Why change your business structure
When you started your business, you chose the structure that was best suited to your situation and ambitions. But when circumstances change, a different legal structure may be a better fit. The main reasons to change are liability, taxes and working with partners. In business structures without a legal personality (Sole proprietor, General partnership, Professional partnership, Limited partnership), the owners are all personally liable. And the tax rates and types of tax differ per business structure. Some examples:
- You are registered as a sole proprietor. After some years the business is expanding. More money is involved and therefore more risk. As a sole proprietor you are personally liable for the company’s finances and debts. Also, you pay income tax on your sole proprietorship's profits. Changing the legal form to a private limited company (bv) means the company is liable. And the bv corporate income tax rate is lower than the highest scale of income tax.
- You want to work together with others and be equal partners. You could change your legal form to a general partnership (vof), or if it concerns a specific profession, to a professional partnership (maatschap).
- You can change a private limited company (bv) to a public limited company (nv) if you want to be able to attract more capital.
- Note: a sole proprietorship does not always have to change its legal form if circumstances change. For example if a second person becomes more involved in the business or even when you hire staff.
Tool for choosing a Dutch legal structure
Use the Tool for choosing a Dutch legal structure to find out which legal structure best suits your company.
1. Choose a new legal structure
Maybe you already know which one. Are you still in doubt? Use the tool to help deciding which legal structure fits you best.
You can change some legal forms yourself. For example, a professional partnership (maatschap) or general partnership (vof). You do this by creating a contract. For legal structures with legal personality, this must be done through the civil-law notary.
For example, if your sole-proprietorship changes into a bv. In this overview (pdf, in Dutch), you can see in the row ‘in formation’ if you need a notarial deed.
Many entrepreneurs with a sole-proprietorship choose a bv. This can be beneficial for taxes. They are also no longer personally liable. Get advice about this.
Liability of your partner
Do you opt for a legal form without legal personality, such as a sole proprietorship or a general partnership? Then your partner is also liable for the debts of your company. Learn how to avoid your partner being liable.
2. Report the new legal structure
You must notify the Netherlands Chamber of Commerce KVK of the new legal structure of your company. Sometimes the civil-law notary will do this for you. You will receive a new KVK number.
Also, you have to include your 'ultimate beneficial owner(s)' or UBOs in the UBO register at KVK. This applies to all business structures except the sole proprietorship.
KVK passes on the change of legal form to the Tax and Customs Administration. The Tax and Customs Administration sees this as ending the old company and starting a new one. You may have to pay income tax over the discontinuation profit (stakingswinst, in Dutch). Agreements (in Dutch) you have with the Tax and Customs Administration for VAT will still apply. For example, whether or not you are an entrepreneur for the tax purposes. And if you should use cash accounting (kasstelsel, in Dutch) or invoice accounting (factuurstelsel, in Dutch). Your VAT obligations and tax debts are also transferred.
You will also receive a new VAT number and VAT identification number. You must pass this last number on to your business partners.
Sometimes the bank will contact you. The name of your business account changes. Ensure that you save all information from the account to the old name.
Your company often also has other products at the bank. Such as financing, credit card or g-account. Ask the bank to also convert these to the new company as well. Sometimes this is not possible because the legal structure has changed. The bank then checks again if you are allowed to have those products and if the conditions change.
Are you a business customer of The Netherlands Vehicle Authority (RDW)? Or do you have an RDW recognition or authorisation? For example, because you have a taxi company. Then report your new legal structure on RDW.nl (in Dutch).
If a car is registered to the company, you may have to change this registration as well.
Inform your insurance company that your company has a new legal structure. You may want to change or take out new insurance policies. Like a pension insurance. A liability insurance must also fit the new legal structure. For example, a directors' liability insurance (in Dutch) if your company changes to a BV or NV.
3. Transfer licenses to the new legal structure
Your business permits are often no longer valid if the legal structure of your company changes. You must convert your permits. For example, if you have a transport company (in Dutch). Or a catering company (in Dutch) with an operating permit and an alcohol license. Or if your company has approvals and permits (in Dutch) from the Dutch Food and Consumer Product Safety Authority. You must apply for some permits again. In that case, there may be a reassessment if you will get the permit again.
4. Convert contracts to the new legal structure
Contracts of your company must be in the name of the new legal structure. To do this, contact the party you have the contract with. For example, insurances and permits, internet and telephone subscription. And rental and supply contracts (water, energy). You need permission from the landlord to change the rental contract of your business premises.
5. Re-register as an employer
If you have employees, you must close your payroll administration. Then register again as an employer with the Tax and Customs Administration. You will then receive a new payroll tax number.
Also inform your emplyees, the salary administrator, the Employee Insurance Agency (UWV), the health and safety service (arbodienst), and the pension fund that you have a new legal structure.
6. Check if you need to include other data in the business records
Perhaps there are different rules for your administration if you get a new legal structure. For example, it is mandatory for a bv to keep payroll records and to draw up annual accounts. A sole proprietorship does not need to prepare annual accounts. Also consider adjusting your website, stationery and invoices. Read more about keeping business records.
If you change the business structure to one with legal personality, such as bv or nv, you must draw up articles of association. You bring them with you to the notary who will draw up the statutes in a notarial deed and handles registration at KVK and the Tax Administration.
7. Decide if you transfer business assets
You can transfer the business assets of your company to your new legal structure. For example your stocks. And assets such as computers, tools and machines.
You can also choose to keep these in private possession. Then you buy them from your company and process this in your administration.
Costs
- You pay a one-time KVK registration fee for the new legal structure;
- If you change to a business structure with legal personality, you pay notary fees. This varies per civil-law notary and could be anything between €500 and €1,000;
- Your company is legally obliged to keep business records. You can outsource this to a bookkeeper or accountant. The prices range from €600 and €1,800 per year per year.
Ask advice
If you need personal advice, contact the Netherlands Chamber of Commerce, KVK. They can talk you through the options.
Statistics: businesses by legal form
Number of business structures with and without corporate (legal) personality.