There are several types of legal entities (rechtsvormen) that entrepreneurs can set up in the Netherlands. They can be classified into two groups: incorporated (legal form is mandatory) and unincorporated (legal form is not mandatory).
Incorporated businesses must have a legal form (i.e. a corporate personality or legal person) represented by a deed drawn up by a notary. This form protects the owner from any debts incurred by the company.
Dutch limited liability company (BV)
Limited liability companies are the most common form of company in the Netherlands.Limited liability companies are companies in which the equity is divided into shares. The Dutch BV limited liability company is commonly employed by entrepreneurs investing in the Netherlands. The Dutch company law is renewed, therefore a Dutch BV no longer requires a minimum capital deposit. A shareholder is the minimum requirement for a Dutch BV and liability is limited to the capital deposited. Dutch BV shares are transferable by notarial deed.
Incorporated undertakings and civil liability
The defining aspect of an incorporated business is that by setting up the company as a legal entity or "legal person", you and your private assets are protected from the debts of your business. However, in case of negligence, you may still be personally liable. It is essential that you fully understand the responsibilities of setting up an incorporated company, as failure to comply with your administrative and tax obligations can lead to fines from the Belastingdienst (Dutch tax office) or, in more severe cases, legal action.
Incorporated enterprises and taxation
Dutch companies with a legal form are taxed differently from individuals or companies without a legal form.
Corporate income tax
In particular, companies with a legal form are obliged to pay corporation tax (vennootschapsbelasting) or corporate income tax on profits. There are some cases where foundations and associations are not obliged to file corporation tax.
Corporate income tax has considerably lower rates than income tax, which is a major influencing factor in why some entrepreneurs choose an incorporated business such as BV However, administration is more complex and annual costs can be higher. A higher turnover is usually required to offset these expenses.
This type of company can be registered if you have a minimum share capital of EUR 0.01 in accordance with the recently amended Companies Act. There are a number of requirements related to the board of directors and the company's registered office, both of which are necessary for what local regulations describe as "substance", and our company INCO Business Group is able to provide all the necessary services to foreign business people.
Dutch BV is one of the most selected legal entities for foreign entrepreneurs.
Unincorporated companies (Rechtvormen zonder rechtspersoonlijkheid)
An unincorporated business structure does not require a legal form, such as a notarial deed. This means that you (and your private assets) are not protected from the debts of your business.
Unincorporated companies can be incorporated directly with the Dutch Chamber of Commerce (KvK) without the services of a civil law notary.
Taxes and unincorporated enterprises
The types of taxes that businesses without a legal form have to pay are BTW, income tax and payroll tax (if there are employees). There are also several attractive tax breaks available. Unlike incorporated businesses, unincorporated businesses do not pay corporation tax.
Civil liability and unincorporated enterprises
The main disadvantage of companies without legal form is that there is no distinction between your private and commercial property. If you are in debt to your company, debtors have the right to claim your personal property. If your business goes bankrupt and you can't cover it personally, then you go bankrupt too. This also applies to any assets you share with a spouse - if you are married in community property.
