7 tips when starting an extra business activity

Entrepreneurs often look for new, complementary ways to earn money. Starting up a new business activity will affect your listing in the KVK Business Register, your administrative records, and tax matters. Here are 7 tips when starting up a new activity.

Some entrepreneurs decide to start up a new activity that is similar to their current activity, while others dip their toes in unknown waters. For example, a construction business may decide to get started in the hospitality industry, a photographer may start organising company outings, or a booth builder may start working for offices, shops, and businesses too. Whatever you are looking to do, the following tips may be of use to you.

1. Review your KVK listing

First, you will have to decide whether to add your new activities to your existing business or whether to register a new business.

Starting a new business

If you choose to start a new business, remember that you are only allowed to own one sole proprietorship. In other words, if you want to set up a new business, you will have to choose a different legal structure. After all, you can have an sole proprietorship and a second business with a different legal structure on the side, like a general partnership (vof) or private limited company (bv).

Adding new activities

If you decide to add new activities to your current business, you will have to consider the following:

A new trade name for your new activities

You can have as many trade names (company names) as you want. However, all company names have to meet the rules set out in the Trade Names Act. If you have come up with a new or secondary name, you have to add it to your listing in the Business Register. You can do this online.

The trade names of personal partnerships (general partnership, professional partnership, and limited partnership) and legal personalities (private limited company, foundation, public limited company, association, cooperative) have to meet special requirements. For example, the legal name of a bv can only be changed by a notary, as it requires updating the articles of association. 

The statutory name is the name mentioned in the articles of association at the time of incorporation.

Need inspiration for your 2nd company name?

Watch the video: 'How to come up with a company name like a pro'.

For English subtitles to the video above, click the settings wheel, click 'ondertiteling' and select English.

Starting a new business

If you choose to start a new business, remember that you are only allowed to own one sole proprietorship. In other words, if you want to set up a new business, you will have to choose a different legal structure. After all, you can have an sole proprietorship and a second business with a different legal structure on the side, like a general partnership (vof) or private limited company (bv).

Business description

When you registered your company with KVK, you provided a business description. This states your main business activities. Check if your business description is still accurate now that you have new business activities.

If your description no longer corresponds to what you do, you will have to change it. Put your main activities first. Based on your changes, KVK will determine the most appropriate SBI code(s) for your (new) activities. If your new business activities are different from the old activities, determine what your main activity is to make sure have the right SBI code and are listed under the right industry.

The government, trade associations, pension funds, banks, and insurance companies all use your company's SBI code. Any change to your main activity can have consequences for municipal permits or your bank account. Check their websites to see what steps to take when you decide to change activities.

You can check your SBI code(s) by requesting information about your certificate online. If you have a sole proprietorship, you can check and update your SBI code(s) via My sole proprietorship.

Cost of updating company details

You can update your company details in the KVK Business Register for free. 

2. Update your terms and conditions and insurance policies

Think about what risks you will run with your new activities. How you can limit them? You might need to update your terms and conditions or draw up an entirely new set of terms and conditions. 

If you started selling products from a shop and want to open an online store as well, you will definitely need new terms and conditions. You can file the new or updated terms and conditions with KVK or the court.

Notify your insurance company where your business liability insurance of your new activities. They will tell you if you have to amend your insurance or not. If you do not inform them, your insurer may not pay out if a problem occurs.

3. Check the zoning plan

Check with your municipality to see if the new activities are in accordance with the zoning plan. If the zoning plan does not allow for your new activity, you might be able to get a  all-in-one permit for physical aspects (Omgevingsvergunning). This grants you an exemption from spatial planning rules. You can also ask the municipality to change the zoning plan.

4. Update your administrative records

If you set up a new business for your additional business activities, you must keep new administrative records. 

If your old and new activities are both performed by the same business, you only need one set of records. Do make sure that it is clear per business activity what the hours, revenue, costs, VAT, and results are. You do this by taking into account the various business activities when organising your general ledger accounts. This will give you insight into your performance on each activity.

Do you use accounting software for invoicing? Create a separate invoice template with its own company name, logo and contact information. 

5. Apply for an additional business bank account

To prevent mistakes and reduce the risk of fraud, Dutch banks use the IBAN Name Check. Online banking software automatically checks that the International Bank Account Number (IBAN) is the same as the (company) name known to the bank. If the name and number do not match, the payment will be blocked. Banks usually use the first company name for your bank account.

If you send invoices with different company names, open a separate business account for each company name. This prevents confusion among your customers and problems with the IBAN Name Check. Different banks charge different rates for an additional business account. 

6. Review your taxes and deductions

If your new activities are with your old company, you only have to file VAT and income tax returns once for all activities together. You can keep using your old VAT ID number and login credentials.

Note that your new activities may be subject to a different VAT rate, such as 9% instead of 21%. Check this overview (in Dutch) to find out what applies to you. If you have never had a VAT number, you can apply for one (in Dutch).

If the tax administration considers you an entrepreneur for income tax purposes, you may qualify for tax relief through your new activities. For example, tax relief for new companies ('startersaftrek') or private business ownership allowance ('zelfstandigenaftrek', in Dutch). To qualify for tax relief, you have to meet the following requirements:

• You have to be an entrepreneur for income tax purposes. Entrepreneurs with a private limited company (bv) are not entitled to tax relief for self-employed professionals or new companies.
• You have to meet the hours criterion (in Dutch) of 1,225 hours per year. 

Extra conditions apply to the tax relief for new companies:

• You have to meet the conditions for tax relief for self-employedprofessionals (in Dutch).

• You were not considered an entrepreneur for income tax purposes in one (or more) of the past 5 calendar years.
• You did not apply for tax relief for self-employed professionals for one or more of your businesses more than twice in the past 5 years.

If you reached the state pension age on 1 January, you are only entitled to 50% of the tax relief for  new businesses and the private business ownership allowance.

An extra business activity can have tax consequences (in Dutch). In principle, you do not have to report to the Tax and Customs Administration that you are going to carry out new or additional activities. Only do this if you no longer have to submit a VAT return due to changes in your business activities.

7. Check ongoing contracts

Check ongoing contracts entered into in your company's name. If you are based in a rented building, check your lease to find out whether you can perform your new activities at this location. You can also find this information in the lease.