There are several different kinds of business structures in the Netherlands (rechtsvormen). These structures can be divided into two groups:
- Unincorporated business structures (no legal form required)
- Incorporated business structures (legal form required)
Unincorporated business structures (rechtvormen zonder rechtspersoonlijkheid)
An unincorporated business structure does not require a legal form such as a notarial deed. Unincorporated businesses can therefore be set up directly at the Dutch Chamber of Commerce (KvK) without requiring the services of a civil law notary. Under an unincorporated business structure, you (and your private assets) are not protected from the debts of your business. Since they are simple to set up, unincorporated business structures are popular with freelancers.
Business structures with no legal form
The four unincorporated Dutch business structures are:
Tax and unincorporated businesses
The taxes that businesses with no legal form need to pay are BTW, income tax and payroll tax (if the company has employees). There are also several attractive tax breaks available for self-employed people. Unlike businesses with a legal form, unincorporated businesses do not pay corporate income tax.
Liability and unincorporated businesses
The main drawback of starting a business with no legal form is that there is no distinction between your private and business property. If you run up debts in your company then the debtors are entitled to claim your personal assets. If your business goes bankrupt and you can't personally cover it, then you also go bankrupt. This also applies to any assets you share with a spouse - if you’re married under community property. To avoid such an eventuality, you can always change your nuptial agreement.
Incorporated business structures (rechtvormen met rechtspersoonlijkheid)
An incorporated business structure requires a legal form, also known as a legal entity or corporate personality, in the shape of a notarial deed. The notary then registers the company with the Dutch Chamber of Commerce (KvK). The legal form is necessary to protect the owners from any potential debt that the company incurs. It is also important to note that incorporated business forms usually have additional tax obligations.
Dutch business structures with a legal form
The five incorporated business structures in the Netherlands are:
Notary required
Businesses with a legal form must be set up via a civil law notary (notaris), who draws up a notarial contract and also registers the business at the KvK.
Incorporated businesses and liability
The defining aspect of an incorporated business is that, by establishing the company as a legal entity or "legal person", you and your private assets are protected from the debts of your business. However, in cases of negligence, you may still be held personally accountable.
It is essential that you fully understand the responsibilities of establishing an incorporated business, as failing to fulfil your administrative and tax obligations can result in fines from the Belastingdienst (Dutch Tax Office) or, in more severe cases, legal action.
Incorporated businesses and taxation
Dutch businesses with a legal form are taxed differently to individuals or businesses with no legal form. Most notably, businesses with a legal form are required to pay corporate income tax (vennootschapsbelasting). There are some cases where foundations and associations are not required to file corporate income tax.
Corporate income tax has considerably lower rates than income tax, which is a major influencing factor in why some entrepreneurs choose an incorporated business such as a BV. However, since the administration is more complex and annual costs can be higher, a greater turnover is usually necessary to offset these expenses.
BVs and NVs also need to pay a dividend tax (dividendbelasting) of 15 percent on any profits that are paid out to shareholders. Shareholders must then pay 25 percent tax on their received amount.
You can find out more about these different types of corporate tax in the Netherlands on our dedicated page.
Annual financial statements
Incorporated businesses must compile and submit annual financial reports and accounts to the Belastingdienst and the KvK.