The best legal structure for a cooperation
- Ellen Koekkoek
- How to
- 2 May 2019
- Edited 22 Dec 2022
- 4 min
You have to choose a legal structure when you start a business. This also applies if you start a new business with a partner. Learn which legal structure best suits your cooperation.
The general partnership (vof), private limited company (bv), professional partnership (maatschap) , and cooperative are legal structures that entrepreneurs often use when collaborating with others. But how do you know what suits your partnership? This depends, for example, on what income you want to earn per month, how much risk you are willing to take privately, and what is beneficial for your tax return. This also applies to your future business partner. Consider the following points and find a legal structure that works for you.
1. How long will the cooperation last?
Are you going to work together once, temporarily, or indefinitely? A partnership agreement (in Dutch) can be interesting for a one-off assignment or temporary partnership. These have fewer formalities and costs. Both your companies remain independent. If it is a partnership for an indefinite period, it can be beneficial to set up a new company. For example, if you develop a new product in co-creation (in Dutch) with customers and other entrepreneurs. A new company gives structure to the collaboration and direction to your plans.
2. Set up a new business?
Do you already have your own business? Then decide if you want to set up a new business or if you want your existing business to accommodate the new collaboration. This choice depends on your future plans, wishes, and personal situation. But also, how risky your new business is and if you have built up capital in your company. It is wise to get advice from a specialist about this.
What is your common goal? And do you want to earn money or work together out of idealism?
If you want to make a profit, choose:
- a mutual cooperation agreement
- general partnership (vof)
- professional partnership (maatschap)
- limited partnership (cv)
- Private limited company (bv)
Note: the extent to which you are liable and how much tax you pay differs per legal structure.
Do you want to realise an idealistic goal? Then a foundation can offer tax benefits.
4. Turnover, profit, and income
How much you earn (turnover) and how much you have left (profit) largely determines which legal structure is most favourable for your tax return. Every legal structure has rules about how much tax you have to pay to the Tax and Customs Administration. Estimate how much turnover and profit you will make. List what this means per legal structure.
Entrepreneurs often ask if it is financially interesting to convert their legal structure to a bv. A general guideline is that with a profit of approximately €120,000, a legal personality (such as a bv or nv) can be more attractive from a tax point of view. With a lower profit, a general partnership or professional partnership may be more favourable. But every situation is different. Have a tax specialist or accountant calculate your income before you make a final choice.
Do you want to be privately responsible for your company's debts or do you want to limit that liability? In some cases, limited liability can be convenient. For example, if you carry out large projects where the damage can be considerable if something goes wrong.
With a general partnership or professional partnership, you are (partly) jointly and severally liable if you or your business partner fail to comply with the obligations. Alternatives are a private limited company or cooperative. This limits your private liability unless there is bad management. Ask a specialist about the influence the liability has on, for example, your tax return or private situation (in Dutch).
6. Growing equity
Do you want to grow wealth within your company? Some business structures offer more opportunities for this than others. Keeping profit within your company and not having to pay tax on it immediately can, for example, be more difficult within a general partnership than with a private limited company. Except for some recognised reservation options for tax reserves (in Dutch). In addition to the tax reserves, the bv does not have a mandatory profit distribution. This can provide more financial room for your business operations.
7. Entry and exit of partners
You might need an extra business partner in your company. In a cooperation agreement, you can mutually decide to attract a new partner. This requires a new mutual agreement. Members of a cooperative can also enter and exit relatively flexibly.
In other legal structures, it is also possible for a new business partner to join later. However, that is often more difficult, just like a partner leaving the company. In a general partnership or professional partnership, you calculate which part someone contributes or takes out. In a bv this process is arranged through buying or selling company shares. The value of the shares must then be calculated. Consider if you need help from an accountant or tax specialist.
8. Transfer of partnership
A cooperation agreement ends automatically when the mutual project is done, or when you agree to terminate it together. You cannot simply transfer your share of the collaboration to someone else. When selling a partnership, such as a general partnership or professional partnership, you must determine the value of the company. This can be difficult because you have to determine the value per partner. There are several so-called 'valuation methods' for this. Determine in advance which method of calculation you will use.
In addition, a partnership does not have registered real estate. If a sale or transfer is at hand, that real estate must be delivered through a notary. In a bv, a share transfer is necessary for the transfer of the company from one to another. Ask an accountant or business valuator for advice.
9. Additional costs
You need a notarial deed to set up a bv, cooperative, or foundation. Take into account the costs of a notary and/or lawyer. You do not need a notarial deed for a professional partnership, general partnership, or limited partnership. You can arrange the agreements yourself. Such as about everyone's input, the profit distribution, and who is allowed to do what.
Contrary to what people think, little or no capital is required to set up a bv. This also applies to a professional partnership, general partnership, limited partnership, cooperative, or foundation.
All legal structures in a row
View all conditions and characteristics per legal structure:
- General partnership (vof)
- Limited partnership (cv)
- Professional partnership (maatschap)
- Private limited company (bv)
- Limited liability company (nv)
- Cooperative and mutual insurance society
- Foundation (stichting)
- Foreign legal structures
Do you need help choosing? Use our decision tool to help you make your choice.
Do you want to be sure of your choice? Consult a specialist to get an overview of financial, tax and legal consequences.