One of the first legal decisions you’ll make for your business is choosing the right legal structure. Whether you start as a sole proprietor (ZZP), establish a general partnership (VOF), or opt for a private limited company (BV), your choice will impact your financial, tax, and legal obligations.
No pressure, right? Let’s break it down so you can make an informed decision without sleepless nights.
Should I Set Up a BV?
It’s no surprise that entrepreneurs often ask this question:
“I’ve been running my business for a while and I’m considering setting up a BV. Is this the right time?”
This is a common dilemma for business owners who are ready to scale. I’ve been there myself. While there’s no one-size-fits-all answer, it’s essential to carefully weigh the legal and financial consequences of your choice of legal structure. (Pro tip: I consulted five different fiscal advisers before making my decision!)
While I don’t assist with choosing the right legal structure, I can help ensure everything is contractually arranged once you’ve made your decision.
Let’s explore the most common legal structures in the Netherlands, the contracts you’ll need, and how I can help protect your business.
Sole Proprietorship (Eenmanszaak)
A sole proprietorship is the simplest and most common legal structure for entrepreneurs just starting out. If you haven’t taken any legal steps to choose a specific structure, you’re likely operating as a sole proprietor already.
Pros:
- Easy and inexpensive to set up.
- Full control over decision-making.
Cons:
- Personal liability: If something goes wrong—say, a client sues you or you can’t pay a business debt—your personal assets (home, car, savings) could be at risk.
- Limited tax planning options.
Essential Contract: To safeguard yourself, start with a clear general terms and conditions document. This outlines your payment terms, liability clauses, and scope of services, reducing disputes and misunderstandings.
Learn more about general terms and conditions on my website.
General Partnership (Vennootschap onder Firma – VOF)
A VOF is formed when two or more individuals start a business together with the goal of generating profit. Partners share responsibility for the business’s operations, profits, and debts.
Pros:
- Shared resources and expertise.
- Greater capacity to grow compared to a sole proprietorship.
Cons:
- Joint and several liability: If your partner racks up debts, you’re equally liable.
Essential Contract: A partnership agreement is non-negotiable here. It defines the roles, profit-sharing arrangements, and what happens if one partner leaves. Think of it as a business “pre-nup”—it’s better to have it and not need it than the other way around.
Get a tailor-made partnership agreement here.
Private Limited Company (Besloten Vennootschap – BV)
A BV is a legal entity, meaning your business is legally separate from you as an individual. This provides limited liability, making it a popular choice for businesses looking to scale.
Pros:
- Limited liability: Your personal assets are generally protected from business risks.
- Tax advantages: More opportunities for tax planning and deductions.
- Professional image: A BV enhances credibility, especially with larger clients or investors.
Cons:
- Higher setup and ongoing costs (e.g., filing annual financial statements).
- More administrative requirements.
Essential Contracts: For a BV, you’ll need:
- Articles of Association to define your company’s internal rules.
- A shareholders’ agreement to set expectations and avoid conflicts between owners.
- Employment contracts for yourself as a Director (DGA) and, of course, if you hire staff.
Click here for more details on BV-specific contracts.
Why Invest in Legal Contracts?
Regardless of your legal structure, contracts are your first line of defense against legal disputes. They clarify expectations, protect your assets, and ensure you comply with Dutch law.
Think of them like insurance—you hope you’ll never need them, but you’ll be glad you have them if something goes wrong. Here’s how I can help:
- For Sole Proprietors: General terms and conditions and service agreements to minimize liability.
- For Partnerships: A rock-solid partnership agreement.
- For BVs: Customized contracts that grow with your business, from shareholder agreements to NDAs.
Typically, lawyers or companies that facilitate setting up or converting a business structure—for instance, from a ZZP to a BV—charge around €2,000 for all contractual arrangements. At Contract Vision, we aim to offer this service at a competitive price while maintaining a personal connection, ensuring your specific needs are addressed professionally and efficiently.
Browse all contract options here.
When Is the Right Time to Change Your Legal Structure?
There’s no magic revenue threshold for transitioning to a BV or any other structure. Instead, consider these factors:
- Legal risks: If you operate in a high-risk industry like construction or healthcare, consider setting up a BV sooner.
- Growth plans: If you want to attract investors or sell your company, a BV is often necessary.
- Tax implications: Consult with an accountant to understand how your current and projected income will be taxed.
Need Help? Let’s Chat
While I don’t assist in choosing the right legal structure, I specialize in ensuring your business is contractually secure, no matter what structure you choose. If you’re feeling overwhelmed or unsure, let me guide you. With over 12 years of experience, I’ve helped countless entrepreneurs protect their businesses with smart legal strategies and contracts tailored to their needs.
