Start a Dutch LLC or a Sole Proprietorship?

The Netherlands is a very appealing country for investors who have the possibility of starting small and then expanding. The even better news is that for setting up a small company, they can choose between the sole proprietorship and the limited liability company, as both types of business forms are suitable for such a venture.

If you want to start a business in this country and don’t know which one is better: the sole trader or the limited liability company, our Dutch company formation consultants can explain both type of structures.

The sole proprietorship in the Netherlands

When having to choose between a sole proprietorship and a limited liability company (simply known as BV), there are a few aspects to consider with respect to the sole Dutch sole trader:

• -          it is not a legal entity, but a form of doing business, therefore it will not have a legal personality;
• -          it can be established by a single person;
• -          it does not offer a limited liability with respect to the personal goods of the owner;
• -          from a taxation point of view, it has certain advantages, such as the lower income tax and some deductions the trader can benefit from;
• -          it does not require a minimum share capital;
• -          it is very easy to set up.

Our company formation agents can help those who want to start as sole traders in the Netherlands.

Opening a Dutch BV

If starting a sole trader is easy, the registration of a Dutch limited liability company is automatically harder, however the new Commercial Code provides for simplified registration procedure. Also, with respect to the share capital requirements, these have been abolished a while back, the minimum necessary amount of money now being 1 euro.

Another advantage of the BV in the Netherlands is, as its name says, the limited liability of the shareholders. They will only be responsible for the amount they contributed with to the business. Also, the Dutch BV has a legal personality.

From a taxation point of view, the limited liability company will be subject to the corporate tax, which in the Netherlands ranges between 20 and 25% depending on taxable amount.

What to choose: the Dutch sole trader or the BV?

To answer that question, one must consider the pros and cons for both types of entities and then decide. A business plan which will allow the future owner should also help him or her determine which form is better.

However, what should be kept in mind is that the sole trader can be changed into a Dutch BV when the business grows. So, if one decides to start small, the business can be changed at any time.

If you need more information in order to decide between a sole proprietorship and a limited liability company, please contact us. Our company registration agents in the Netherlands can help you set up any of the two business forms.