Starting a business in the Netherlands
The Netherlands is home to a friendly and international business environment in the heart of Europe. With its central geographic position, outstanding connectivity and strong tax treaty network, the Netherlands is considered a strategic hub to enter and serve the EMEA market. Combined with an open and stable economy, endless opportunities for companies to innovate and expand, a solid workforce and outstanding infrastructure, the Netherlands has developed into an ideal base for European, US and Asian Pacific companies looking to either establish their European headquarters or global presence.
Starting a business
Although several formal procedures and requirements must be observed when starting a business in the Netherlands, the legal formation process is relatively easy and straightforward. With the appropriate professional support, businesses can expand rapidly and with relative ease.
As a starting entrepreneur, you need to determine which legal structure best suits your organization and its activities. It is important to choose a structure with the right fit, as this determines the liability for your business debts and tax obligations. If you run your business as a private firm, you will be personally liable for your business debts. If you operate your business through a public or private limited liability company, you will be subject to corporate taxation.
If you are an experienced entrepreneur or professional working within a multinational organization, you may already be familiar with the entity formation process in the various countries. You may have less need for advice on legal forms and their pros and cons, but need a quick and hands-on approach when setting up a new entity within your company’s corporate structure.
This blog will broadly discuss the key, mostly legal, aspects of starting a business in the Netherlands.
Legal forms, formation process and timing
Dutch corporate law offers a range of options to entrepreneurs to conduct their business. These options can mainly be divided into the following categories.
- Forms of enterprise without legal personality. These enterprises have no corporate existence and cannot independently bear rights and obligations and enter into agreements in their own name. Their assets and liabilities are legally owned by the private persons behind these businesses. Available options are the:
- Private firm (eenmanszaak).
- General partnership (vennootschap onder firma).
- Professional partnership (maatschap).
- Limited partnership (commanditaire vennootschap).
The formation of enterprises without legal personality does not require a notarial deed or the involvement of a Dutch notary. They can be established by means of the mere registration in the trade register of the Dutch Chamber of Commerce (in case of the private firm) or a private formation agreement (in case of the partnerships). Depending on the type of partnership, subsequent registration with the Dutch trade register is mandatory. The formation and registration process of these forms of business generally varies from one to three weeks, assuming relatively straight forward partnership agreements.
The main disadvantage of these forms of businesses is that there is no distinction between your private and business property. If your business runs up debts, your creditors are entitled to claim your private assets in addition to your business assets. If your business goes bankrupt and you can’t personally cover its liabilities, this will result in your personal bankruptcy as well. Depending on the matrimonial property regime applicable to you, this may also apply to any assets you share with a spouse.
Forms of enterprises with legal personality (legal entities). These businesses can legally own assets in their own name and enter into legal obligations (agreements). The following alternatives are available.
- Private limited liability company (besloten vennootschap).
- Public limited liability company (naamloze vennootschap).
- Foundation (stichting).
- Association (vereniging).
- Cooperative (coöperatie).
One of the key features of businesses with legal personality is that, by establishing the business as a legal entity, you and your private assets are in principle protected from your business debts. The most commonly used legal form with legal personality in the Netherlands is the private limited liability company, or: the Dutch B.V.
The above legal entities are established by means of the execution of a notarial deed of incorporation before a Dutch notary. The deed of incorporation will contain the entity’s bylaws. The formation and registration process generally takes two to three weeks – assuming a relatively straight forward formation – but can be done quicker if urgent. Upon formation, certain information regarding (i) the legal entity itself, (ii) its officials and (iii) its enterprise, must mandatorily be filed with the Dutch trade register. The registered information must be kept up-to-date. Any changes or amendments regarding the legal entity, its enterprise and its officials must be notified forthwith upon their occurrence to the Dutch trade register.
Taxation and financial statement obligations
Your new business also need to be registered with the Dutch Tax Authorities. Businesses without legal personality are subject to VAT (depending on the circumstances), income tax and payroll tax (if there are employees). Depending on the circumstances, several attractive tax breaks may be available. Legal entities are subject to VAT (depending on the circumstances), payroll tax (if there are employees) and corporation tax. VAT and corporate tax registration automatically follows the legal entity registration with the Dutch trade register.
Annually, within six months after the end of the financial year of a legal entity (or within five months in case of private and public limited liability companies), financial statements must be drawn up and deposited for inspection by its members or shareholders at the office of the legal entity and adoption. Under circumstances, this term can be extended up to a maximum period of ten months. Within eight days following adoption of the financial statements, the financial statements must be filed with the Dutch trade register. In any case, no later than twelve months after the end of the financial year, the legal entity must have filed its financial statements with the Dutch trade register. Depending on net assets, net turnover and the number of employees, the financial statements may need to be audited by a certified public accountant (register accountant).
Whether you are a starting entrepreneur or a seasoned professional, we can assist you with tailor-made advice or support. We have the local knowledge to help you navigate the legal formalities of Dutch business formation. We are strongly positioned in the Netherlands as corporate and business advisor and are legal advisor to many of the world’s leading corporations on the complex issues of today’s integrated global market. Whether you want to set up in the Netherlands, just want to streamline your Dutch operations or require more information regarding any of the topics of this blog, our lawyers will be happy to assist you.