Entity and Structure for Businesses in the Netherlands
When starting a new company, founders should first select the preferred legal business structure:
Besides that there is the foreign branch. The latter has been out of fashion and is hardly seen as a serious legal form.
Besides these entities exists the NV, comparable to a public liability company (or US Corporation). This is a very rare legal form in the Netherlands and not typically recommended.
Which legal structure is right for me?
Of the before mentioned, only the BV can be managed from abroad. That is because the others require residency in the Netherlands. The Dutch BV is the equivalent of the, German GmbH, the UK Limited company, the Norwegian AS and the Swedish AB.
On top of that, the low corporate tax rate makes the BV the most interesting choice for most small, medium and large enterprises in the Netherlands. Other advantages are that the BV is investor-friendly and the most transparent way of working together with co-founders.
A foreign entrepreneur in the Netherlands has roughly three options:
- Either he has an existing entity abroad that will function as the mother company of the Dutch daughter company,
- Or he sets up a single BV with himself as the main shareholder.
- A third option is the so-called BV holding structure. This means in effect that the founder sets up two BV entities, a holding BV and an operating BV. The owner holds the shares in the holding which in turn holds the shares in the operating BV. This is the same setup as the Norwegian AS holding structure.
If the Dutch entity will not be a daughter company of a foreign entity, then the BV holding structure is usually the most plausible way to structure the company.
Let's take a small consulting business that wants to relocate to the Netherlands and will employ a small team. There is one shareholder and director. In the future, new partners or investors might come on board.
In this case you can either set up one BV or a holding structure.
- Single BV is directly owned by the shareholder (person). Profits are taxed with corporate income tax. Distributions of profits to the shareholder (person) will be taxed immediately.
- A BV holding structure consists of a holding BV (in case of several shareholders, several holding BV's) that hold the shares in the operating BV. Profits in the operating BV are taxed and can then be distributed to the holding BV tax-free. Capital built up in the holding BV is protected from bankrupcy in the operating BV. In case of a sale of shares in the operating BV (for example when the business is sold), the profits will be transferred to the holding BV where taxation can be postponed and profits reinvested free of tax.
Legal contracts for a BV
Find all contracts you should consider when starting and operating a BV limited company in the Netherlands.
Are there 2 or more shareholders active in your company? In that case, you should have a shareholders agreement. This agreement determines who has control over the company and what happens when issues arise.
Secondly, if you or anyone else will be employed in the BV company, you should have an employment contract. Not only is this important to protect the employee's rights. It also makes sure the employer knows what to expect from the employee in the BV.
Thirdly, it is very common to transfer money back and forth from your personal account to the company account and vice versa. Even if you accidentally using your company credit card instead of your private one, you are formally taking a loan from the company. These financial transactions should be legally formalized in a so-called current-account agreement (or in Dutch: rekening-courant).
Fourth, make sure to have your terms and conditions in order. Even more, if you operate a webshop, make sure you have your customer's rights and obligations written down in our specialized terms and conditions for ecommerce.
Fifth, almost all companies in the Netherlands deal with personal data in some way or another. You are most likely one of them. This is why we have designed an online GDPR check. Here you can do a legal quick scan to find out which legal documents you should have in order to be fully GDPR compliant.
And finally, at one stage in your company's lifetime it probably needs funding. Or you will sell or buy some shares in a Dutch company. We have created a selection of legal documents that are helpful when dealing with finding capital, selling and buying shares and taking a business loan.
FAQ about legal forms and structures in Holland
Compare legal forms in the Netherlands In the Netherlands, choosing the right legal form for your business is a crucial decision with far-reaching implications. This comprehensive guide examines various Dutch legal forms, including the Besloten Vennootschap (BV), sole proprietorship (also known eenmanszaak as ZZP), partnership, co-operative, and foundation. Our in-depth comparison table highlights the key […]
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Incorporation Packages for BV Structures
- Personal shareholder
- Corporate income tax from 19%
- No personal liability
BV Holding Structure
- Multiple tax advantages
- Additional protection of assets
- Great foundation to invest and work from
Corporate shareholder BV
- Company as the BV shareholder
- Corporate income tax from 19%
- No personal liability
- Company formation
- Legal contracts & compliance
- Tax & accounting services