You’ve got the idea, you’ve identified your market and you are already working out marketing campaigns in your head. But starting a business in the Netherlands begins with a key decision: choosing the right legal structure for your fledgling company.

If you have been thinking of setting up a business in the Netherlands, the first thing you need to do is decide what sort of company to launch. The Netherlands has a number of different corporate legal structures and much depends on whether you plan to be self-employed, take on staff or have ambitions to grow into a multinational.

The type of company you opt for will determine more than just the paperwork, says Rasim Kazimov, managing partner and co-founder of corporate service provider NetherBridge Partners, which helps new and established firms start and expand their operations in the Netherlands.

“If you are setting up a company, you need to have a professional accountant, you need to pay your bills and you need to file your taxes,” he says. “The type of company you set up determines liability, taxation, governance and even how investors perceive your business,” he says. “So you need to be careful in figuring out what the best legal structure is for you.”

Dutch limited liability company or BV

The most popular form for a Dutch company is the BV, or besloten vennootschap – the Dutch limited liability company. A BV is a private limited company with its capital divided into shares which are not usually publicly traded.

You can set up a BV for a minimum investment of just one cent per share, which means you do not need a huge amount of starting capital. You are not personally liable for debts apart from your investment, you can have as few as one director and you will pay corporate tax of 19% on profits up to €200,000 and 25.8% above that.

A BV, says Rasim, offers “flexibility, limited liability and credibility”. It is, he says, the most straightforward vehicle if you’re setting up a Dutch subsidiary of a foreign parent company or are starting out big.

Planning to go public?

The NV, or naamloze vennootschap, is the Dutch equivalent of a public limited company or PLC. As a public company, its shares can be listed on the stock exchange, you need minimum share capital of €45,000 and a board of directors. Larger NVs also require a supervisory board. Tax-wise, you pay the same rates as a BV but face stricter reporting requirements.

If you are looking to start a small business with a partner, you could opt for a VOF, or vennootschap onder firma, which is a classic partnership structure. A VOF requires no minimum capital, partners are jointly liable for debts and profits are taxed as personal income.

A VOF, says Rasim, makes sense for small, low-risk businesses where trust between partners is strong. “It’s easy and cheap to set up, but the liability risks make it unsuitable for larger ventures.”

The eenmanszaak

If you’re a freelancer or running a one-person business, an eenmanszaak, or sole trader business, could be an option. As a sole trader, you are the only owner but you can employ staff if you wish.

You will, however, be fully liable for debts and any profit will be taxed as personal income. There are some tax credits for sole traders, although these are being reduced or phased out, but the structure is still often the best option for freelancers and people who are just putting a toe in the water.

The CV

The CV (commanditaire vennootschap), or limited partnership, is similar to a VOF but with two kinds of partners: general partners, who manage the business and carry unlimited liability, and limited partners (commanditaire vennoten), who contribute capital but are not involved in day-to-day management.

CVs are most commonly used for investment vehicles or joint ventures where you want passive investors on board.

Other options include the foundation, or stichting, and the cooperative, but these have specific characteristics which are not suitable for most forms of commercial activity.

It may seem straightforward at first glance, but each decision carries tax, legal and financial consequences,” says Rasim. “Choosing the wrong structure can result in unnecessary tax exposure or even personal liability. That is why obtaining proper professional advice before you begin is essential.”

“And we can always find a solution for every client’s problems.”

NetherBridge Partners advises companies on every aspect of establishing and operating a business in the Netherlands, from company formation and legal structuring to accounting, tax compliance and strategy. Feel free to get in touch.