What is a BV? (Besloten Vennootschap) We explain it to you

What does 'BV' mean?

BV stands for besloten vennootschap, the Dutch private limited company. It is a legal form with certain characteristics. Here are the main characteristics of the besloten vennootschap (BV) for you:

(1) The BV has shareholders. These are people who own part of the company and thereby obtain certain voting rights, meeting rights and profit rights.

(2) A BV is a company with limited liability. This means that, in principle, the debts of the BV cannot be recovered from the private assets of the directors or shareholders. So there is no personal liability: private assets and business assets are seen as two separate things, and the liability of shareholders is limited to the amount they have invested in the BV. This means that in the event of bankruptcy, private assets are usually left out of it, unless there is mismanagement or fraud.

(3) The BV is a legal entity that acts on behalf of the company. As a legal entity, the BV has its own rights and obligations and is, in principle, treated the same as a natural person.

(4) The shares are not freely transferable. This means that legal rules apply to when and how many shares are sold or issued. Shareholders must sell their shares through a transfer of shares, after they have offered the shares to their fellow shareholders (the offer obligation). The people who hold shares come together in the general meeting of shareholders.

(5) The BV is based on articles of association. The articles of association are included in the deed of incorporation of the BV and contain the 'rules of the game' of the BV. How are decisions made, what is the value of the shares and what is the purpose of the besloten vennootschap? These questions are all answered in the articles of association. Do you want to change something in the rules? Then you first have to amend the articles of association. Special rules apply to amending the articles of association.

The possibilities of the BV

By setting up a BV (besloten vennootschap), you can do business in the Netherlands. This means you can offer products or services to several people and sell them under a company name. The besloten vennootschap is a very popular legal form in the Netherlands because of its many advantages. In addition, a BV often looks more professional to large clients, investors and business partners than other legal forms. You can also have several BVs at the same time.

One of the advantages of the BV is that, as a director (and shareholder), in most cases you are not jointly and severally or personally liable for the debts of the BV, unless there is improper management. This is the limited liability of the BV, which protects your private assets against any debts. However, directors can be held personally liable in the event of fraud, mismanagement or failure to comply with legal obligations. In cases of serious mismanagement, even the Dutch Tax Administration can hold a director jointly and severally liable. This joint and several liability works differently for a legal form such as a sole proprietorship or VOF (general partnership).

Do you have a risky business or long-term contracts, and do you not want to be fully personally responsible for them? Then this is the perfect legal form for your company. The limited liability also applies if your BV goes bankrupt and there are still debts to be paid.

Which bodies does the BV have?

• The board of directors

Most BVs have two bodies: the board of directors and the general meeting of shareholders. The board handles the general and day-to-day management of the besloten vennootschap. The directors are authorised to act on behalf of the besloten vennootschap and handle everyday matters.

• The general meeting of shareholders

The other important body is the general meeting, which consists of the shareholders. In this meeting, the shareholders make important decisions, such as appointing directors and making a profit distribution. The general meeting has all powers that the law or the articles of association do not give to the board or to others. A shareholder who has a non-voting share may not vote in the meeting.

• The supervisory board

In addition to these two bodies, there is also the Supervisory Board (Raad van Commissarissen). As a body, the board supervises the management of the BV and checks how the BV complies with its internal rules and legal obligations. Although it is not a mandatory body, it is often found in large BVs or in specific sectors such as healthcare. The task of the Supervisory Board is to assess strategic decision-making and the functioning of the board of directors and to give advice where needed. It offers an extra layer of governance and transparency in running the business.

The director and major shareholder

A BV often has a director and major shareholder (DGA). This is a shareholder with a substantial interest in the company who holds at least 5% of the shares. In a BV, the DGA is not only a major shareholder but also the person seen as the director of the BV. This means the DGA also manages the day-to-day running of the company. In addition, a DGA is obliged to pay themselves a market-rate salary under the usual wage rule. The BV withholds payroll tax on this salary (usual wage), which counts as an advance levy on income tax.

A DGA therefore has a different role than ordinary shareholders. In general, ordinary shareholders also have to follow fewer rules than the DGA. For example, special tax rules apply to a DGA under which they can be held personally liable if the BV has debts.

It is important to note that the specific differences between DGAs and other shareholders can vary depending on the structure of the BV and the agreements laid down in the articles of association and the shareholders' agreement. The DGA structure normally applies to BVs in which one person or a small group of people both manage the company and own a substantial part of the shares.

The ultimate beneficial owner (UBO)

The DGA should not be confused with the ultimate beneficial owners (UBO). This is a different concept, created so that people can easily see who the owner or director of a BV is. This is especially important in cases of money laundering or fraud. The UBO is the person who ultimately controls the BV, usually through owning shares or voting rights, even if this control is exercised indirectly. This can be the same person as the DGA, but that is not always the case. You see this especially often in smaller BVs.

When can you set up a BV?

Anyone who officially lives in the Netherlands and speaks Dutch or English can easily set up a besloten vennootschap. You must be at least 18 years old to set one up. Are you still a minor? Then you need permission from the court and/or your parents to start with this legal form.

In addition, a mandatory starting capital is no longer required to set up a besloten vennootschap. In 2012, the Netherlands introduced the Act on the Simplification and Flexibilisation of BV Law, which abolished the starting capital. So as a starting entrepreneur, you can easily set up a besloten vennootschap, even with 1 euro cent in the bank. The naamloze vennootschap (NV, the Dutch public limited company) still requires a starting capital of € 45,000.

Paying tax

Types of tax

Once you have set up a besloten vennootschap, you also have to pay certain taxes. For example, you pay tax on the profit of the besloten vennootschap. A BV pays corporate income tax on this profit. You pay 19% corporate income tax on the first € 200,000 of profit and 25.8% on the profit above that. You also pay VAT (turnover tax), which you pass on to your customers by including it in the price of your products. If the BV has a turnover of no more than € 20,000 a year, it can use the small business scheme (KOR), so it does not have to charge VAT. Unlike a sole proprietorship, a BV has no right to entrepreneur's deductions, such as the self-employed deduction.

In addition to corporate income tax and turnover tax, dividend tax must be paid on the BV dividend (the profit made) that is distributed to the shareholders. A BV is also obliged to prepare annual accounts every year and to file the annual accounts with the Chamber of Commerce.

The fiscal unity

It is also useful to know that if the shares of your operating company are held by a holding company, a tax arrangement called the 'fiscal unity' (fiscale eenheid) may apply. In this case, the activities of the operating company and the holding company are treated as one for tax purposes. This can lead to certain tax advantages, including an exemption from dividend tax for the holding company.

What does the incorporation process look like?

At Firm24, we can guide you from start to finish in setting up a BV and make sure everything is arranged down to the last detail. This usually takes between 3 and 5 working days. The incorporation process of a besloten vennootschap looks like this:

(1) You complete the online application procedure to set up a BV. This takes about 10 minutes. During the application, you state which activities the company will carry out, who the founders are and what the name will be. Is something unclear while you fill in the application? Then you can go straight to the chat, where a support employee will help you.

(2) Is everything clear? Then complete the application and choose the nearest notary. If you want to set up a BV, a notary is required.

(3) Complete the online identification by having your ID checked and taking a biometric selfie.

(4) After completing the application procedure, make an appointment with the notary. The notary drafts the deed, and you discuss it during the appointment. The notary decides whether this appointment takes place by phone or at the office.

(5) After the meeting, the notary makes sure the notarial deed is signed (the execution of the deed) and registers the company with the Chamber of Commerce. Nowadays, you can also arrange this digitally. In that case, you receive a digital notarial deed. Until the BV is officially registered in the trade register, the directors are personally liable for obligations entered into on behalf of the BV.

(6) The KVK registers the company in about half a working day.

(7) The notary then uploads the deed of incorporation, your KVK extract and the shareholders' register to the Firm24 portal, so you can get started with the company.

What happens next?

The notary registers your company with the KVK immediately after the deed of the besloten vennootschap has been executed. So you do not have to visit the KVK yourself or apply for a number. Once that is done, you can take the KVK extract to the bank to open a business account. Every besloten vennootschap needs a separate business account. Without a bank account, you cannot pay up the shares, and formally the besloten vennootschap has not yet been fully set up. To pay up the shares, you make a transfer from your private account to the company's business account. That is how you officially pay for the shares. As the description, you enter “payment of shares 1 to #” and you are done.

A VAT number

Once the incorporation of the besloten vennootschap is complete, the Chamber of Commerce in most cases automatically passes the company's registration on to the Dutch Tax Administration. Based on the activities, the Tax Administration decides whether you qualify for a VAT number. About two weeks after the registration with the KVK, you receive a letter from the Tax Administration with the VAT number.

A holding usually does not get a VAT number. Did you not get a VAT number, but do you want to invoice from the holding? No problem: contact your tax office to apply for a VAT number.

Finally: prefer to talk it through first?

What the best choice is for you always depends on your situation and what you ultimately plan to do with your BV. That is why many entrepreneurs choose to briefly discuss their situation with one of our advisers to see what the best option is for them. An advice meeting is of course also possible if you already own a BV. It is completely free and you can schedule it via this link.