Private limited company (bv)
- 26 Oct 2020
- Edited 23 Feb 2023
- 6 min
A ‘besloten vennootschap’ or bv is a Dutch legal structure for a business. It is equivalent to the private limited company. With a bv, you have limited personal liability for your company's debts. How do you incorporate a private limited company or change your current legal form to a private limited company? Learn more about the Dutch bv.
What is a private limited company or bv?
Known in Dutch as a ‘besloten vennootschap’ (bv), you start a private limited company (bv) on your own or with others by going to a civil-law notary. After that, you need to register it with the Netherlands Chamber of Commerce KVK. A bv is a legal personality. This means it is separate from you as an individual. Generally speaking, the company is responsible for paying any debts, not you. As a director of the bv, you work for the company and act on its behalf. You can also reserve profits within the bv and build up equity, which is money that belongs to the company.
In the event of bankruptcy, the bv is responsible for any debts. As a director or shareholder, you are protected and not personally liable. This private protection is seen as an advantage of the bv. But if you need a loan from a bank, the bank may ask you to co-sign for the loan as an individual. This is because they do not want to carry all the risk themselves.
Setting up a private limited company
To set up a private limited company (bv), it is necessary to go to a civil-law notary. The notary will create a notarial deed and go over the articles of association with you. These are the internal rules the bv must follow. They include:
- the company's purpose
- the company’s activities
- the responsibilities of the board of directors
- the number and types of company shares.
When setting up a private limited company, you have to register the ultimate beneficial owners (UBOs) of the bv in the UBO register. For example, people who own more than 25% of the shares. A bv can have 1 or more UBOs. Learn more about the UBO register.
There are costs when you set up a Dutch bv with a civil-law notary. For a typical public limited company, this may be €500 to €1,500. The notary registers the bv in the KVK Business Register. There is a one-time registration fee to do this.
You must also put at least 1 eurocent per share in the bv. This is the starting capital.
A bv or a holding company
It is not unusual to set up a second private limited company. This may be recommended by your accountant or adviser. However, this is not the same as a bv. The second private limited company is called a holding company. Your company is then a ‘working public limited company’ (werk-bv). You can structure companies in this way for tax reasons, to be more flexible, or to protect equity from your business risk. A few examples:
- To sell your business
Suppose you want to sell your company. You only sell the shares of the working bv. You can put the sales profits from this in your holding company, tax-free.
- To distribute profits
There are 2 shareholders with different private situations and spending patterns. One prefers to put their part of the profits from the working bv in their holding company, where it remains tax-free. The other shareholder wants to take their part of the profit immediately and will pay income tax on it.
- To spread or minimise risk
The property, equipment, or your built-up pension are on the holding company’s balance sheet. Only the activities of your business are in the working bv. As a result, your capital is not all in the same place.
Liability and debts
If your company goes bankrupt and there are debts, the bv as a legal personality goes bankrupt. As a shareholder, you can lose the capital you have invested in the bv. But creditors cannot claim your private assets such as your house, car, or savings.
You are only personally liable if you have mismanaged your bv. For example, by not reporting payment problems to the Dutch Tax Administration on time. Or if you entered into contracts that you knew you could not fulfil.
Choosing a bv structure just to avoid private liability is not always the best option, as it involves higher costs, more record keeping, and higher taxation than a sole proprietorship (‘eenmanszaak’). In other legal structures you can also cover risks. For example, by taking out liability insurance, or setting out clear delivery and payment terms.
How to deal with debts for your bv?
Normally, as a bv owner, you are not responsible for your company's debts. However, as a director owning 5% or more of the shares, banks may ask you to co-sign loans as a private individual. This means you will be held personally liable. Anti-corruption laws may also make you personally liable.
If you cannot pay your suppliers or outstanding debts, it is important to seek help immediately. You can use the debt flowchart to find out how to manage your business and personal debts.
Be sure to file your taxes correctly
Once you register your bv with KVK, the Tax Administration will automatically contact you. If your business is subject to VAT requirements, you will receive a VAT identification number (VAT ID) and a VAT number for turnover tax. You should file your VAT return online every quarter, or even monthly if you prefer.
As a director of a bv, you must earn at least the customary wage as set out by the Tax Administration. This is set at €51,000 per year in 2023. This wage is subject to payroll tax.
The bv is responsible for filing a tax return on the profit earned. Profit is calculated as the turnover minus purchases and costs, which include salaries for the director and other employees. The tax on profits is known as corporate income tax (‘vennootschapsbelasting’, vpb). For profits up to €200,000, the bv pays 19% corporation tax. For profits above €200,000, the rate is 25.8% in 2023. After paying the corporation tax, the bv can allocate the remaining profit to reserves or equity. Shareholders may also choose to distribute profits in the form of dividends, in which case the bv withholds a 15% dividend tax. If you have a 'substantial interest' (‘aanmerkelijk belang’, in Dutch), you will be subject to a 26.9% tax on the gross dividend. You can deduct the dividend tax withheld by the bv on your tax return.
As a business owner, it is important to maintain good records. Your bookkeeping is a critical part of this. With information from these records, you can prepare your company’s annual accounts, which provide an overview of your financial position. You create an overview of the expenses incurred and the money received. You will base your tax returns on these annual accounts, which must be kept.
At the end of the financial year, the bv must file a balance sheet with explanations to KVK. These documents are available to the public.
The Tax Administration has requirements for your records. In addition to your annual accounts, your records must include your agenda or invoices. Although bookkeeping is mandatory, it is also a useful way to understand your business's performance. You can handle your records yourself or hire a bookkeeper or accountant.
If you have a bv, you can hire employees. As an employer, the bv pays payroll taxes and social security contributions for its employees and directors with minority shareholdings. If you are hiring an employee for the first time, you must register as an employer with the Tax Administration and tell KVK how many people are employed at the bv.
If you are a director with more than 50% of the shares, you are no longer insured for employee insurance schemes (WW, WIA, ZW).
Changing or ending your bv
You may have different reasons for ending your bv. For example, because there is no successor, or because you sell the bv. If you end the bv, you have to follow a dissolution procedure. If you sell the bv, you have to transfer the shares to the new owner via a civil-law notary. If you profit on the sale of the shares, you must pay income tax for a ‘substantial interest’ (often referred to as ‘box 2’). The buyer can also take over only the assets and liabilities. You then keep the bv yourself. The bv pays corporation tax on the profit it makes on the assets.
It can be financially beneficial to convert your bv to a sole proprietorship (‘eenanszaak’) or vof (‘general partnership’). Before doing this, you have to dissolve the legal personality.
If you end your bv, this can have consequences for permits from the municipality, financing, insurance, pension funds, or the bv's bank account. Check with the relevant institutions to learn what steps you need to follow when you close your bv.
Sole proprietorship or bv?
If you are deciding between a sole proprietorship or a private limited company, list the differences between the 2 options. For example, the difference in private liability, and which legal form has the lowest tax burden. The advantages of the bv only become relevant if the profit is at least €100,000, although this amount is only an indication. It always depends on your personal situation. And calculating the tax on profits is different for a sole proprietorship than for a bv. In case of lower profits, the sole proprietorship is financially more attractive.
Before making your choice, get advice from an expert or notary. Consider your personal situation, business plan, and run through scenarios and calculations.
Tip: tool for choosing a Dutch legal structure
There are several considerations to take into account when setting up a business. Your legal structure determines your liability and which taxes you need to pay. Are you not sure whether the bv is the right legal structure for your business? Use the Tool for choosing a Dutch legal structure to find out which legal structure best suits your company.