Starting a business in the Netherlands is done easily, but there are choices to be made. You have to choose between the legal type of business and this choice reflects in the tax consequences. The basic choice is between the one man company and the BV company. What is best?
What is best depends on the needs of the entrepreneur. The limited liability company, BV company, is attractive because it limits the liability, but does it? Can you do business and not being held responsible privately? We think you cannot. General terms and conditions in connection with the liability insurance can equal out the difference between the two companies, more or less.
The BV company shows to the clients and business relations a solid business, only by the BV extension, but you can still operate alone. The one man company is often mistakenly associated with only one man (or woman) operating the business. That is not correct. The one man refers to the capital of the company owned by one man, but the company can have as many employees as the company desires.
The BV company has many fiscal rules with respect to the relation between the shareholder -managing director and the BV company. Rules with respect to salary, taken out funds and more rules that can have substantial effect on the tax due in the end.
The one man company has nearly no rules, the full profit is taxed, substantial tax credits are provided, so a starting entrepreneur can earn around EUR 22.000 in taxable profit and not pay income tax during the first three years of the start of the company. After that the amount drops to around EUR 18.000. In the BV company the profit is taxed from the first euro earned.
The BV company does offer possibilities you do not have in the one man company. Possibilities such as a transfer of the shares to a third party in case of sale of the business. In a holding structure no tax over the sale is immediately due. Loan agreements can be made, pension obligations internally can be created and more possibilities.
It is possible to change the one man company in time into a BV company, which can be interesting with respect to a future sale or other opportunities.
