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.
Report the new legal structure
You must notify the Netherlands Chamber of Commerce KVK of the new legal structure of your company. You must also report the change to the Tax and Customs Administration.All business structures with a legal personality such as bv and nv must be recorded in a deed at a 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.
Tax and social security implications
Changing your legal structure can have tax consequences and social security implications for you and your company.
- You may have to pay income tax over the discontinuation profit (stakingswinst, in Dutch).
- For VAT purposes a change in legal structure or partnership is the same as starting a new company. Read more about Consequences for VAT (Gevolgen voor de btw, in Dutch).
- If you have personnel, you must close the payroll administration and re-register as an employer. See Chapter 2 of the Handboek Loonheffingen (in Dutch). Your company will receive a new payroll taxes number.
- It can also have consequences for social security. How is your pension arranged, or your disability insurance? For example: if you start a bv, you will be an employee of that bv and covered by social insurance.
- 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;
- In addition, your company is legally obliged to keep records. You can outsource this to a bookkeeper or accountant. The prices range from €600 and €1,800 per year per year.
What else you should know
Changing the legal structure can mean that:
- you have to adjust your private situation. For example, to properly arrange liability if you are married in limited community of property and you do not want your partner to be liable.
- you must invest €45,000 to start a public limited company (nv).
- you may have to keep more records than before. For example, if you become an employer. Certain types of company also have to produce annual accounts and file them with KVK.
- you have to include your 'ultimate beneficial owner(s)' or UBOs in the UBO register. This applies to all business structures except the sole proprietorship.
- 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.
- If a car is registered to the company, this registration may need to be changed as well. Read more.
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.