Setting up a BV in the Netherlands
Many multinational corporations nowadays have a limited company in their portfolio of international entities. They are known as Besloten Vennootschap (BV). The primary advantage of setting up a BV is that it is an anonymous entity. As to entity management or subsidiary governance activities it is one of the most straightforward legal forms.
Structuring a BV
The equity of a BV is divided into shares which are owned by shareholders. Although they hold ultimate power, the directors of the company are responsible for running the business on a day-to-day basis. A supervisory board can also be appointed to monitor the board of directors. In smaller BVs, the only shareholder is the director himself.
Setting up a BV
There are 3 steps required to set up a BV:
- Incorporation (civil-law notary) by statuses
- Deposit (min 0.01 pounds)
- Listing in the commercial register, carried out by civil-law notary
- Registration at the Dutch Tax and Customs Administration
It is possible to start trading even before you set up a BV. You can operate as a ‘BV in formation’ in case your civil-law notary is in the process of preparing your incorporation. This is referred to as a ‘BV io’. Before entering into any agreements with business partners, you should state that you are acting in behalf of a ‘BV io’.
Liability
The director will not personally be liable for the debts of his BV. Despite this, banks require the director to co-sign for loans as a private individual. This will make the director personally liable to repaying the loans. Banks can also hold you personally liable if:
- You were aware that the BV would not be able to deliver its promises when you entered into an ambitious agreement.
- The Dutch Tax and Customs Administration were not informed in time about your inability to pay your taxes.
- Taxes and social security contributions were not paid as a result of mismanagement or negligence.
- In the previous three years, your BV was declared bankrupt due to mismanagement.
- Payments that could financially jeopardize the BV were still made.
Sole Proprietorship or PLC
If you are unsure about whether to be a sole proprietor or have a private limited company, you can make a list of differences to consider the best option for you. While taxes for BV are lower, annual costs are higher. In addition, liability is an important factor to consider.
Withdrawing equity
If directors plan to withdraw equity from their BV, they are required to perform a ‘payment test’. This is only allowed when the business has sufficient funds which help to preserve its financial position and ensure payment to creditors.
Selling your business
There are two ways you can sell your company: selling shares or divesting the business from the BV by selling the equipment. However, you will have to pay a corporation tax on the profit.