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Setting up a company requires careful consideration of several factors. This is especially true if you want to step foot into the Netherlands’ business market. The first step will be to familiarize yourself with the country’s business culture and legal system. 

Many Entrepreneurs get stuck and become overwhelmed by the multitude of legal issues entailing the startups. IP acquisitions, security law compliance, license acquisition, labor, employment, taxes, and other similar factors must be addressed properly for a successful business startup.

Dutch law allows a few business structures that vary depending on the company’s proprietorship, financial structure, etc. A Private Limited Company setup is the best option if you are considering a private setup in the Netherlands.

So, How would you take the lead to start it up? We’ve got you covered!

Let’s explore a Dutch BV and what facts you need to know while setting it up.

What is a Private Limited Company (BV)?

The Dutch Besloten Vennootschap, commonly known as BV, is a legal entity equivalent to a Private Limited Company. You can start it on your own as the only director/sole shareholder or with your partners or legal entities. 

A Dutch BV is a business structure with a legal personality, which means that the BV is responsible for any debts rather than you as an individual. As a Director, you are deemed an employee of the BV acting on its behalf. 

A private limited company’s equity can be divided into shares owned by shareholders. Although they also have the ultimate power, the director takes charge of the business operations entirely. The company can either have a two-tier board, where a supervisory board is set up to oversee the board of directors, or a single-tier board, where supervisors themselves are part of the board of directors. 

Formation of BV

The first step to forming a BV is to have complete know-how on how to set up a Dutch BV. It is commonly mis-believed that you can’t start trading unless you have a set up of a company. However, it is possible to do your trading even if you don’t have a private limited company’s establishment. 

The only thing you need to ensure is to register yourself with KVK’s Business Register and have a civil-law notary certify that they are running the incorporation on your behalf. Undertaking this route, you can operate as a Private Limited Company under incorporation (BV io)

It is also vital to clearly state before the business partners that you are acting on behalf of the legal entity called ‘BV io.’ Another thing to note is that any contracts will be done so as a legal entity in formation, and you will be liable for your actions on behalf of the ‘BV io.’ Once the BV is established, you may transfer the contracts to your BV. However, this is subject to the agreement of the other party. 

If you are acting as a sole proprietor, you can add ‘BV’ to your name. However, you must note that you are entering into an agreement as a sole proprietor or eenmanszaak if you sign a contract during this phase. 

Financial Structure

Finances must be calculated and jotted down in detail before you dip your toes into setting up a BV. Such finances not only involve the costs of establishment and employment of the company but also all overhead costs that are unavoidable, such as:

  • Starting capital of at least €0.01.
  • Registration fee for the KVK’s Business Register.
  • Accounting/ Bookkeeping fee
  • Civil law notary’s fee (could vary from €500 and €1,000 depending upon your company structure)

Like any other business, you need to keep records for your BVs and produce annual accounts to deposit them with KVK. The data to be submitted will depend greatly on the type and size of your company.

Taxes Structure

If you are the owner of 5% or more of your company’s shares, you have a substantial interest and are eligible to be the director or major shareholder. As a Director or major shareholder of the BV, you are obliged to pay the income tax on your salary or Dutch dividend tax.

Paying a salary to yourself from the BV can be more expensive. Alternatively, If you pay out dividends, they provide you an affordable option and help reduce the tax burden. 

Apart from the taxes you will have to pay, Your BV is also entitled to pay its relative taxes like corporation tax (commonly called ‘vennootschapsbelasting, VPB) over its profits. Suppose your BV has an annual turnover of more than €20,000; you can make use of KOR, the small business scheme. According to this scheme, you will not charge VAT to your customers, and in turn, you will not have to pay Turnover tax VAT to the Dutch Tax and Customs Administration. This scheme applies to every single activity in your company. 

Liability

As discussed earlier, while you own BV, you are not personally liable for business debts in papers. However, in practical life, the banks may require you to co-sign for loans as a private individual. What it means is that you will certainly be responsible for repaying all the loans taken by the company. 

There are various scenarios where you can be held liable personally. These include,

  • A case where you fail to inform the Dutch Tax and Customs Administration that you cannot pay your taxes and other social security contributions in a timely manner.
  • If you sign an agreement while knowing your company is unable to fulfill its commitments.
  • In case you don’t pay taxes and other social security contributions due to negligence or mismanagement in 3 years before reporting to the Dutch Taxes and Customs Administration.
  • In case your BV was declared bankrupt owing to mismanagement (failure to file annual accounts and reports) in the three years leading up to bankruptcy. 

In case you appoint another legal entity as a director, it will not exempt you from personal liability.