What is a legal entity?
The law says that companies and organisations can have rights and obligations, just like natural persons and people. This applies to companies that have a legal structure with legal personality, like a private of public limited company (bv or nv). The company is then a legal entity. You set up a legal entity through a deed at a civil-law notary. When you have a company with legal personality you are not personally liable with your own money for debts or damage claims, for example. Instead, your company is liable.
A civil-law notary must set up the legal entity before you can register your business at the Chamber of Commerce KVK. See step 1:
Rights and obligations
If your company is a legal entity, it has legal capacity. This means that your company can make decisions, have debts, and enter into agreements. Your company can also own assets and property. For example, company assets such as computers, a delivery van, and equipment. But also debts and money in your company bank account. In the eyes of the law, a legal entity is almost the same as a natural person. A legal entity can inherit. You can sue a legal entity. And a legal entity can go bankrupt. Of course, legal entities cannot get married or be sent to jail.
Legal entity representation
A legal entity has a board: a chairperson, secretary, director, or a general board member. These people act for and on behalf of the legal entity. This means that they can make binding agreements on behalf of the legal entity. Another legal entity can also be a director, represented by a spokesperson. For example, a bv can be in the board of another bv.
If your company is a legal entity, the directors are only personally liable in exceptional cases. For shareholders of a BV, the value of the shares is the only risk The liability of legal entities is regulated in Book 2 of the Dutch Civil Code. Read more about directors' liability.
Legal forms with legal personality
- Public limited company (nv)
- Private limited company (bv)
- Mutual insurance company
- Religious communities
- Statutory bodies (national government, municipalities, Regional Water Authority etc)
- Organisations that perform government tasks
- Limited Liability Partnership (LLP)
What is a natural person?
A natural person (a human being) has rights and obligations. In the Netherlands, everyone can close agreements, own property, marry, inherit, be in debt, or draw up a will. And earn money by working. Do you want to start a business in person? For example, as a hairdresser, photographer, or accountant. Then choose a legal form without legal personality. A sole proprietorship is owned by a natural person. There is no separation between private and business assets. A commercial partnership (vof) or public partnership (maatschap) also consists of natural persons. In a sole proprietorship or partnership, the owners are personally liable for the actions, debts, and damages.
Legal structures without legal personality
- Sole trader or sole proprietorship
- Commercial partnership (VOF)
- Public partnership (maatschap)
- Limited partnership (CV)