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Choosing a Business Structure

When starting a business, choosing a business structure or the right legal structure is crucial.
choosing a business structure

When starting a business, choosing a business structure, in other words, choosing the right legal structure is crucial.

A legal structure is the legal form you choose for your business. There are a variety of legal structures, and they can be divided into two (2) main categories. Legal structures with corporate (legal) personality and legal structures without corporate (legal) personality.

Types of legal structures

Legal structures without corporate (legal) personality:

  1. Sole proprietor or sole trader (eenmanszaak)
    • You alone are responsible and liable, for the company, its finances and its debts.
  2. General or Commercial partnership (vof or vennootschap onder firma)
    • A company in which at least 2 persons work together under one common name. Every person who participates becomes a partner. Every partner contributes something, in the form of money, as well as goods or labour.
  3. Professional or public partnership (maatschap)
    • If you are looking to work as a self-employed individual alongside other professionals, e.g. dentists, architects, farmers or lawyers, one option is to create a legal entity in the form of a professional or public partnership. In a maatschap, you practice your profession alongside your partners under a shared name.
  4. Limited partnership (cv or commanditaire vennootschap)
    • A limited partnership consists of at least two persons and there are two types of partners:
      • Managing partners. The managing partner runs the business on a day-to-day basis.
      • Silent partners, also known as limited partners, involves him/herself with the business’s financial affairs. The silent partner does not actively interfere with the company, unlike shareholders within a BV.
  5. Shipping company (rederij)

Legal structures with corporate (legal) personality:

  1. Private limited company (bv or besloten vennootschap)
    • Business structure with legal personality. This means that the bv is generally speaking liable for any debts, rather than you as an individual. As a director, you are an employee of the bv and you act on its behalf.
  2. Public limited company (nv or naamloze vennootschap)
    • The main difference between a bv and an nv is usually the size: an nv tends to be a larger company, with several directors.
  3. Cooperative (coöperatie)
    • You can set up a cooperative with one or more members. Members can enter or leave the cooperative without jeopardising its continued existence. This is different from a commercial partnership (vof) or professional partnership (maatschap), where partners are not allowed to just leave.
  4. Association (vereniging)
    • An organisation whose main objective is not making a profit. Most associations focus on organizing social activities. If an association makes profits, it must be reinvested into the association. You are not allowed to divide the profits amongst members.
  5. Foundation (stichting)
    • An organization that does not aim to make a profit. The money raised by a foundation consists of donations, loans, subsidies and legacies. Its primarily purpose is to support a social or non-profit cause. It may also be a business, but its profits must be allocated to the foundation’s cause or purpose.
  6. Religious society (kerkgenootschap)

Which business structure suits you?

There are many possible business structures as listed above, which one is best for you, depends on your circumstances. There are some considerations to be taken into account as well, such as:

  • Are you starting on your own or with other?
  • Is your purpose to make profit?
  • How do you want to be liable?
  • Are you in need of funding?

Answers to the above questions serve as a guidance in choosing a more suitable business structure.

Requirements

There are also some requirements that you need to meet.

The requirements vary per legal structure. For sole proprietorships and general partnerships (vof) there are no incorporation requirements and no need of start-up capital. The registration is done by yourself. For some other legal structures, the set up need to go through a civil-law notary, (for example: a bv, nv or foundation). For an NV you need a starting capital of € 45,000.

Interactive Tool

To help you choose the business structure, which best suit you, you can use this interactive tool for choosing a Dutch legal structure.

Source: business.gov.nl