New Businesses: Legal forms

New businesses in the Netherlands have to make a choice from a number of legal forms. Your choice will be the legal form in which to run your business and determines such aspects as liability and tax obligations.

Types of legal forms

There are legal forms with and without corporate personality. These are:

Sole trader
Limited partnership (CV)
Partnership under common firm (VOF)
Private limited company (Ltd.)
Public limited company (NV)

The most used forms are further explained below.

One-man business (eenmanszaak)

One-man business is also referred to as sole trader or sole proprietorship or independent
If you start a one-man business you will be the fully independent founder and owner. More than
one person may work in a one-man business, but there can only be one owner. A one-man
business can also employ personnel.

Setting up

You can establish a one-man business without a notarial deed. Registration in the Trade Register
is mandatory. As a private individual you can only register one one- man business. However, you
can have more than one trade name and carry out various business activities under different
trade names. These activities can be carried out at the same or at another address, as a branch
office of the one-man business.


As the owner of a one-man business you are responsible for everything concerning your
enterprise; for every legal act and all its assets and liabilities. No distinction is made between
private and business property. Thus, business creditors can seek recovery from your private
property and private creditors from your business property. If your one-man business goes
bankrupt, you yourself go bankrupt as well. If the owner of a one-man business should be
married in a community of property regime, the creditors may also lay claim to the partner’s
property. Partner liability can be avoided by a prenuptial or a postnuptial agreement drafted by a civil-law notary. However, since partners are usually requested to co-sign when taking a loan,
the agreement may not offer the protection expected. A civil-law notary can provide more

Taxes and Social security

The profit made in a one-man business is taxed in box 1 – income tax. If the Tax Administration
fully considers you an entrepreneur, you are entitled to tax allowances such as the
entrepreneur’s allowance, investment allowance and the tax-deferred retirement allowance.
The owner of a one-man business cannot claim social benefits under the Sickness Benefits Act,
the Work and Income Act and the Unemployment Insurance Act. Therefore, it is advisable to
take out insurances to cover these risks. You will qualify for the following national insurance

• General Old Age Pensions Act.
• Surviving Dependants Act.
• Exceptional Medical Expenses Act.
• General Child Benefit Act.

General partnership, the “VOF”

A general partnership is a form of cooperation in which you run a business with one or more
business partners. You and your partner(s) are the associates or members of the general
partnership. One of the characteristics of this legal form is that each partner contributes
something to the business: capital, goods, efforts (work) and/or goodwill.

Setting up

A partnership contract is not a statutory requirement for the formation of a general partnership,
but it is, of course, advisable to put down in writing what you and your business partner(s) have
agreed upon.
A partnership contract could arrange the following matters:

• name of the general partnership;
• objective;
• contributions by partners in capital, know how, goodwill, assets and efforts (work);
• distribution of profits and offset of loss; • allocation of powers; • arrangements in case of illness;
• arrangements for a partner’s days’ holiday.


An important characteristic of the general partnership is the joint and separate liability of the
partners. Each partner can be held fully liable – including private property – if the general
partnership fails to meet its obligations, even if these obligations were entered into by another,
authorised partner. Creditors of the partnership may

Taxes and Social security

Each partner will pay his own income tax on his profit share. If the Tax Administration sees the
individual partner as an entrepreneur, he is entitled to all kinds of tax allowances, such as the
entrepreneur’s allowance, investment allowance and the tax-deferred retirement allowance.
As far as social security is concerned, the same rules apply to the entrepreneur
– partner as to the owner of a one-man business.

Private company with limited liability, ‘BV’

In contrast to the legal forms described above – enterprises run by natural persons – the private
limited is a legal person: a person having rights and obligations, just like a natural person. The
natural person who has incorporated the private limited cannot be held liable, in principle, for
the debts incurred by the private limited. The BV itself is seen as the entrepreneur, whereas the
natural person who is appointed director merely acts on behalf of the BV and cannot be held
personally liable for his acts. A private limited company can be incorporated by one person – a
sole shareholder BV – or by more persons. The capital of a private limited is divided in shares.


Incorporation takes place through a notarial deed. This should include the articles of association
of the company. The civil-law notary will check the legal contents of the articles.
As of October 1st, 2012 it is no longer necessary for a BV to have a minimum capital of € 18,000
(cash or in kind) in the private limited.


The shareholder’s liability is limited to the total sum of his participation. Since the BV is a legal
person, having its own independent rights and obligations, the persons involved – directors and
supervisors – cannot be held liable for the debt of the company. In other words: the company’s creditors can never seek recovery from the private assets of these officers. However, a company
director or officer may be held liable as a private person if he has acted negligently or culpably.
If he is responsible for the company’s bankruptcy because of wrongful or fraudulent behaviour
in the company’s policy, creditors of the company may file a claim against him.
In the formation phase of the company, a director may be liable for the company’s acts. This
liability ends as soon as the legal person is incorporated and the acts are confirmed by the
company. As long as the company has not been registered in the Trade Register, directors’ and
officers’ liability continues. In practice, limited liability often does not apply because banks
require the director and principal shareholder of the company to co-sign for loans taken out on
behalf of the BV

Taxes and Social security

The private limited pays corporation tax
– also referred to as company income tax – on the profits earned. The BV’s director and
shareholder is employed by the BV His eligibility for social security under the Dutch social
security laws depends on the relation of authority between himself and the private limited. A
relation of authority is considered not to exist if:
• the director, possibly with his or her spouse, can cast more than 50% of the votes in the
shareholders’ meeting;
• two thirds or more of the shares are held by the director and/or close relatives up to the third
• the director cannot be dismissed against his will.

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