The Dutch BV versus commonly used forms of Private Limited Companies worldwide

As an entrepreneur, it is often very difficult to choose which legal form best suits you and perhaps where to establish your company. After all, there are countless countries in the world, and with them countless legal forms, all with their own advantages and disadvantages. This knowledge base article will outline the benefits of starting the Dutch private limited company in comparison with other commonly used private limited companies.

Flex-BV legislation

The Netherlands has a very broad and a future-proof landscape. This is partly due to the fact that entrepreneurship is strongly encouraged by the Dutch government. One of the biggest factors where we note this is the introduction of the ‘flex-BV’ in 2012. As of October 1, 2012, there is no longer a required minimum capital of €18,000 to establish a Dutch private limited company. In order to provide a comprehensive explanation of why the Dutch private limited company is a favorable legal structure, this article in the knowledge base will highlight the distinctions between the most commonly utilized private limited companies across the globe and draw comparisons between the Dutch private limited company and other legal forms in the Netherlands.

The benefits of a Dutch private limited company compared to other private limited companies

The Dutch private limited company is called the ‘besloten vennootschap’ and abbreviated as ‘BV’. The BV is a legal form with limited liability, this ensures that as an entrepreneur you have more leeway. To start with the comparison with other countries it is important to address which legal forms are most commonly used in Europe as private limited companies. These are the British ‘Ltd.’ and the German ‘GmbH’.

The British Ltd. versus the Dutch ‘Besloten Vennootschap’

The British Ltd. is the British legal equivalent of the private limited company. The biggest difference between the BV and the Ltd. is the intervention of the Dutch civil-law notary. Under the British legal system it is not mandatory to incorporate a Ltd. via the civil-law notary. This seems beneficial, less costs and more accessible, but the fact is that the disadvantages are merely shifted to the future. This is because, for example, the tax authorities will keep a close eye on you and regularly ask additional questions that will be annoying.

Irrespective of this does the civil-law notary give a lot of advantages. Of course, it is a fact that this entails costs, but where the confusion arises, however, is when people claim that the intervention of a notary - and the costs that therefore come with it- are only disadvantageous. The intervention of a notary is mandatory in the Netherlands when incorporating a ‘besloten vennootschap’. The notary can be seen as an independent party that should guarantee the quality of companies, in order to keep the economy healthy. Business is thus protected from people - who consciously - do not have good motives or obviously incorrect expectations/objectives. Partly because of the notary’s supervision, the ‘besloten vennootschap’ has a very good image!

The German ‘GmbH’ versus the Dutch ‘besloten vennootschap’

The ‘Gesellschaft mit beschränkter Haftung’, or abbreviated as GmbH, is the German equivalent of the private limited company. The biggest difference between the ‘BV’ and the ‘GmbH’ is the minimum initial capital to be invested in shares when incorporating the business. As mentioned earlier, with the new 2012 dutch legislation, the ‘flex-BV’ was created. This means that the Dutch “BV” can be incorporated with an initial capital of one euro cent. However, this is not the case with the ‘GmbH’ in Germany. Here, a minimum capital of €25,000 is required. This ensures that legal forms that are actually meant for SMEs are in practice not suitable for starting entrepreneurs with not high enough starting capital.

Conclusion

The BV has a good image both internationally and nationally. However, many of these advantages require a holding structure. Are you in search of more information about setting up a BV or holding structure? Or would you like to incorporate your own BV? Schedule a free consultation with one of our advisors!