What types of entities are available in the Netherlands?
When you are considering to set up a business in the Netherlands, it’s important to consider your corporate structure. In order to do so, you need to know about the different type of legal entities and company forms are available in The Netherlands.
Since each country has it's own business structures and regulations it is advised to thoughtfully review the benefits and disadvantages of each kind of firm within that country. Legal entities often differ in the way they are structured: the amount of share capital, number of partners involved, independence and tax regulations.
The corporate structure that you select, might have consequences for the tax treatment of your profits, or the type of liabilities you have as entrepreneurs.
When exploring the options of opening a new business in the Netherlands, it is of high importance that you select the right legal entity for your business.
What are the most common company forms in the Netherlands?
For every type of business and industry, there is a most commonly used business structure. Although this does not mean this option will fit best with your specific situation, the overview below does make it easy to get an understanding of the differences:
Which legal entity best suits you depends on your circumstances. The most common considerations have been compiled below to help you decide. If you need personalised advice, contact our Incorporation team.
Types of legal entities & company forms
There are company forms with and without corporate (legal) personality, also called a ‘corporate veil’, because this legal personality (or veil) protects the assets of its shareholders from any liabilities of the company.
Legal structures with corporate (legal) personality are:
Private limited company (bv or besloten vennootschap)
This kind of company can be registered if you have a minimum share capital of 0.01 EUR, according to the recently amended Company Law. There are a series of requirements related to Board of Directors and local company headquarters, both being required for what the local regulations describe as “substance”, and our company INCO Business Group is able to provide all required services to foreign businessmen.
The Dutch BV is one of the most selected legal entity for foreign entrepreneurs. Contact us to review your situation and get personalized advice.
The branch registration of a foreign company is quite popular for companies that are slowly entering a new market. The registration of a branch differs from the formation of a Limited company as a subsidiary of an overseas company because the branch is not considered a separate legal entity. You can read more about the differences between a branch and subsidiary in our Business Toolkit.
The registration of a Dutch branch can be done within a few working days and does not require the involvement of a notary. The overseas company can be registered at the Dutch Chamber of Commerce, and apply for a Dutch VAT number after that. Opening a bank account for a Dutch branch might be challenging.
No minimum paid-up capital is required, although it’s required to translate and legalise the documents of the overseas company (English, German, Dutch, is allowed).
Public limited company (nv or naamloze vennootschap)
The Dutch NV is the so-called Public Limited Company. This means that the shares of a Dutch NV are freely transferable, without the required consent of the other shareholders. In fact, there is no legal requirement to keep a shareholders register, although there are some upcoming changes in this aspect. The Dutch NV is the only legal entity that is able to go ‘public’ in The Netherlands and get listed on a stock exchange.
From a legal point of view, the Dutch NV looks very much like the Dutch BV, and they have to consider many of the same Company Law stipulations. Both entities require the involvement of a notary to get incorporated, after which the entity will be registered at the Chamber of Commerce. Both types of legal entities are liable for the standard Corporate Tax rates.
Until all of the formation requirements have been met, the founders of the NV are jointly and severally liable, which is also true for the BV. Under normal circumstances, the directors of the NV are not liable for debts of the NV.
In the event of bankruptcy, however, the directors can be held jointly and severally liable if there is improper management, while that improper management is also an important cause of the bankruptcy. In a number of cases, a Public limited company can also hold its (former) director liable for mismanagement. The high risks that drivers are supposed to run are reasons why they are very well paid in a number of cases, a fact that is the subject of discussion.
One of the differences is the required paid-up capital of 45.000 EUR (of which 20% should be paid up at formation).
A Dutch Foundation (Stichting) is a unique legal entity, and can be considered the ‘civil law’-equivalent of the Anglosakson ‘trust’. Whereas the ‘trust’ is not a legal entity, but rather a ‘trust deed’, the Foundation is a (self-owning) corporate entity, without any share capital or shareholders. The vehicle is popular as NGO-vehicle, or used for asset protection purposes. It's quite easy to register a company or non-profit vehicle in The Netherlands, even as non-resident, or non-profit. INCO can assist you with the incorporation of the company, and the (business) development, as well as providing ongoing corporate secretarial and administrative support.
The Dutch Foundation, can be an interesting vehicle, but it depends a lot on your situation.
A Dutch Foundation is a Dutch legal entity with limited liability but unlike a Dutch limited liability company (a Dutch B.V.) it has no members or shares capital.
Not having any shareholders means it offers a degree of anonymity to the ultimate beneficial owner(s) (UBO) of the entity (although a UBO-register is being introduced in the Netherlands soon). This means that any party involved in the Foundation, apart from the Foundation’s board of directors remain undisclosed.
As it is considered a ‘legal person’, Foundations can be used as the top entity in a group structure and be recognized as the UBO of the structure.
Foundations are commonly used for the following:
Privacy and asset protection
Avoidance of inheritance tax and estate planning
Setting up a Dutch Association is about pursuing a certain goal. It is therefore important to describe this goal as well as possible in the statutes of the Dutch association. It is important to know that at least two people are needed to set up an association. Making a profit is not forbidden, provided that these extra proceeds benefit the purpose of the association. Distributing the profit to members is not permitted. An association can receive money in many ways, by performing commercial activities. Not by definitions from (tax-free) donations.
In any case, members are able to make contributions. It depends on the tax law in their country of residence, whether the contribution is tax-deductible or not.
In order for us to assist you with the incorporation of the Dutch association, we would require (and suggest!) a Tax Memorandum which will clearly describe your situation and the tax consequences that you need to consider. There are substance requirements, gift tax considerations, and other possible tax affairs that might affect your position.
Business structures without corporate (legal) personality are
Sole proprietor or sole trader (eenmanszaak)
The sole proprietorship is quite popular among expats (freelancers) or startup’s that don’t expect any significant profits (or liabilities!) in their first years of business and are not likely to include investors or co-shareholders. You can find more information on the restrictions of a Sole Proprietor (as also is the case with a branch) in this article (compared to a Private Limited Company).
Neither 'self-employed professional' (also known as zzp'er) nor 'freelancer' can be qualified as a legal entity. It simply requires a registration at the Chamber of Commerce and a different type of Income-tax bill.
Self-employed professionals should decide if they want to operate as sole proprietors or to incorporate a private limited company. Our team can assist you in making this choice.
General partnership (vof or vennootschap onder firma)
This business form is applicable for companies with two or more partners that operate under the same name with the same economic objectives, and unlimited liability on the business’s debts. They share the profits and they don’t have to present a minimum share capital, such as for the Dutch BV. The personal assets of each general member of the partnership can be taken by the creditors if there are debts that can’t be covered by the company funds.
A Dutch Partnership can easily be established in the form of a so-called VOF (Vennootschap onder Firma). It’s not very usual to establish such a partnership, in order to perform international business activities, but it might be suitable in case of a local partnership or joint venture. The VOF can also be interesting to jointly own an asset in The Netherlands, such as real estate, although the C.V. is also a popular partnership-type for this purpose.
Professional partnership (maatschap)
Professional Partnership is formed by two partners, at least, who are responsible for their claims. This kind of business is preferred for practising a profession and not for business. The partnership often involves several professionals who practice their profession in collaboration with others. Consider a general practice or an architectural firm.
The sizes are, therefore all active as independent entrepreneurs and are taxed in this way. Certain matters such as accommodation or a joint profit distribution are arranged by the umbrella partnership.
Starting a partnership is fairly easy. Start-up capital is not required and you do not have to go to a notary before it is established. All sizes can be held liable in certain cases for a proportional part of the company. In the event of a bankruptcy, a partner will not pay for the accrued debts on his own (this can be both an advantage and a disadvantage).
It is possible to hire staff on behalf of the partnership.
Even though you compete with the other sizes under one size, in many cases you retain your own customers.
The contribution of other sizes can be beneficial for you because you share the profit with each other.
Limited partnership (cv or commanditaire vennootschap)
To register another form of partnership, the Dutch CV (Limited Partnership), at least two partners are required - one managing partner who has unlimited liabilities and takes the management decisions - and a silent partner who invests in the partnership (typically in the form of capital)and has his liability limited to his contribution.
It’s not required to visit the notary to establish a CV. It is, however, advised to involve a professional to draft a proper CV- deed, which functions as a partnership agreement.
This partnership agreement (CV deed) is not legally required, however, by putting your objectives and agreements in writing, it will ensure clarity among the partners. For example, in a CV partnership agreement you would include:
Who the managing and silent partners are and what they contribute, such as money, labour, machines;
How to distribute the profit and loss;
at which time the CV ends, for example, due to cancellation or incapacity for work.
You can, of course, ask the notary or our help, to draft the CV partnership agreement. However, this is not mandatory.
How do you make changes in your Dutch company structure?
In our Business Toolkit’s category ‘Corporate Structuring’ you find a lot of information on how you can make changes in your Dutch company structure.
In case you like to change simple details, such as the address of the director, or contact details, you can update thee records at the Chamber of Commerce (Kamer van Koophandel).
In case you like to change the shareholders, or share capital of a legal entity, a public notary will have to be involved. This is also the case when you like to update your Articles of Association/Formation Deed (statuten).
In case you like to transform your current company form (for example, a sole proprietorship) to a legal entity (such as the Private Limited), in most cases you require to start a company from scratch. This means you will have to transfer the assets (and debts) to the new company. You might be able to avoid any tax consequences for such a transition. It’s best to contact one of our tax experts to discuss such a transition.
So how do you decide which business structure works best for you?
Although the Dutch B.V and the Dutch branch are the most popular options to start a Dutch business, the choice that you need to make is very personal. If you are a well-established multinational expanding to The Netherlands, you will be considering different matters, then if you are a sole proprietor starting your first business. For this reason, we have created an overview of the possible scenario’s below, which will help you decide the right business structure for your situation.
Are you a:
And in case you are aiming for:
A European VAT/EORI number
Fully-fledged office in The Netherlands
Needless to say, please contact our Incorporation Team to discuss your situation, so we can discuss all of this information via phone, or during a personal meeting in The Netherlands.
Read more information on our Dutch incorporation services here: Company Formation page.
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