How a limited partnership works

What is a commanditaire vennootschap?

A commanditaire vennootschap consists of at least 2 people. The owners of a CV are called vennoten in Dutch. 

In a CV, there are 2 types of vennoot:

• Beherend vennoten (managing partners) run the business on a day-to-day basis. These partners are liable for debts and obligations the CV incurs with their private assets.
• Commanditaire or stille vennoten (silent or limited partners) are the investors in the company. They are not actively involved in running the business and only run the risk of losing any money they have invested in the company. They receive a share of the profits.

Setting up a commanditaire vennootschap

The managing partner sets up the CV and registers the company in the KVK Business Register. You do not have to register who the silent partners are. You only have to state how many limited partners are taking part in the CV and the amount of equity or goods (equipment, for example) they bring to the company.

Ultimate Beneficial Owner (UBO)

When you set up a CV, you must report your company's UBOs to KVK for inclusion in the Dutch UBO register. UBO’s are the ultimate beneficial owners of an organisation. Or someone who takes the decisions in the organisation. A CV can have one or more UBOs. For example, persons who own 25% or more of the CV. 

Liability and debts

Sometimes a business runs up debts.  The question then is who must repay the debts. In a commanditaire vennootschap, the managing partners are jointly and severally liable for the debts of the CV. Also known as personally liable. Which of the partners entered into the debt does not matter.

Jointly and severally liable

If a debt arises, you normally pay it from the capital of the CV. Capital consists of money and assets, such as machinery. But if the CV does not have enough assets, the partners have to repay the debt with their own money. Joint and several liability involves the entire debt. Suppose you are 1 of 2 general partners. Then you are not liable for half, but for the whole amount. If your partner does not have enough money, the creditor can make you repay the whole amount.

A silent partner is not liable for debts of the CV. They only run a risk with money they invest. A silent partner may act as a managing partner. If they do, they then also become liable.

Liability when joining an existing CV

Are you joining an existing limited partnership?? Then you will become liable for the debts and obligations  the CV  already had before you entered the partnership. 

Before joining, check the CV’s financial situation or ask a financial specialist for advice. You can also agree with the other partners that you are not liable for any existing debts. Make sure you include any such agreement in a partnership contract 

Partner with private debts

If one of the managing partners has private debts, their creditors cannot claim the CV’s business assets or the private assets of the other partners. However, a partner with private debts may face debt restructuring or personal bankruptcy. This has consequences for the CV, as the partner is then no longer allowed to make decisions on certain business activities.  

Drawing up a CV contract

You can set out agreements about the limited partnership in a cooperation contract, also known as a CV contract. This is not mandatory, but putting your agreements in writing can be useful and helps avoid misunderstanding.

A CV contract might include arrangements about, for example:

• who the partners are and what they contribute, for example, money or wotk
• how you will divide the profits
• who is authorised to do what on behalf of the CV

You can also take out mutual life insurance so the CV can continue in the event of the death of one of the partners. You can draw up a contract yourself or ask a lawyer or specialist to do so.

Signing authority of the vennoten

If you are authorised to sign, you may sign contracts or perform certain legal acts on behalf of the CV. Reporting a change in the KVK Business Register, for example. If there is no contract, then all partners are fully authorised to sign. With a CV contract, you can limit signing authority. For instance, partners must sign together above a certain amount. You can even agree that one or more of the partners is not authorised to sign, while still remaining liable.

Agreements on signing authority can be recorded in the Business Register. This means they are public so your clients will also know who is allowed to act on behalf of the company.

Power of attorney

Sometimes it is convenient to have someone who can sign on behalf of the partners, for example, a staff member. You arrange this with a power of attorney. In the power of attorney, you can also specify what the authorised representative may or may not do. Register the authorised representative in the KVK Business Register. This is not mandatory, but it gives your clients clarity about who is allowed to sign.

Staff

A limited partnership can hire staff. The CV is the employer and must pay social contributions and payroll taxes for the employees. Are you hiring staff for the first time? If so, you must register as an employer with the Netherlands Tax Administration (Belastingdienst). 

Changing or ending a CV

You can change the legal form of your company. For example, you can convert a CV into a BV (private limited company) or continue as an eenmanszaak (sole proprietorship).

You might even want to end the business altogether at some point. When you end a CV, you must first dissolve it and then deregister from the KVK Business Register. You must also settle with the Tax Administration. Are there things on your balance sheet worth more than the book value? Or do you sell the business for a higher value than is shown in the books? Then you have to pay tax on the discontinuation profit. Read more about what you need to do when you out when you end your.

A CV or a BV?

Are you unsure about choosing between a CV and a BV? Then list the differences and decide what is important to you and your potential business partner(s). This comparison between an eenmanszaak and a BV is a useful tool. When choosing between a CV and a BV, the structure in which you pay the least tax is usually the deciding factor. A CV is more attractive if you expect your profits to be low. A BV is often only favourable when profits are circa €100,000 or more per managing partner.

See also the decision tool for choosing a legal structure that suits your company.