (vof or vennootschap onder firma)
- Professional partnership (maatschap)
- Limited partnership (cv or commanditaire vennootschap)
If you choose a business structure without legal personality, you will be personally liable for the debt of your company, with your private capital and belongings.
Legal structures with corporate (legal) personality are:
- Private limited company (bv or besloten vennootschap)
- Public limited company (nv or naamloze vennootschap)
- Cooperative (coöperatie)
- Association (vereniging)
- Foundation (stichting)
When you set up a legal structure with legal personality, a civil law notary has to draw up the relevant papers, including your registration at the Netherlands Chamber of Commerce (KVK), to create the legal personality. If your company is a legal personality, you won't be personally liable for the company's debts. There are some exceptions to this, for instance if grave mismanagement, recklessness or fraud on your part has led to the debts.
Filing annual accounts
Certain types of company are required to file their annual accounts with the Netherlands Chamber of Commerce (KVK). The size of the company determines how the accounts have to be submitted.
UBO register
Parliament is currently discussing the implementation of a UBO register for Dutch businesses in 2020. If it is accepted, most businesses that are registered in the Dutch Commercial Register will have to include their 'ultimate beneficial owner(s)' or UBOs in this UBO register, including the European legal structures listed on this page. This is one of the measures taken in accordance with the Prevention of Money Laundering and Terrorism Financing Act (Wet ter voorkoming van witwassen en het financieren van terrorisme, Wwft). Persons who have more than 25% of the company shares, more than 25% of the voting rights, and/or have the ultimate say in company matters are considered UBOs. Inclusion in the UBO register can be arranged via the website of the Netherlands Chamber of Commerce KVK. Companies that were already registered in the Commercial Register will have a year and a half to register their UBOs. See for more information (in Dutch) Rijksoverheid.nl.
European legal structures
European legal structures offer you the option to work together across borders with companies from other Member States of the European Union. There are three European legal structures:
- European Economic Interest Grouping (EEIG)
- Societas Europaea (SE, European public limited liability company)
- European cooperative society (SCE)
Legal entity supervision
Do you want to incorporate a private or public limited company, or amend your articles of association? Your legal entity falls under the continuous supervision of Justis, the Agency for Scrutiny, Integrity and Screening (Ministry of Justice and Security). The aim is to detect and prevent abuse. You do not require a certificate of no objection (verklaring van geen bezwaar).
Changes in the legal structure
Changes in the legal structure or the collaborative venture in which your business participates will have fiscal and administrative consequences. Changes must be reported to the Dutch Tax and Customs Administration (Belastingdienst) and the Netherlands Chamber of Commerce (Kamer van Koophandel, KVK). You may have to re-apply for certain licences from your municipality, including, for example, the licence under the Licensing and Catering Act and operating permit.
Tips for choosing a legal structure
There are quite a few considerations to be taken into account when making the choice for a legal form or business structure. The statements below can help you find out which bracket suits your situation best. Select and deselect statements to access information on several considerations you may have. Try to read all the information here; it will help you make a well-informed decision.
In the Netherlands, there are many options, but the business structures chosen most often are:
Of these four, the sole proprietorship and general partnership are not legal entities, and the private limited company and the cooperative are. The difference is explained in the paragraph Types of legal structures.Those are not legal structures, even though the words are widely used. Freelancers/zzp-ers need to choose a business structure when they register – usually, they opt for sole proprietorship. But private limited company is also an option. You can also opt to start a cooperative together with a group of other zzp’ers; that way, you’ll have the protection of a legal entity, with the benefits of a sole proprietorship. Be aware that the cooperative will have to pay corporate tax over profits made.
In that case, you can register as a sole proprietor or as a private limited company. Once you’ve registered as a sole proprietor, you can decide to join or found a general partnership or cooperative.
In that case, you may want to start out as a sole proprietor. Be aware though, that as a sole proprietor you are personally liable for your company debts. On the upside, you will be liable for income tax but not for dividend or corporate tax. And there are tax benefits to be had: check the entrepreneur allowance.
In that case, a private limited company may be the choice for you. To start a private limited company, you will require the services of a notary. Be aware that as a bv you will be liable for corporate tax and dividend tax. Also, you will need to file your own income tax return over your salary. On the upside, you will not be personally liable for the company’s financial obligations.
In that case, you may consider starting out as a general partnership, a private limited company or a cooperative. A quick comparison will tell you what the main differences between these three are.
| Private limited company (bv) | General partnership (vof) | Cooperative / Mutual insurance company | |
|---|---|---|---|
| Setting up | Notarial deed | No requirements, preferably written / notarial contract | Notarial deed |
| Capital required | €0.01 | None | None |
| Governance | Directors | Partners | Board |
| Other bodies | Shareholders, possibly Board of Commissioners | None | Board of members, poss. Board of Commissioners |
| Liability | Directors (in case of mismanagement or unwarranted payments to shareholders) | All partners privately 100%, if partnership does not meet obligations | Members: fully (WA), partly (BA) or not at all (UA). Directors (in case of mismanagement) |
| Taxes | Corporate tax, income tax on directors’ salaries, dividend tax | Income tax, SME profit exemption, entrepreneurs allowance (if hours criterion is met) | Corporate tax, income tax on profit payments |
| Social security | No employee insurances, unless dismissal against the director’s/shareholders’ will is possible | No employee insurances | Only in certain cases |
In that case, you might consider starting a private limited company, as this will make you eligible for lower taxes.
BV’s are often viewed as more ‘real’ than sole proprietorships, especially abroad. So if you want to do business internationally, if you want to secure major clients, or if you want to be able to sell your business later on, a private limited company will help you realise those goals. On the other hand, starting a cooperative also lends you a professional image. So if you start out as a sole proprietor and then join forces with others, your business will profit from all the advantages of legal status, while preserving the benefits of being a sole proprietor. Also, you’ll profit from benefits that come from operating on a larger scale, such as tariffs for procurement and housing.
If you are looking for capital, and you involve private investors or banks, most likely they will want some security that their investment is a sound one. To provide this security, you either need to be able to prove that you can pay back the investors if the business goes bankrupt, or you need to start a private limited company, in order to establish a legal entity, which is more secure as a creditor than a sole proprietor (i.e., you personally). You may decide to offer your investors a share in the business, this is called equity. In that case you have shareholders, and need to start a BV. If you can procure government funding, you may not need to take money matters into account quite as much when deciding upon a business structure. But always be aware that loans have to be repaid somehow, and be realistic about your ability as a private person to do so.
Not what you are looking for?
If you need personal advice, contact the Netherlands Chamber of Commerce. They can talk you through the options.