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Business forms

If you want to start a business or set up an organization in the Netherlands to achieve a specific goal, a legal form or company form must be chosen. Which company form you can best use depends to a large extent on your personal preference, the characteristics of your company and the degree to which you want to run personal risk. You can choose from the next one types of companies: Private Limited Company, Sole Proprietorship, Company Under Firm, Public Limited Company, Limited Partnership, Partnership, Foundation, Association and Cooperative. In this article we will discuss the different types of company. You can already make a small selection based on the next one criteria.

Criterion 1: what is the purpose of your company?

The types of companies mentioned above all have their own advantages and disadvantages. These are discussed later in this article. First we make a rough classification based on three questions. The first is whether you want to make a profit. If so, the foundation and association company forms are not available. The second question is whether you want to collaborate with others. If the answer is 'yes', the Sole Proprietorship will be rejected. The third question is whether you want to be personally liable in full or in part. If the answer is 'yes', you can opt for a Sole Proprietorship, a VOF, a Partnership or a Limited Partnership.

Criterion 2: how do you want to work?

The choice of company form also depends to a large extent on the type of company you want to set up. The next one questions have to do with this. Do you want to hire staff? Are you going to make large investments or do you need a lot of capital? Do you expect to run major financial risks? If you answer all those questions with 'yes', it is obvious to choose a Private Company or a Public Limited Company. If you answer the questions with 'no', it is obvious to opt for a Sole Proprietorship. If you want to collaborate with others, you can opt for a partnership, a general partnership, a cooperative or a limited partnership.


Private Company (BV)

The most important characteristic of a Private Company is that the capital is fixed in shares and that there is limited joint and several liability. The shares are in the name of shareholders. If you set up a BV - alone or together with others - and start working there as a director, you are employed by the BV. To establish a BV you need the approval of a civil-law notary before your company can be registered in the Chamber of Commerce trade register. A BV offers the possibility to set up a large company, which requires a lot of capital.

Advantages and disadvantages of a BV

The biggest advantage of a Private Company is that the shareholders and owners are not personally liable for debts. That liability lies with the BV. From a tax point of view, a BV offers considerable advantages over company forms where the profit is taxed on the basis of income tax. A subjective advantage is that a BV has an image of quality. A downside is that many requirements have to be met in order to set up a BV. It is also not always easy to distribute money from the BV to you as a shareholder and owner.

Read more about the BV


Limited Liability Company (NV)

As a form of company, the Public Limited Company is very similar to a Private Company. The capital of an NV also consists of shares and the director is employed by the company. The main difference is that the shares are held by a BV and cannot be transferred to another owner. This is possible with an NV. In addition to registered shares, an NV also has the option to issue public limited shares. If you are planning to go public with your company, this is a plus as it allows the shares to be transferred quickly.

Advantages and disadvantages of a Limited Liability Company

The Limited Liability Company is a form of company for large companies that need a lot of capital. It is attractive that it is possible to act quickly. A Public Limited Company is also advantageous for you as a director. You have limited liability, you can make use of social insurance under certain conditions. Your income from corporate tax offers various options for tax deduction. A disadvantage of a Limited Liability Company is that a high start-up capital is required. In practice, it also appears that there is a relatively high tax burden for low profits.

Read more about the NV


Association Under Firma (VOF)

If you, together with a number of other persons, have sufficient capital, setting up a Vereniging Onder Firma (VOF) is a realistic option. You are then jointly the owner. All the necessary capital is invested by the owners. It is also possible to set up a VOF together with your partner. Unlike the Private Company and the Public Limited Company, a VOF is not a legal entity. The risk therefore rests entirely with the owners. If the company goes bankrupt, the former owners remain personally liable.

Advantages and disadvantages of a VOF

A general partnership is very easy to set up. There are no minimum requirements for invested capital and you can benefit from the input of other people. Because you are seen as an entrepreneur, you can take advantage of tax benefits such as the self-employed person's allowance, starter's allowance, SME exemption and the small business scheme. A disadvantage is the high degree of liability. Lack of freedom is also a disadvantage. This is because you are committed to the agreements you made with the other partners for years to come.

Read more about the VOF


Limited partnership (CV)

The limited partnership (CV) as a form of company is very similar to a Onder Firma Company. The difference is that in a limited partnership, silent partners are involved in addition to the initiators. These silent partners do not interfere with the company in terms of content and management, but they do provide capital. In return, they benefit from the profit. A limited partnership is an ideal form of business for a group of entrepreneurs who together have a good idea for a company, but do not have sufficient capital.

Advantages and disadvantages of a limited partnership

As a form of business, a limited partnership is especially lucrative if you are an initiator of a company. You can set up the company without too many preconditions and you need less capital. The Tax and Customs Administration considers you as an entrepreneur, which means you can benefit from the same tax benefits as the owners of a general partnership. A disadvantage is the high degree of liability. If the company gets into trouble, you as the owner are fully liable. The silent partners run a lot less risk. If the company is doing well, they will benefit from the profit. If things go badly, they only run the risk of losing their investment.

Read more about the CV


Proprietorship

Anyone who wants to start their own business quickly opts for the sole proprietorship as a form of business. The great popularity of this form of business is mainly due to the fact that a company can be started very quickly and without too many complications. It is enough to register with the Chamber of Commerce in the Trade Register and then you can get started with your company. You are completely your own boss, you have complete freedom and can hire staff. Most self-employed people choose this form of business. That is actually a shame, because if you want to collaborate with others, you could also have opted for an Association Under Firm or a Private Company.

Advantages and disadvantages of a sole proprietorship

The biggest advantage of a sole proprietorship is that it is very easy to set up a business. There are virtually no costs involved and hardly any preconditions are set. From a tax perspective, this form of business is quite lucrative, because as an entrepreneur you can benefit from substantial tax benefits. Think of the entrepreneur's allowance, the starter's allowance, the small business scheme and the SME exemption. But the disadvantages are also not nauseous, because as the owner you are fully responsible for your actions. As a private person, you therefore have to pay for all debts, even after bankruptcy. That may mean selling all of your assets.

Read more about the sole proprietorship


Partnership

A partnership is a form of business in which two or more persons who already have a sole proprietorship work together. The participants in a partnership are called the 'partners'. The contribution of you as one of the measures consists of labor, capital or goods. The advantage of working in a partnership is that you can use the facilities together and act as a single organization. A repair shop can easily be accommodated in a partnership. Various specialists, also of the same specialty, can apply their knowledge and complete assignments alone or together with the other mates. We can collaborate on marketing and housing.

Advantages and disadvantages of a partnership

A partnership offers the necessary benefits. It is a form of business that can be set up quickly, easily and without starting capital. As a 'measure' you benefit from the input of the other partners and as an organization you can hire staff and rent workspaces together. As a measure, your contribution is indicative of the degree to which you are liable. You must pay income tax on the profit distributed by the partnership. Because the Tax and Customs Administration sees you as an entrepreneur, you benefit from many deductible items. A disadvantage of working in a partnership is loss of freedom. You are obliged to keep to the agreements with your mates.

Read more about the partnership


Cooperative

Companies also work together in a cooperative . Then they are called members. A cooperative is led by a board. It is a form of company that requires a notarial deed for its incorporation. Just as with an association, the members have the highest decision-making power. Just as with a partnership, the profit in a cooperative is divided among the members on the basis of individual agreements. If you are a member of a cooperative, this is certainly not without obligation. The cooperative will draw up a formal agreement for the cooperation with you and each other member, which sets out the guidelines and conditions for the cooperation. A well-known example of a large cooperative is FrieslandCampina. There are also small cooperatives, where the members are self-employed.

Advantages and disadvantages of a cooperative

The great advantage of a cooperative is the cooperation between the members. The fact that there is a common interest - the supply of raw materials so that an end product can be made from them - ensures continuity in production. The fact that the members in the General Members Meeting can participate in decisions is sometimes seen as a disadvantage. It delays decision-making and can lead to conflicts if the interests of the cooperative and its members collide. Another disadvantage is that setting up a cooperative is a complicated process that can take a lot of time.

Read more about the cooperative


Association

The association is an enterprise form for groups of people - members - who are engaged in an activity together. It could be anything. A football association, a music association, scouting or a political party. At an association, the members have a lot of influence on policy. In the General Members Meeting they can agree to proposals from the board. Establishing an association is quite simple, because a lot has been regulated by law for the way in which the board and the members should deal with each other. An association is not suitable as a form of business for commercial activities, because it is prohibited to distribute any profit to its members.

Advantages and disadvantages of an association

An association and a foundation are neither suitable as a form of enterprise for commercial activities. It therefore only makes sense to compare an association with a foundation, because that too is a form of business in which all profit must be spent on the organisation's goal. The advantage of an association is that there are members, which guarantees that democratic decisions are taken. At the same time, that is also a disadvantage. Because a General Members Meeting sometimes slows down decision-making.

Read more about the association


Foundation

A foundation is a form of company that is set up to achieve a specific goal. That does not necessarily have to be a good cause. Societal and social goals are also often housed in foundations. Crucially, the people behind it are not profit-making. It is prohibited for a foundation to distribute any profit to the directors. Profit should only benefit the cause. There is a persistent prejudice surrounding foundations that they are suitable for obtaining all kinds of financial advantages through vague constructions.

Advantages and disadvantages of a foundation

Just like an association, a foundation is not suitable for accommodating commercial activities. Foundations are very suitable for pursuing idealistic goals, especially if they are goals that do not directly involve people. Examples are the healing of diseases and the promotion of nature. A goal such as making music together can better be placed with an association. An advantage of a foundation is that the decision-making rests with the board. As a result, decisions can be made quickly.

Read more about the foundation


Overview with all the characteristics of all business forms

The most important characteristics of the business forms discussed earlier are listed in the next one overview. You can use that to make an initial selection of an enterprise form that is most sensible for your business to use. Do not take a hasty decision and learn about the advantages and disadvantages of the two or three types of business that seem interesting to you.

Proprietorship Partnership VOF Cooperative BV NV CV Association Foundation
Characteristics - An owner - Group of sole traders or private limited companies (partners) - Group of sole traders or private limited companies - Group of sole traders or private limited companies
- Written agreements with members
- One or more shareholders
- Legal person
- One or more shareholders
- Legal person
- Group of sole proprietorships or private limited companies and limited partners - Group of people wants to achieve a goal together
- Legal entity (not mandatory)
- One or a few people want to achieve an ideal goal
- Legal person
Liability - Privately - Each for an equal share, also private - Partners are fully liable, also privately - Own choice: complete, limited or none - Not private, only in maladministration - Not private, only in maladministration - Partners are fully liable, also privately
- Silent partners are only liable for their contributions
- No liability, unless there is maladministration or if the association is not a legal person - No liability, unless there is maladministration
Establishment - Chamber of Commerce registration - Sizes register with Chamber of Commerce
- Partnership contract (option)
- VOF registers with Chamber of Commerce
- Company contract (option)
- Notary takes care of incorporation
- registration at Chamber of Commerce
- Founded by the notary
- Notary registers with the Chamber of Commerce
- Founded by the notary
- Notary registers with the Chamber of Commerce
- VOF registers with Chamber of Commerce
- Company contract (option)
- is established by deed at the civil-law notary
- Register with the Chamber of Commerce (if the association is a legal entity
- is established by deed at the civil-law notary
- notary takes care of registration with the Chamber of Commerce
Taxes - income tax with various deductions - partners pay income tax with various deductions
- partnership pays VAT
- income tax with various deductions
- VOF pays VAT
- cooperative pays corporate tax
- members pay income tax
- Corporation tax
- income tax on director's salary
- Dividend tax
- No deductions for entrepreneurs
- Corporation tax
- income tax on director's salary
-Dividend tax
- No deductions for entrepreneurs
- income tax with various deductions
- VOF pays VAT
- Corporation tax - Corporation tax
Social Security - no employee insurance - no employee insurance - no employee insurance - employee insurance - no employee insurance - no employee insurance - no employee insurance - no employee insurance - no employee insurance
Obligations - Chamber of Commerce registration - Chamber of Commerce registration of the sizes - Chamber of Commerce registration - Chamber of Commerce registration
- Filing annual accounts
- Prepare and file annual accounts with the Chamber of Commerce
- Monthly wage tax return
- Prepare and file annual accounts with the Chamber of Commerce
- Monthly wage tax return
- Chamber of Commerce registration - filing annual accounts (under certain conditions) - Deposit annual accounts (depending on turnover)
Cost - no - costs of drawing up a partnership contract - costs of drawing up a company contract - no - accountant costs annual accounts - $ 45,000 seed capital
- accountant costs annual accounts
- costs of drawing up a company contract - Cost of preparing annual accounts (possibly) - formation expenses $ 50
- Costs preparing annual accounts

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