How to start your own business in the Netherlands
Starting a business in the Netherlands? Nargiz Yusifova from AZ Legal is here to inform you about what the process looks like, including the advantages and disadvantages of certain Dutch business structures.
Some may assume that establishing a new company in the Netherlands requires Dutch nationality or a permanent residence permit. However, you can start your own business from abroad, irrespective of your nationality and with plans to come to the Netherlands based on your business.
Starting your own business
The process of setting up a company in the Netherlands involves several stages, which may appear lengthy and complex. However, by dividing these steps into small components and working with an experienced team, you can achieve a streamlined incorporation process.
1. Choose a name
Firstly, you should choose a proper name for your company, then you can start the process by making a business plan. A business plan is a fundamental document for any new business which highlights your business’ main activities, objectives, and mission roadmap for achieving its goals.
2. Do market research
Before forming your plan, however, it's essential to conduct market research and structure it to address key questions such as:
- What products or services will you offer?
- Who will your clients be?
- How will you secure financing?
- Is there a demand for your product or service in the Dutch market?
It is also important to understand to what extent your services align with the unique demands of the Dutch market, facilitating your entry into the country.
3. Choose a legal structure
One of the main points that should be defined before establishing a company is choosing the appropriate legal structure. Is it a business without a legal personality (corporate) or a business with a legal personality?
A business without a legal personality involves the following things:
- Sole proprietor or sole trader (eenmanszaak)
- General partnership (VOF)
- Public partnership (De maatschap)
- Limited partnership (De commanditaire vennootschap)
- Shipping company (Rederij)
On the other hand, legal structures with a corporate personality are:
- Private limited company (BV)
- Public limited company (NV)
- Cooperative (coöperatie)
- Association (vereniging)
- Foundation (stichting)
- Religious society (kerkgenootschap)
The main difference between these two structures is related to the liability aspect. If you choose a business structure without a legal personality, you will be personally liable for your business’ obligations and debts. However, if you choose the other option (corporate), your personal assets will be separate from your business' liabilities.
Eenmanszaak and BV
Since the eenmanszaak and the BV are the most preferred options from each category, here are their key characteristics from a Dutch standpoint.
The advantages of an eenmanszaak
Firstly, if you choose to incorporate a BV structure, you will need to engage a notary who will execute the Deed of Incorporation. This process can be time-consuming and may involve some costs. However, you can register a sole proprietorship with the Chamber of Commerce (KVK) with a one-time registration fee.
Secondly, if you establish a BV with other shareholders, or anticipate new shareholders joining in the future, control of the company may be shared with others. This means that the shareholders may receive dividends and have voting rights in significant decision-making processes. However, if you want to maintain full control, an eenmanszaak would be the recommended option for you.
The final advantage of an eenmanszaak is that there are certain services, including accounting, legal, and tax related matters, that need to be completed after the company is incorporated in the Netherlands. This can result in significant expenses. However, besides the lower formation costs, as a sole trader you can spend less money in running your business compared to a BV.
The advantages of a BV
Incorporating a BV is a highly preferred option if you plan to obtain a residence permit based on your business in the Netherlands. A BV creates a more professional image for the various government agencies when they assess your residence permit application. Furthermore, this image can benefit you when presenting your business to potential partners or investors.
A BV ensures that your personal liabilities will not affect your business operations. The BV possesses separate capital, and if it fails to meet its obligations, it will only be liable to this capital (of course, if you are not demonstrably negligent as a managing person).
If you plan to operate a complex business - with more risk and external funds, for instance - then a BV would be preferable. This structure allows for multiple investors, including individuals like family members, to invest in your company and help you expand your business.
In addition to attracting individual investors, if you want to spread risks effectively and gain tax advantages, then you can consider setting up a holding company which is also part of the BV structure.
Dutch holding companies
A holding company is a type of financial organisation that can either own 100 percent of a subsidiary or hold controlling interests in other subsidiaries (operating companies).
One of the main advantages of running a business through a holding company is that it provides an extra layer of protection, especially if you are involved in a business with higher risk. For instance, if one of the operating companies faces financial problems or goes bankrupt, the holding company will not be affected by these losses.
Another significant reason why holding companies are useful is that if you want to sell your share in an operating company in the future, you can transfer the money received from this sale to the holding company without paying any taxes. This is known as the deelnemingsvrijstelling (participation exemption). Additionally, the holding structure allows for centralised control over its subsidiaries.
However, like any business structure, holding companies also have their disadvantages. Its structure can be complex, leading to higher operational costs. Also, maintaining day-to-day control over operating companies can be challenging and achieving synergies among subsidiaries may also pose a challenge.
Consult with an advisor
Besides considering these points mentioned above, you should also have a registered address before establishing a company - which can be either physical or virtual. Also, if you intend to create a structure that requires an incorporation with a notary, you should consult with a suitable notarial / tax advisor or ask a professional to liaise with one on your behalf.
Starting your own business in the Netherlands as an expat can be complicated. However, AZ Legal can simplify the process for you so you can have a smooth and enjoyable journey to entrepreneurship!