To choose the right legal form for your company, it is good to know the advantages and disadvantages of a Private Limited Company (BV). This article will inform you and give you more insight into which legal form suits your company best.
A Private Company is a legal form (type of company) that you can apply for at the Chamber of Commerce. Unlike a sole proprietorship, a BV itself is liable for any debts, claims and the like. The owner of the BV (director) is himself employed by the BV and has hedged his private assets and separated them from the BV. In addition to the limited tax benefits, these are certainly the biggest advantages of starting a BV.
Conditions for a Private Limited Company
When setting up a BV, a number of conditions must be met with regard to the formation and some tax obligations. Some conditions of a BV are:
- A notarial deed containing the articles of association drawn up by an official notary.
- Declaration of no objection which the notary will arrange for you.
- Founders may not have had to deal with a bankruptcy or property crime in the last 8 years before incorporation.
- Deposit at least 18,000 euros into the company in the form of real estate or euros.
- Registration in the trade register of the Chamber of Commerce.
- Submit the annual accounts annually to the Chamber of Commerce
Switching from a legal form to a BV
It is also possible to switch from, for example, a sole proprietorship to a BV. The most common reason for this is; moving “liability” to the BV and tax benefits.
Liability and exceptions
- In a BV, the director is not liable with his private assets, but there are a number of exceptions to this, namely:
- Failure to inform the tax authorities in time that premiums and taxes cannot be paid on time.
- Failure to meet the conditions, such as the annual filing of annual accounts (applicable for the last 3 years before bankruptcy.
Taxes at the BV
The DGA (director-majority shareholder) income tax on wages (payroll tax) and dividend tax if dividend has been withdrawn. The BV pays corporate tax on the profit. So in total there are 3 types of taxes for a BV:
This is the payroll tax on your own wages as a DGA, consisting of; income tax, national insurance contributions and health insurance law.
Everything in income (minus purchases, costs and debts) is taxed. These rates may change annually.
When funds are withdrawn from the BV to “private”, dividend tax must be paid. Dividend has been 25% for years.