The Dutch cooperative as legal entity for a start-up
If you are not familiar with Dutch law and you want to incorporate a legal entity for your start-up, you probably think that a "Besloten Vennootschap" (BV) is the right solution. A BV is comparable to a Private Limited Company in other countries. It has one or more shareholders; profit distribution and voting rights are connected to the number of shares.
This may work well if you are the only founder, or if it's clear from the beginning how much each founder will contribute. But that is hardly the case with start-ups. Often, you don’t know how much you'll need to invest before you reach the break-even point, or what kind of investments you'll need.
The Dutch "coöperatie" is a good alternative
De "coöperatie", or cooperative, is a legal entity comparable to a BV, but has much more flexibility. Profit rights and voting rights can be attributed to the members in different ways, and this can change along the way, without a trip to the notary. If you plan to move away from the Netherlands in due course, there is another advantage: you may be exempt from paying dividend taxes.
The law regarding cooperatives (coöperaties) as a legal entity (rechtsvorm) in the Netherlands is extremely brief and mostly refers to the (also relatively short) law for associations. There are only a few functional limitations and the best news is: even foreigners and foreign legal entities can incorporate a cooperative or be a member. Once established, the cooperative keeps its own record of members.
Otherwise, a cooperative is comparable to a BV: it is a separate legal entity, you can transfer the ownership and if a cooperative goes bankrupt, you will only lose the capital you brought in. At least, this is the case when you use the variety "Coöperatie U.A.". This variety offers excluded liability for members; most people choose this form of cooperative.
The concept of the start-up cooperative
A lot of start-ups fail because of internal disagreement about how to split the shares. For example, if you both have 50 percent of the shares and one of the founders gets ill, goes on a honeymoon, pursues a different venture, or it turns out that you need an additional team member, who would like to have shares as well. What do you do?
The concept of the start-up cooperative is this: the more you invest in time and cash, the more "shares" you receive. This way, each founder or team member can build up shares pursuant to the moment that the venture breaks even and you have sufficient income to pay all costs and salaries.
Every month, your team will sit together to determine how much every member contributed. The cumulative investment of each member determines his or her share in the profit and can also determine the voting rights.
If you need to add a new team member, the decision can be made within the team, there is no need to go to a notary. And in case you want to sell (part of) your venture, and the buyer has a preference for a BV, you can easily turn the cooperative into a BV during the transaction.
How about taxes?
In general, it makes sense to incorporate your business in the Netherlands if you live here, or if at least some part of the activities of the start-up will take place in the Netherlands.
As the cooperative will be incorporated in the Netherlands, the Dutch tax authorities will treat it as a Dutch legal entity, and you will have to pay Dutch company tax (Vennootschapsbelasting). For start-ups, this will be 20 percent of your profits.
For founders living in the Netherlands, any dividend may either be treated as a part of your income as an entrepreneur or as "Aanmerkelijk belang", which means that you will pay an additional 25 percent on the payouts. If you live outside of the Netherlands, any dividend payouts will be taxed according to the laws of your country.
Please note that if the board members of the cooperative live abroad, the tax authorities of that country may also think that the cooperative falls under their jurisdiction, or there may be a tax treaty that arranges this. So please check this in advance.