Legal forms and liability in the Netherlands: How to choose the right structure for your business

‍Thinking of starting a business in the Netherlands, or expanding your existing operations into our vibrant economy? Let us help you choose the right structure for your business.

It’s no surprise that the Netherlands attracts many foreign companies seeking a foothold in Europe. Companies such as Netflix, Tesla, and IKEA have established their regional operations here, benefiting from the country’s innovation-driven workforce, competitive tax structures, and strong consumer base. Moreover, the Netherlands is renowned for its logistics capabilities, making it ideal for businesses looking to distribute physical goods across Europe efficiently.

With so many options available, choosing the right legal structure is critical - it impacts everything from personal liability and taxes to how smoothly your business will run on a day-to-day basis. This article will provide an overview of the key business forms available and their implications, and point you toward resources that can help you make the best choice for your specific needs.

Legal forms without legal personality

When a business does not have legal personality, it means there is no legal separation between the business and the owner(s). As the owner, this can expose you to personal liability if something goes wrong, so it’s essential to understand where your obligations begin and end.

1. Eenmanszaak (sole proprietorship): As the owner of a sole proprietorship, you are 100% personally liable for business debts. This means if the business fails, creditors can go after your personal assets (e.g., savings, property). If you’re married in community of property, your spouse's assets may also be at risk unless you have a prenuptial agreement.
2. VOF (general partnership): In a general partnership, all partners are jointly and severally liable for the business's debts. This means that even if only one partner incurs debts, all partners are equally responsible for settling them. If one partner cannot pay, creditors can demand full payment from the other partners.
3. CV (limited partnership): A limited partnership has two types of partners: managing and silent partners. The managing partners are fully liable for business debts, while silent partners are only liable up to the amount they invested. This structure can provide some protection for silent partners but still exposes managing partners to personal liability.
4. Maatschap (professional partnership): In a maatschap, liability is typically shared equally among partners unless otherwise stated in a partnership agreement. Each partner is generally liable for an equal share of the business’s debts.

Setting up a business without legal personality (e.g., sole proprietorship, VOF, or CV) is generally quick, low-cost, and straightforward. The registration fee with the KVK is around €50, and the process can be completed within 1-2 days. However, these structures come with full personal liability, meaning the owner or partners are personally responsible for business debts.

Legal forms with legal personality

Legal forms with legal personality offer greater protection because the business itself is considered a separate legal entity. This reduces the risk of personal liability for owners and directors.

1. BV (private limited company): In a BV, the company itself is liable for debts, not the individual shareholders or directors. However, directors could still face personal liability in cases of mismanagement, fraud, or failing to meet legal obligations.
2. NV (public limited company): Similar to a BV, an NV separates personal and corporate liability. This structure is typically used for larger companies, and shareholders’ liability is limited to their investment in shares.
3. Vereniging (association) and stichting (foundation): These entities are often used for non-profit purposes, with the legal entity itself being liable for its obligations. The directors are generally not personally liable, unless in cases of negligence or mismanagement.
4. VvE (owners' association): In a VvE, the legal entity is responsible for debts, but in cases of financial shortfalls, members may be required to contribute in proportion to their ownership share in the property.
5. Cooperatives and mutual insurance societies: The liability within cooperatives and mutual insurance societies varies depending on the internal structure, with options for limited liability, excluded liability, or civil liability among members.

For legal forms with personality (e.g., BV or NV), the setup is more complex and expensive. Costs can range from €500 to €1,500 for notary fees, with additional annual accounting and reporting costs. The process typically takes a few weeks due to the need for legal documentation, notarial deeds, and KVK registration. However, these structures offer limited liability, protecting personal assets from business debts.

Resources to help you decide

When deciding on the right legal form, consider the following resources for guidance:

1. KVK (Chamber of Commerce): Provides tools to help you choose the right legal structure, such as the ‘Which Legal Structure Suits Your Company?’ tool.
2. Business.gov.nl: Offers comprehensive information on starting and running a business in the Netherlands, including legal forms and obligations.
3. Legal counsel: Consulting a legal expert can be beneficial, especially for understanding specific liability issues or complex partnership structures.

What’s next?

When setting up a business, it’s essential to assess how much personal liability you’re willing to take on. If you want to limit your risk, a legal form with legal personality—like a BV or NV—is ideal, as it shields your personal assets.

Next, align your business goals with the legal structure. A BV or NV is more attractive if you’re planning for growth or seeking investors due to its shareholder framework and liability protections. If you’re starting with partners, make sure to have clear agreements outlining responsibilities and liabilities to avoid future disputes.

For complex matters like liability distribution or partnerships, it’s smart to consult a legal professional. And don’t forget to leverage the KVK tools and resources to help navigate legal requirements and ensure compliance.

Conclusion

Selecting the right legal form for your business is a crucial decision with long-term implications. Understanding your liability, the protections each legal structure offers, and using the right resources will help you make the best choice for your business.

For more information and tools, check out the Netherlands Chamber of Commerce and Business.gov.nl, or speak to an expert at Docfield.