Limited partnership (cv)

What is a cv?

A limited partnership consists of at least 2 persons. Within a cv, there are 2 types of partner – a managing partner and a limited partner.

• Managing partners. The managing partner runs the business on a day-to-day basis.
• Silent partners, also known as limited partners. The limited partner involves themselves with the business's financial affairs. The silent partner is not actively involved in running the company, unlike shareholders within a BV.

You can think of a commanditaire vennootschap as a special type of 'commercial partnership' (vof). Like the vof, the cv is not a legal entity. The managing partners are personally liable for possible debts of the company.

Setting up a cv

You have to register your limited partnership in the Business Register at the Netherlands Chamber of Commerce KVK. You pay a one-time fee to register in the Business Register. Basic details of the cv are registered such as company name and activities

Managing partners have to supply their personal details, like name and address. Limited partners, however, do not. You only have to state how many limited partners are participating in the CV and the amount of equity they bring to the company. You prepare your registration online.

Register your UBOs

Most businesses that register in the Dutch Business Register (including several European legal structures) have to include their ultimate beneficial owner(s) or UBOs in the UBO register. Find more information about the UBO register.

The limited partnership contract

It is not mandatory to draft a partnership agreement when setting up a limited partnership, but putting your agreements in writing can be useful. For example, a cv contract might include arrangements about:

• who the managing and limited partners are and the equity they each bring into the company, such as cash or labour
• the contribution of goods and how partners will divide any profit or loss
• taking out a life insurance policy for the continuation of the business if 1 partner dies.
• agreements about the client portfolio, should partners ever split up

All managing partners may act on behalf of the cv. All partners can be held liable for the consequences of these actions, such as concluding contracts. You can set out different agreements about liability in the cv contract.

You can draw up a cv contract yourself. Or you can arrange it through a lawyer or civil-law notary. The costs for drawing up a partnership agreement differ depending on the civil-law notary or lawyer. On average, the costs are between €200 and €400.The cv's activities and the powers of the partners are recorded by KVK in the Business Register.

Liability

A cv is not a legal personality. This means that the managing partners themselves are responsible for all the company’s activities. And are liable for its finances with their own money. Also, for any debts. A managing partner is personally liable for the entire debt of the limited partnership. Even if the debts have been incurred by another managing partner.

Creditors can choose whether to claim the assets of the company or the managing partners first. If the assets of the company are not enough to repay the debts, creditors are entitled to the private assets of the managing partners. Are you married in community of property? Then your partner is also financially liable for debts. You can avoid this with prenuptial or partnership agreements.

A silent partner is not involved in the business operations and may not perform legal acts on behalf of the company. The silent partner is therefore not personally liable. However, the silent partner can lose the money they invest in the cv. If a silent partner actively involves themselves with the cv, they may be privately liable.

Liability when joining later

A managing partner who joins the cv later is automatically liable for debts incurred before they entered the partnership. Are you joining an existing limited partnership? Check the financial situation first.

Managing partners who join later can also make agreements on the distribution of any existing cv debts. If a claim then arises, the other partners will reimburse the difference to the new partner.

Does a managing partner leave? Then they remain jointly and severally liable for debts incurred while they were a partner in the cv. Again, the partners can agree among themselves on the division and compensation of the debts.

Administration

You are legally obliged to keep records. You can outsource this to a bookkeeper or accountant. The prices range from €500 to €1,000 per year.

Filing financial statements

If all managing partners in your limited partnership are foreign, you will have to file your financial statements with KVK.

Taxes

As a managing partner, you have to pay income tax on your share of the profit. If the Netherlands Tax Administration (Belastingdienst) views you as a business owner you are entitled to the SME profit exemption. If you meet the hours criterium (in Dutch), you are also entitled to other tax benefits, including the entrepreneurs' allowance(ondernemersaftrek). Starting entrepreneurs are also entitled to the tax relief for new companies (startersaftrek) 3 times in the first 5 years.

Read more about deductions and tax schemes.

A limited partner is only entitled to tax schemes for investments, such as discretionary depreciation (willekeurige afschrijving) and the investment allowance (investeringsaftrek). Silent partners are not entitled to tax benefits for entrepreneurs.

For VAT purposes, the cv is an entrpreneur and pays VAT.

• See additional information about paying taxes in the Netherlands

Signing authority

Each managing partner is authorised to sign. This means that they may sign contracts or perform certain legal acts on behalf of the cv, such as reporting a change in the Business Register. If you want to limit the authority of partners, you can make agreements about this in the partnership contract and record them in the Business Register.

A cv can also choose to appoint power of attorney to someone else. This person is then authorised to act on behalf of the company. You can register this person in the Business Register. This is not mandatory but means your business partners also know who is allowed to act on behalf of the company.

Personnel

A cv can hire personnel. If you hire personnel, you have to pay payroll taxes and social contributions for them. If you are hiring an employee for the first time, you must register as an employer with the Tax Administration. You must also report this to KVK. Read the checklist Employing staff in the Netherlands for more information.

Social security and national insurance contributions

As a managing partner, you pay national insurance contributions. You are entitled to an old-age pension (AOW) when you reach retirement age. AOW is a minimum income. You can arrange to supplement this pension yourself.

Because you are not an employee, you are not entitled to any of the benefits available to regular employees, such as sickness, unemployment or disability benefit (ziektewet, WW and WIA respectively). It is up to you to take out disability insurance when you start your own business. If you are pregnant, you are entitled to maternity allowance of at least 16 weeks. You can apply at the Employee Insurance Agency (Uitvoeringsinstituut Werknemersverzekeringen, UWV, in Dutch).

Health insurance is mandatory and basic cover is sufficient. You pay a premium to your health insurance company and a contribution as part of your tax return.

Depending on your company's activities, it can be wise to take out additional business insurance.

Dissolving and liquidating a limited partnership

The cv ceases to exist if a partner leaves the partnership agreement or dies. However, it is possible to include a survivorship or takeover clause in the partnership contract, so that the remaining partners can continue running the business, for instance by seeking a new partner or continuing as a sole proprietorship. In the cv contract, you agree who is entitled to what and how you divide the company.

Do you want to change a silent partner? If so, you need to amend your mutual contract. Does the number of managing partners or the contribution of the limited partners change? If so, you must report this to KVK. For the limited partners, you only need to state the number of partners and their contribution. You do not need to record their personal details to the Business Register.

If the cv stops altogether then the company must be dissolved. All partners must give notice to do this. When dissolving your cv, you have to pay any outstanding debts and return each partner's share in the partnership. This is called liquidation, or in Dutch vereffening. Any surplus is then distributed to the partners based on their share in the cv's profits. The way this is done is set out in the partnership contract. For example, you can agree that you divide what remains based on everyone's profit share. Or that you pay remaining debts from your private assets.

Make sure you report the changes to KVK and the Tax Administration.

More information about ending your limited partnership.

Changing your legal structure

You can change a cv into a different legal structure, such as a general partnership (vof) or sole proprietorship. You must report your changes to KVK and the Tax Administration. Check Belastingsdienst.nl (in Dutch) to see if you have to pay discontinuation profit (stakingswinst).

You can also change the cv to a private limited company (a bv). One of the differences is that the bv is liable for finances and possible debts. There are several ways to change a cv into a cv. These steps are similar to changing a sole proprietorship into a bv.

Note: Be aware that for tax purposes, the Netherlands Tax Administration views changes in legal structure as ending one business and starting another.