The most popular legal entity in the Netherlands is by far the private limited liability company. Almost all our clients choose this company type, as it matches well with almost all business ideas and goals. In addition to the private limited liability company, you can also choose to incorporate a public limited liability company. Although these two legal entities overlap somewhat and have some similarities, there are many noteworthy differences that you should definitely take into account should you wish to establish one of these two types of companies. We will list all similarities and differences on this page to make it easier for you to make an informed decision about this matter. You can also read some interesting background information on limited liability companies in general, including some historical details. We will also inform you how we can set up your new Dutch business and what you will need for the incorporation procedure.  

General history of limited liability companies

The concept of limited liability companies has a long history worldwide. As it is, this concept has evolved over time in different parts of the world. The earliest forms of Limited Liability Companies (LLCs) emerged in the 19^th century, with a formalized structure that is akin to the modern LLC. In the United States (US), the first limited liability company statute was enacted in Wyoming in 1977. The German version of a limited liability company is a “Gesellschaft mit beschränkter Haftung” (GmbH) and was first established in 1982. In France, the limited liability company is known as the “Société à Responsabilité Limitée” (SARL), which saw the light of day for the first time in 1925. Subsequently, the entire concept of limited liability companies was established with the Limited Liability Act of 1855 in the United Kingdom (UK). However, private limited companies, as we understand them today, were established under the Companies Act 1980. In the Netherlands, the limited liability company has its roots in the legal system. The first Dutch company law that introduced the concept of limited liability was the Dutch Commercial Code of 1838. The "Besloten Vennootschap" (BV) is the Dutch equivalent of a private limited company. The BV structure was introduced in the Netherlands in 1971 through the Flex-BV legislation, making it more flexible and at the same time modernizing company law.

Public Limited Liability Companies (PLCs) are companies whose shares are traded on a public stock exchange, allowing the public to buy and sell shares in the company. The development of Public Limited Liability companies was somewhat parallel to the development of private limited liability companies. In the UK, the concept of a public limited company evolved with the Joint Stock Companies Act of 1844, which allowed companies to be incorporated with limited liability. The Companies Act of 1862 further refined the legal structure of several company types and paved the way for the establishment of public limited companies. In the US, publicly traded companies have a bit of a longer history. The first public companies already appeared in the 18^th century, but the legal framework for public companies wasn’t entirely defined until the 20^th century. In the Netherlands, public limited liability companies are known as "Naamloze Vennootschap" (NV). The legal framework for NVs has evolved over time, with regulations outlined in the Dutch Civil Code.

The establishment and regulation of public limited companies vary from country to country, and legal frameworks have evolved over time to adapt to changing economic and business environments. In many cases, the development of public limited companies is closely tied to the growth of stock exchanges and capital markets. It's also important to note that legislative changes over time have influenced the development of limited liability companies. The information provided here offers a general overview, and for more specific details, it's advisable to refer to the relevant legal and historical sources of every country involved. Since this page is solely focused on the establishment of a Dutch BV or NV, we will only outline Dutch laws and regulations.

The benefits of owning a Dutch company

The Netherlands is ranked as one of the most favorable locations for corporate ventures worldwide. The country currently holds the 4th position in the Global Competitiveness Index of the World Economic Forum (WEF), as well as multiple other top positions in well-known indexes throughout the world of business. This is definitely not without reason, as the Dutch offer a very lively and competitive market for business, as well as excellent secondary conditions such as a highly skilled and mostly bi- or trilingual workforce, a fantastic digital and physical infrastructure, a strategic position for international trade, and many beneficial treaties with other countries. The Netherlands is also an EU member state and is held in high regard by the rest of the EU member states. You will therefore benefit from a professional and trustworthy image when you establish a company in the Netherlands. You have direct access to the European Single Market as well as all other countries due to the great trade capabilities of the Dutch. Another advantage is the relatively low cost of company formation and the many interesting tax incentives and deductions, which make it profitable to even start multiple businesses here. Foreigners are especially welcomed, since the Netherlands holds innovation and diversity in high regard. As such, you can also apply for interesting subsidies that might provide your newly formed company with an extra financial boost.

Private or public limited liability company (BV or NV)?

That being said, while the Netherlands does provide unique advantages for a business to thrive, it is vital to find the right type of company to suit your needs. In this article, we will make a distinction between a private limited liability company and a public limited liability company in the Netherlands. These two legal entities are also known as a Dutch BV company and an NV company, respectively. We will also discuss which of these legal entities is best suited for your individual business. In the Netherlands, these are not the only legal entities available, by the way. When you establish a business, you need to choose a specific legal entity that fits your preferences and ambitions. There is a significant distinction between unincorporated business structures (“rechtsvormen zonder rechtspersoonlijkheid”) and incorporated business structures (“rechtsvormen met rechtspersoonlijkheid”). The main difference between these two is that there is no distinction between your private and business assets in an unincorporated business. You and your company are, in essence, the same entity. So, if you create debts with your business, you can personally be held accountable. If you choose an incorporated business, you separate private and business assets and thus enjoy protection from business debts in most cases since your business is seen as a separate entity.

There are four types of unincorporated business structures:

• Sole proprietorship (Eenmanszaak or ZZP)
• Limited partnership (Commanditaire vennootschap or CV)
• General partnership (Vennootschap onder firma or VOF)
• Professional partnership (Maatschap)

There are six types of incorporated business structures:

• Private limited liability company (Besloten vennootschap or BV)
• Public limited liability company (Naamloze vennootschap or NV)
• Cooperative (Coöperatie)
• Mutual insurance society (Onderlinge waarborgmaatschappij)
• Foundation (Stichting)
• Association (Vereniging)

Legal requirements differ between the business structures, and there are also quite extensive differences in general requirements for establishment, the way you pay taxes, and the structure of each legal entity. In general, the business structure that is most often chosen by foreigners is the Private limited liability company (Dutch BV) due to the several practical and tactical benefits of this legal entity. If you would like personal advice about the best legal entity for your (future) business, Intercompany Solutions is always ready to assist you with any query you might have.

Your personal ambitions and preferences matter

If you want to make the best choice available, it’s important to consider what you want to do with the company. As we have already mentioned multiple times, the Dutch BV far outweighs all other legal entities in terms of practicality, workability and tax/financial benefits. For example, you can establish a holding structure with a BV, which makes it possible to incorporate multiple subsidiaries under one umbrella company. One of the main benefits of this type of structure is asset protection. You can transfer funds from your subsidiaries to your holding BV, which will keep these assets safe in case your subsidiary is not doing so well. Another benefit of this practice is, that you can fund the establishment of new companies with paying little to no taxes. If you are serious about becoming a successful entrepreneur, the holding structure is definitely the most promising solution for you. There are some benefits to a public limited liability company as well, but you should note that, amongst other things, the start-up costs and initial share capital deposit are much higher. We will outline all the similarities and differences of both company types below.

The private limited liability company (Dutch BV)

A private liability company differs from a public liability company in the way that a private company does not have its stock available for public purchase on the stock exchange. However, a private Dutch company is still considered a legal entity separate from its shareholders and has its own identity in the eyes of the law for litigation or taxation purposes. Additionally, private liability companies must also register in the Dutch Trade Register in order to engage in commercial activity. One of the main benefits of a private limited liability company is the limited liability for directors and shareholders. Only when you can be seen as accountable for certain debts is there a chance that you can be held personally accountable financially. This is also the main reason most entrepreneurs choose the Dutch BV as their company type.

Characteristics of the Dutch NV

The BV is a privately held Dutch legal entity comparable to a ‘private limited liability company’. There are some main characteristics that explain how a BV works and how it differs from other legal entities, which we will list below.

• Practically no initial investment is needed, as only a minimum share capital of €1 is required to officially establish a Dutch BV
• The issuing or transferring of shares requires permission from the shareholder(s)
• The shareholders are all registered in the Dutch company register
• A foreign company, local company or natural person may be the shareholder or director of the Dutch BV, so if you own a foreign company, you can open a Dutch subsidiary under the umbrella of your already existing company
• The issued and required paid-up capital is determined by the founders, and this is registered in the articles of association when the deed of incorporation is drawn up
• Different types of shares allow varying voting and dividend rights, which means there can also be non-voting shares and non-profit shares
• Particular class shares may limit profit sharing entitlement; however, such shares must always have voting rights
• Transfer restrictions are sometimes allowed
• Shares are not admitted to the stock exchange and are thus only privately held by directors and/or shareholders
• The shareholders are only liable for the amount paid as share capital, not for any company debts, unless there is concrete proof of faulty management
• Amendments to Dutch Business Law have made it much simpler to incorporate a Dutch BV, reducing the cost of company formation in Holland greatly.

Benefits of the Dutch BV

The Dutch BV offers several interesting benefits for entrepreneurs, which is exactly why this legal entity is chosen so often when establishing a business. First and foremost, the limited liability every shareholder and director profits from is a massive plus, since this will keep your personal financial situation relatively safe, even if you create debts with the company. Please note that it’s important that you cannot foresee certain situations when making decisions, as you only benefit from limited liability when you cannot actually be held liable for the situation. This entails, for example, improper management and fraud. Next to the limited liability, you can divide your property and financial risks among several BVs via a holding company structure, which enables you to create a company structure that is entirely tailored to your preferences. If you want to start several companies, the holding structure is the most interesting way to realize this. This also enables you to keep your assets safe since the holding company is also exempt from liability when one of the subsidiaries gets into ‘trouble’.

By the way, not only are your assets safe in the holding company, but using the holding structure enables you to invest money in a fiscally very attractive way. In some cases, you don’t even have to pay tax at all under the participation exemption, so you are able to reinvest the profits you made tax-free. The current corporate tax that you have to pay with your BV is 19% for sums up to 200,000 euros and 25.8% for all sums above that amount. The share capital you need to deposit is only 1 euro, whereas it used to be 18,000 euros. This changed in 2012, when the Flex-BV was introduced. This makes the Dutch private limited liability company available to a much larger audience, including foreign investors. Furthermore, a Dutch BV simplifies business succession, making it less complicated to instate your children, for example. Partially selling your company is also fiscally attractive compared to other legal entities. The issuance of shares is also a very lucrative way to attract investors, since you can offer them something tangible. And last but certainly not least, a Dutch BV helps you to solidify your professional image, as this legal entity is held in high esteem throughout the world. All in all, the BV is categorized as a well-defined legal organization that makes it relatively easy to save up assets, for example, for your pension.

Structure of a Dutch BV

A Dutch BV generally comprises either a director-shareholder or a board of directors (board). There are also often multiple shareholders who form the general meeting (GM) of shareholders. The optimal tax-legal structure of a Dutch BV consists of at least two BVs that are "connected to each other". The founder or entrepreneur does not own the shares in the actual company, the operating BV (or subsidiary), directly but through a holding company, which is sometimes also named a management BV. It is a structure in which there is one BV in which you are a full shareholder. This is the holding company. You own the shares of this holding company. That holding company actually does nothing more or less than hold the shares in another BV that is, as it were, "underneath" it. In this structure, you are a 100 percent shareholder in your own holding company, which is then a 100 percent shareholder in the operating company, BV. In the operating company, your business activities are really carried out at your expense and risk. This is the legal entity that enters into agreements, provides services, and makes or supplies products. When there are multiple directors, you can expand the construction to multiple BVs. It is possible to have a one-tier board as well as a two-tier board. A supervisory board (or non-executive directors on the board) is optional, but not obligatory. Furthermore, the articles of association can contain regulations granting shareholders limited opportunities to give general instructions to the management board. The director or board ultimately decides about profit distribution.

The public limited liability company (Dutch NV)

There are many steps to forming a public limited liability company, but with the right guidance, these actions are quick and simple. Furthermore, as a public limited liability company, a portion of your shares will be available for purchase on the stock exchange. Be diligent about how many shares are available on the international stock exchange, as, although rare, some companies have been bought out by random members of the public. This is often achieved via mergers or acquisitions, with an acquisition sometimes being hostile. In some cases, for example, when nearing bankruptcy, this can be positive, but in general, it’s wise to handle your assets with diligence. The Dutch NV is also a legal entity and is therefore seen as independent of you by Dutch law. There are by far more BVs than NVs in the Netherlands, since generally only very large corporations choose to establish an NV. Chances are that the BV is the best choice for your company. Nonetheless, we will still outline all the basic information regarding the Dutch NV.

Characteristics of the Dutch NV

Shares

The NV is a public Dutch legal entity comparable to a ‘public limited liability company’. There are some main characteristics that explain how an NV works and how it differs from other legal entities, which we will list below.

• On the contrary to a Dutch BV, the minimum capital to deposit when incorporating an NV is €45,000; only then can the company be publicly listed
• Different types of shares are allowed (such as bearer shares)
• All shareholders receive voting rights as well as profit rights
• Transfer restrictions are sometimes allowed
• Shares are admitted on the public stock exchange, providing liquidity and allowing shareholders to buy and sell shares freely
• A Dutch NV needs to be formed by notary deed, similar to the Dutch BV
• The NV is also limited in its liability if all formation responsibilities are fulfilled
• This company type is also led by a board of directors
• It may require a committee of commissars to supervise the board of directors
• Specific accounting requirements apply to publicly traded companies, which are more complicated than the requirements for a BV
• Shareholders are not listed in the Dutch company register
• Public limited companies can have numerous shareholders, and ownership is often dispersed amongst them
• Public companies are subject to rigorous disclosure and reporting requirements to provide transparency to investors and the public
• Due to their size and public nature, NVs often have sophisticated corporate governance structures to ensure accountability and protect the interests of shareholders.
• Public companies are subject to specific regulatory requirements imposed by the relevant securities exchanges and regulatory bodies

Benefits of the Dutch NV

There are also benefits to owning a Dutch NV, but typically only under certain circumstances do these outweigh the benefits of owning a BV. Just like a BV, an NV can have one or multiple directors. So, if you wish to start a company alone or with others, both are possible. Since the shares in an NV are not personal, they can be transferred freely. The NV also offers personal financial protection due to its limited liability, but in the event of improper management, you can still be held accountable. Next to that, there are several possibilities for tax deduction, such as via investment deduction, through arbitrary depreciation under certain conditions, and via Research & Development deduction. In general, the NV is only the best choice if you aim for a large public corporation.

Structure of a Dutch NV

A Dutch NV also has a board of directors as well as a general meeting of shareholders, with or without voting rights. In this case, a one-tier and two-tier board are both options. The management of an NV can freely hire staff. In some cases, a committee of commissars is also required by law to be present. A supervisory board (or non-executive directors on the board) is generally optional, just like a BV. The articles of association can contain regulations granting shareholders the right to give specific instructions to the management board. The General Meeting of Shareholders is the body that makes all decisions regarding profit distribution. If a certain contribution might threaten the continuity of the company, the management board may refuse approval for the distribution of profit, dependent on the outcome of a liquidity test. Interim dividends are a possibility.

Differences and similarities between the BV and NV

As you can see, there are some factors that are similar within both legal entities, whereas there are also substantial differences. The public limited liability company is a legal form that is not very common in the Netherlands. There are approximately 2,500 companies that use the Dutch NV company as a legal form, and these are mainly large companies. This is because it is easier to raise capital (by issuing new shares) as a public limited liability company than as a private limited liability company. With an NV, just like with a BV, the capital is raised by shareholders. The NV is a so-called capital company (as opposed to a partnership). The big difference with a BV, however, is that with an NV, the shares do not have to be registered (although it is possible), hence the term “Naamloze Vennootschap” which translates in English to ‘Nameless company’. This means that shares are easily transferable. The person who can show a share (although this no longer happens physically nowadays) is a shareholder, shares in the profits, and has a vote. So, in principle, the NV does not always know who its shareholders are. The articles of association determine a large part of the rules regarding the possibility of transferring shares freely in a BV.

Oftentimes, there are certain transfer restrictions that limit some (or all) shareholders. In such cases, the other shareholders need to give their consent when a shareholder wants to transfer shares. Also, the other shareholders have a preemptive right to buy shares from a selling shareholder. This is not the case in an NV, where shares can be transferred freely. Another noteworthy difference is, of course, the minimum share capital required during the incorporation of both company types. The minimum amount for a BV is only one euro, while the NV requires 45,000 euros. This can make the NV unattainable for many entrepreneurs. Another main difference is the public vs. private part. The NV can be listed on a public stock exchange, but a BV company only issues private shares. Furthermore, the Dutch NV is obligated to have a board of directors and has more strict requirements, while the BV only needs a director and a shareholder. All in all, the Dutch NV is usually only formed by (already) public companies and not starting entrepreneurs. The BV is much more accessible for a wide variety of entrepreneurs without having to invest large amounts of money, and without the strict regulations that accompany the establishment of an NV. However, if your company starts growing rapidly, and you would like to go public at some point, you are always able to convert your BV into an NV during a later stage of entrepreneurship.

The Dutch Trade Register

Both the Dutch BV company and the Dutch NV company need to be registered in the Trade Register in the Netherlands, since registering your business is mandatory for almost all legal business practices. The Dutch Trade Register serves to provide a legal framework that enables a corporation to act as its own entity in terms of liability and taxation. Moreover, the Dutch Trade Register provides an authenticity for companies when dealing with customers and interacting with other businesses. The business register includes the following information:

• Legal name
• Address
• Phone number
• Fax (if applicable)
• E-mail contact
• URL (if applicable)
• Description of the business, including services, products, the number of current employees, branches, etc.
• A liable correspondent of business

If you own a Dutch company, the Trade Register can immensely help you with finding solid business partners. Look for information about competition and general queries related to due diligence, for example. As every BV and NV have to provide annual statements. If you want to know for sure whether a company has a good reputation, the Dutch Trade Register is your ally. We discuss this topic in depth in this article.

What is the best choice for you as a foreign entrepreneur?

First, we should make one thing clear: there is no clear answer to this question. As a business evolves throughout its lifecycle, its priorities change, and its benefactors, either public or private, may alter. Thankfully, if this occurs, a private company may change its listing to a public listing and start selling on the stock exchange. This change is known aptly as ‘going public.’ Nevertheless, private limited liability companies are usually suited for businesses that would rather gain strategic investors in exchange for greater portions of equity or those who simply do not meet the 45,000-euro minimum requirement. Moreover, public companies are able to gather large amounts of revenue fairly quickly in exchange for their stock. It depends largely on your personal preferences and the nature of your company, as well as the possibilities that are realistically within your reach.

If you would like to receive more information on starting a company in the Netherlands, please contact our experienced business advisors. We will gladly offer you the personal advice you need, which will assist you in making the perfect choice for your Dutch business.

Establishing a Dutch company with Intercompany Solutions

Our incorporation procedure is relatively straightforward, both for the establishment of the Dutch BV and NV. There are a few steps we always follow, which makes the procedure easy to understand. The first thing we will need from you are some documents and a bit of information. A valid form of identification is always necessary, as are the names and details of all future shareholders involved. You will also need to let us know who will be appointed as a director and who will only be a shareholder. Next to this information, we will also need the preferred company name. We will check this name for you, since you cannot use a name that is already in use by another company. Make sure the name fits the company well and is original, for this will greatly speed up the process. If you can acquire all the necessary information and send it to us in a timely manner, the incorporation process should take no longer than 3 to 5 business days. Once we have all the documents, we check and validate them for you before we send them to the notary public.

In general, we will already send the information to the Dutch Chamber of Commerce to pre-register your company. At this point, the company is known as ‘in formation’ (BV i.o.), which is necessary to apply for a Dutch bank account. Especially when you want to establish a Dutch NV, since you will need the bank account to deposit the minimum share capital. We therefore also go to the notary public, who will draft the deed of incorporation and the articles of association. Once this is done, the share capital can be deposited, and the company can be fully registered in the Dutch Trade Register. You will then also receive a VAT number. We can also take care of extra services for you, such as applying for an EORI number, secretarial services, applying for visas or permits, financial and legal services, and any type of advice you might need for your business. Intercompany Solutions has many years of experience in the field of business incorporation in the Netherlands. Thus, we can assist you from every angle and make sure your Dutch business runs smoothly.