Types of Dutch business entities
Sole Trader (Individual Business Owner)
General Partnership (VoF)
Limited Partnership (CV)
Private Limited company (BV)
Public Limited company (NV)
(Individual Business Owner)
A sole trader (Eenmanszaak) is the only owner of a business, though there may be employees. Income tax is paid on profits made. Sole traders can be personally liable for business obligations, as can their spouse. This kind of sole proprietorship is also referred to as ZZP (zelfstandig zonder personeel – ‘self-employed without staff’). Although the ZZP form is not a legal entity, the term is commonly used.
(Vennootschaap Onder Firma, VoF)
(Commanditaire Vennootschaap, CV)
Active partners are liable to third parties and personal assets (including those of a spouse) are not protected from creditors (though a marriage contract can protect spousal assets). It is highly recommended to enter into a partnership agreement when becoming a partner, in order to clarify the duration of the partnership, contribution expectations, profit split, among other things.
Private Limited Liability Company
(Besloten Vennootschaap, BV)
A BV is a private limited liability company and is considered to be a legal entity, which limits the risks to the owner(s). Shareholders are only liable for their own capital contribution. To start a private company (BV), at least €18,000 in paid-in capital (not necessarily cash) is required. Shares are allocated based on the capital, and for tax purposes, any person owning more than five percent of shares has a “substantial interest” in the company and is liable for taxes on capital gains or dividends paid. It is necessary for owners to obtain a background check for fraud or bankruptcy from the Ministry of Justice. BVs are often considered to be the best way for a foreign company to establish a subsidiary in the Netherlands.
Company information and proof of incorporation in a foreign country (if applicable) must be filed annually with the Chamber of Commerce (KvK). Directors of companies registered outside of the Netherlands are legally liable for the actions of the company until all legal requirements are completed.
Public Limited Liability Company
(Naamloze Vennootschaap, NV)
Operating a branch does not require government approval, but the branch and the branch manager must register with the local Chamber of Commerce Trade Register. The foreign company must also provide the Chamber of Commerce with:
- The articles of incorporation (in Dutch, French, German or English) as well as bylaws.
- The annual report, including accounting details, as governed by the laws of the country of incorporation (may be in Dutch, French, German or English).
- An extract from the trade register or document of registration in the country of incorporation, not more than one month old.
- Information regarding the registered office, the law under which the company is incorporated and (to be submitted annually) a report on the share capital IF the company is incorporated outside of the EU/EEA.
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