Tips for Selecting Your startup's Legal Business Structure
In order to register your business with the Dutch Chamber of Commerce (KvK), you must select your business legal structure. In the Netherlands, you can choose among various types of legal structures, each with particular advantages and limitations so it’s important to understand which choice is the best for your business.
RSIN and KVK numbers
First off, there is a distinction between legal forms that make your business its own legal person – one with an RSIN number and KvK number – and legal forms without personhood, which will only receive a KvK number upon registration. These two larger groups include various subtypes of legal business forms. Keep in mind that the businesses of freelancers and self-employed professionals (zzp’ers) are not considered as legal persons, but that they can act as sole proprietors, have a private limited company, or join a cooperative (more on this below).
For entrepreneurs who are starting a new business, the most recommended legal structures are as follows:
This is the simplest legal structure. The sole proprietorship (eenmanszaak) does not constitute a legal person, which makes the process of registration with the KvK a lot quicker. For this legal structure, special tax benefits are provided, especially during the first years. However, be aware that the sole proprietorship option does entail some risks, such as you being personally liable for your business debts.
BV – Private limited company
The BV (besloten vennootschap) constitutes a company with limited liability. This is the most chosen type of legal structure among foreign startuppers and, unlike the sole proprietorship, it does constitute a legal person. Consequently, the registration with the KvK is a more complex process and usually requires a civil-law notary, which makes it a longer and more expensive process. Nevertheless, once the process of registration is officially started, the BV may already start to operate immediately as a “private limited company in formation” (BV i.o.) according to the Dutch law.
One of the best advantages of the BV is that you can share your responsibilities with other shareholders and, legally, you have no personal liability for business debts. However, keep in mind that the latter aspect is only true up to a certain point, for in some cases such as a bankruptcy caused by mismanagement, you can be personally liable.
VOF – General partnership
The VOF (vennootschap onder firma) is a business run by more than one person. The partnership has to be registered with the Chamber of Commerce, but a civil-law notary is generally not required. As for the sole proprietorship, it is not a legal person. It means that both the partners (and also their respective spouses, if not protected by a specific marriage contract) are personally liable for business debts.
A cooperative (coöperatie) is an association between several members. It constitutes a legal person and it requires a civil-law notary to be registered with the KvK. There are various types of cooperatives. An Entrepreneurs cooperative, for example, brings together several self-employed entrepreneurs (zzp’ers) who do not have any employees of their own. All the members share certain rights over the cooperative and can profit from the agreement. Furthermore, they can enter or leave the cooperative without compromising its continued existence.
Since a cooperative constitutes a legal person, its members are not personally liable for business debts. However, there are some exceptions, such as in the case when the cooperative is dissolved and there are still outstanding debts to be paid.
The choice of the legal structure must be made according to the nature of your startup and your specific needs. Statistically, the most common choice of foreign startuppers is the BV because it protects them from debt liability. If you would like some more information, do not hesitate to contact the KvK through this contact form on their website.