Types of Corporate Entities
Various types of legal entities can be established in the Netherlands, each with distinct characteristics and legal obligations. These include:
Sole Trader (Individual Business Owner)
General Partnership (VoF)
Limited Partnership (CV)
Private Limited company (BV)
Public Limited company (NV)
Sole Trader (Individual Business Owner)
- A sole trader, known as “Eenmanszaak,” is the sole owner of a business, potentially with employees.
- Income tax is paid on the business profits.
- Sole traders can be personally liable for business obligations, and this liability can extend to their spouse.
- The term “ZZP” (zelfstandig zonder personeel or ‘self-employed without staff’) is often used to describe this structure.
Dutch General Partnership (VoF – Vennootschaap Onder Firma)
- In a general partnership, more than one person operates the business.
- Partnership agreements define contributions, liability, and entitlement.
- Each partner is usually considered a self-employed entrepreneur for tax purposes, with income tax payable on profits.
- All partners, as well as their spouses, share joint personal liability for business debts and obligations, unless protected by a marriage contract.
Dutch Limited Partnership (CV – Commanditaire Vennootschaap)
- A limited partnership is run by multiple individuals, comprising active and limited partners.
- The limited partner typically provides financial backing without day-to-day involvement.
- Limited partners are only at risk of losing their financial investment if they don’t participate in managing the company.
- Active partners are liable to third parties, with personal assets exposed to creditors. A marriage contract can offer spousal protection.
- Typically formed among professionals like attorneys and GPs.
- Partners are considered self-employed entrepreneurs (ZZPers) for tax purposes.
- Partners hold individual liability for business obligations, and spouses may share this liability, with potential limitations through marriage contracts.
Dutch Private Limited Liability Company (BV – Besloten Vennootschaap)
- A BV is a legal entity that limits risks to owners (shareholders).
- Shareholders are only liable for their own capital contributions.
- A minimum of €18,000 in paid-in capital is required to start a BV.
- Shareholders owning over five percent of shares are considered to have a “substantial interest” for tax purposes.
- BVs are a common choice for foreign companies looking to establish a subsidiary in the Netherlands.
Dutch Public Limited Liability Company (NV – Naamloze Vennootschaap)
- NVs can be subsidiaries of foreign companies.
- These companies are owned by shareholders, and their shares can be traded publicly.
- Shareholders’ identities may remain undisclosed.
- At least €45,000 in paid-in capital is required for NVs.
- NVs are less common in the Netherlands.
- Foreign companies can operate in the Netherlands through a branch office.
- Easier to establish than a subsidiary.
- The branch is not a separate legal entity; the foreign head office is liable for branch obligations.
- No government approval is needed, but the branch and its manager must register with the local Chamber of Commerce Trade Register.
- The foreign company must provide specific documents annually, including articles of incorporation, the annual report, and information on share capital if the company is incorporated outside the EU/EEA.
These various business entities provide flexibility and legal structures to suit different business needs in the Netherlands. Each type has unique characteristics, advantages, and compliance requirements, catering to a wide range of businesses and industries.
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