Change your company type in Holland. Business expansion may prompt investors to consider changing the types of their companies. There are many reasons to make such a decision: better recognition on the market, less liability and increased access to funds.

The initial choice of company type is largely dependent on the amount of available capital and the business opportunities at the time. The first step often is to set up a small business. In time the investors will decide whether to upgrade to another type of business form allowing them to broaden their horizons and develop further.

Converting a sole trader into a company with limited liability

Service providers can initially register as sole traders. This is a simple form of business allowing entrepreneurs to provide services to customers at low administration and incorporation costs. Sole proprietorship is a business owned by a single person. However, after some time the owner may decide to change the structure of the business and establish a company with limited liability (called a BV in Dutch).

The major reason for switching from a one-man business to a BV is limiting the liability. Sole proprietors are liable for all obligations and debts of their businesses, while the assets of BVs are considered separately from the personal assets of their owners. Read more on the difference between a Dutch BV and a Sole Proprietorship.

Investors converting to companies with limited liability have to incorporate their BVs following the normal procedure and register them at the Commercial Chamber. They also need to obtain an available company name and a registered address.

Our Dutch experts in company formation can assist you in incorporating your new company. Once the BV is established, the one-man business ceases all of its operations and its assets are transferred.

If you plan to switch to another form of business in Holland, you must remember that all contracts of the business will have to be signed again after the incorporation of the new entity.

Dutch company types

The available forms of business in Holland include partnership, private or public company with limited liability and sole proprietorship. International investors are free to incorporate any of these entities and pick the one corresponding to their business requirements.

Partnerships can be transformed into BVs through a procedure similar to the one described for one-man businesses. The partners have to establish a new entity, dissolving the partnership. The procedure for conversion from private to public limited liability companies and vice versa requires more steps including amendments to the Association Articles of the company.

If you need further information on incorporation in Holland, please, do not hesitate to contact our agents in company registration.

The Dutch high technology industry is one of the most inventive worldwide due to the modern facilities and the innovations in the field of development and research. The Dutch high-tech products and expertise are in high demand and are subject to global export.

In case you are interested in starting a business in the Dutch high tech industry, please do not hesitate to contact our incorporation agents. They will assist you with information and legal advice on how to start your business in the Netherlands.

Achievements in collaboration and technology

The long-lasting Dutch tradition of entrepreneurship, creativity, openness, collaboration and pragmatism is a perfect match for the sector of High Technology Materials and Systems. These characteristics make the country the ideal place to seek solutions related to the contemporary challenges of society in the fields of wellness, health, renewable energy, security, climate and mobility. These challenges are quite complex and such solutions are mainly found through achievements in collaboration and technology. The key to success in this complex and fiercely competitive sector lies in active collaboration and innovation across the whole value chain and establishment of an effective network (or ecosystem) of institutions and companies. The Netherlands has such ecosystems, competency centres scattered on its territory. Perhaps the main centre is Brainport in Eindhoven, located in the south-eastern part of the country. In 2015 it was voted the most innovative region in the world. Other Dutch areas, in particular Delft and Twente, also boast good concentrations of universities and companies working in the field of high technology. The sector encompasses many industries that are closely related to each other, such as high technology systems, aerospace, materials (incl. steel) and automotive.

Five reasons why the high technology industry in the Netherlands is crucial to meeting contemporary global challenges

1. The Dutch tradition of openness, creativity and entrepreneurship

The long lasting Dutch tradition of pragmatism, creativity, openness, collaboration and entrepreneurship is the ideal match for the sector of high technology materials and systems. There are many examples of the nation’s ingenuity, including the sawmill, the rotary screw pump, the submarine, the microscope, the Variomatic, the  six-cylinder engine, various systems for navigation and methods for transformation of food crops and waste into energy. All these characteristics make the country the ideal place to seek solutions related to the contemporary challenges of society in the fields of wellness, health, renewable energy, security, climate and mobility. These challenges are quite complex and such solutions are mainly found through achievements in collaboration and technology.

2. Excellence in technology: The Netherlands is leading on the market of high technologies

The sector of high technology encompasses many industries that are closely related to each other, such as high technology systems, aerospace, materials (incl. steel) and automotive. National knowledge institutes and companies working in this sector are famous with their technological competence and leadership in their segments of the market. Fast advancement and strong collaboration within the whole value chain is necessary in this complex and competitive sector.

The country is among the leaders in nanotechnologies. Publications from the Netherlands yield more citations in relation to patents than studies from any other country worldwide. The nation ranks third with respect to citation impact. It is also a global leader in design, development and production of micro – and nanocomponents and high technology equipment. The characteristics of the high tech products are:

• high intelligence (embedded software, systems and sensors);
• impeccable precision (precision manufacturing, nanoelectronics);
• high efficiency (smart electronics and mechagronics).

The high technology sector in the Netherlands strives for value, diversity and complexity. It is generally directed towards niche markets and small product patches, relying on high technological competence for success.

3. A population with advanced computer skills

The Dutch are advanced computer users with an exceptionally high rate of broadband / computer penetration and use of mobile services. The IT infrastructure in the Netherlands is among the most developed worldwide and has specialized networks that power global efforts in Research and Development. This environment supports the rise of world-class hardware companies, IT consultancies and software developers working in the fields of safety, healthcare, mobility, business and simulation. Furthermore, a lot of companies develop gaming content for the internet, mobile telephones and major platforms. The country is ranked first in Europe in the embedded systems industry and first in the world in equipment for manufacturing of microchips.

About seventy percent of the Dutch innovations are related to Information Technologies and enable key developments in many fields, e.g. water management, production of ornamental plants and foods, and the automotive industry. The considerable number of partnerships between public and private institutions, where the Dutch government collaborates with the private and educational sector, leads to active development in the diverse fields of embedded systems, modeling, multimedia technologies, virtual laboratories and parallel computing.

4. Specialized networking between institutions and companies, and leadership in open innovations

It is crucial to have an efficient network (or an “ecosystem”) of institutions and companies specializing in the high technology industry. One region with high concentration of entrepreneurs in the sector of high technologies is Brainport, Eindhoven, located in the southeastern part of the country. Other regions, such as Delft and Twente (Yes! and Knowledge park), also boast numerous universities and companies working in the field of high technologies.

The country is a global leader in open innovations and public-private collaborative research. In 2011, the region of Brainport, Eindhoven was voted as the smartest region in the world. This is a good example of collaboration between researchers, companies and governmental institutions with the aim to accumulate knowledge and deliver innovative technologies that set standards worldwide. The result is extensive cooperation between specialized suppliers, OEMs and academia.

5. Always considering future perspectives

The Dutch sector of high technologies is a global frontrunner in the creation of novel materials and technologies for applications in state-of-the-art communication systems, safe and economical aircraft, electric and hybrid cars, large scale production of solar energy and its storage, and modern medical equipment for early detection and effective treatment of diseases.

 

The Netherlands is among the largest providers of chemical services and products in Europe. The necessary materials are readily available or easily accessible, while the extensive national network for transportation facilitates travel on the continent and overseas.

If you are interested in establishing a company in the chemical industry of the Netherlands, please do not hesitate to contact our local incorporation agents. They will provide you with further information on company formation and investment opportunities in the country. You can also read this article for more information on the incorporation procedure.

Development of intelligent solutions and smart materials

The chemical industry in the Netherlands has adopted a methodical approach to finding solutions to the great challenges of society and, in particular, pays attention to 5 main areas: Resources and Climate, Food Security, Healthcare, Energy and Transport. Due to the multidisciplinary nature of the challenges, the sector works in collaboration with numerous other industries. The Dutch chemical sector has a platform aimed at connecting different stakeholders for the purpose of mutual creation of new solutions.

Similarly to other industries all over the world, the chemical industry in the Netherlands is facing the problem of depletion of resources. Natural sources are becoming increasingly scarce as a consequence of overconsumption or they are simply hard to find. The Netherlands is up to this challenge, as it can provide new opportunities and catalyze the shift towards more sustainable, greener chemicals. The current situation requires the utilization of more sustainable source materials that are also safer for the environment in the development of smart solutions and materials. Also, there is a need to adopt new processes with reduced formation of undesirable wastes and by-products.

Five significant contributions of the chemical industry in the Netherlands

1. Leading services and products

The chemical industry is among the leading sectors at a national level with significant contributions to the country’s economy. Holland is among the strongest providers of chemical services and products in Europe. The necessary materials are readily available or easily accessible, while the extensive national network for transportation facilitates travel on the continent and overseas. Also, the industry is taking important measures to become more sustainable.

2. Many leading companies establish their headquarters in the Netherlands

The country hosts sixteen of the top twenty-five chemical companies in the world, including Shell, AkzoNobel, BASF and DSM. Research is carried out at TNO and the universities of Delft, Twente, Wageningen and Eindhoven.

3. Competitiveness and collaboration among companies

The chemical industry in the Netherlands is competitive because of its integrated character. Companies trade with one another to purchase and obtain materials. Furthermore, they collaborate through partnerships with the government directed towards regional clustering, production and innovation.

4. Clusters of joint expertise

The chemical sector in the Netherlands is split into clusters combining specific expertise. For instance, in the south-eastern part of the country, there is a cluster directed towards materials with high performance, while the biotechnological branch has formed a south-western cluster. The companies supplying chemicals for biotechnological purposes are concentrated to the northeast.

5. Stakeholders work together to create innovations

The government, companies and universities collaborate in the development of new technologies, forming a stable chemical community. The sector works openly to create innovations. It achieves its goals through centres of chemical innovation where big companies, small businesses and start-ups work on innovative concepts and assess their feasibility. There are five such centres in the Netherlands: the Valley for Application of Green Polymers, Chemelot, Plant One, the Campus of Green Chemistry and the Biotech Campus. These companies share their expertise, services and infrastructure.

If a group of individuals wants to fulfil a particular goal, for example, all members want to participate in a given sport, make music or improve a shopping area, they have the option to establish an association (vereniging) that is a type of legal entity.

Main characteristics of the Dutch association

• Associations in the Netherlands should have at least two members.
• All association members are entitled to a vote.
• The Members Meeting (Ledenvergadering) has exclusive authority and power.
• The Members Meeting nominates a Committee that includes, as a minimum, a chairperson, a secretary and a treasurer.

Association types

Practically there are two forms of associations in the Netherlands, depending on their legal capacity:

1. Full capacity associations

When you establish an association with full capacity (or volledige rechtsbevoegdheid), theoretically, you do not carry personal liability for its debts. However, you need a Latin notary to prepare a deed that states the establishment of the association and its statutes, including:

• name and address;
• objective (profit sharing among partners is not considered an objective);
• requirements for inclusion of members;
• procedure for holding a general Members Meeting;
• procedures for appointment and removal of committee members;
• post-dissolution surplus allocation.

In case you decide to amend any of the above, you need to hire a Latin notary to update the deed of establishment of the association. Associations have internal regulations complementary to the statutes. They concern the practical daily affairs. These internal rules do not need to be notarized.

Associations with full capacity have to be listed in the Trade Registry (Handelsregister) at the Commercial Chamber (Kamer van Koophandel).

Full capacity associations have the duties and rights of public members, e.g. they can borrow money and inherit and own registered property.

Subsidizing organizations usually require subsidized associations to have full capacity in legal terms.

2. Limited capacity associations

An association set up without a Latin notary has only limited capacity in legal terms (beperkte rechtsbevoegdheid) and its owner carries personal liability for all of its obligations. This liability can be limited by registering the association in the National Commercial Registry.

Limited associations are not allowed to own registered property, for example, real estate.

Both limited capacity associations and full capacity association can be used to form a cooperative. Read here on cooperatives in the Netherlands.

Registration at the National Commercial Registry

You are obliged to register your association at the Dutch Trade Registry to obtain full statutory capacity. You carry personal liability until the date of registration. Usually, the Latin notary dealing with the establishment of your association will also complete the registration, but it is advisable to require confirmation.

You have to report any changes in the list of committee members to the Chamber of Commerce in eight days. Former members of the committee continue to carry liability if they are listed in the National Commercial Registry.

Read more on the Dutch Company Register. 

Taxation

Associations functioning as businesses owe corporative taxes (vennootschapsbelasting). All profits have to be directed to the purpose or objective of the association. Depending on the situation, the association may have to charge and pay Value Added Tax.

Liability of committee members

The association is a form of legal entity. Therefore, in theory, the members of its committee do not carry personal liability for its debts. Still, there are exceptions, e.g. in cases of negligence, mismanagement or failure to register the association at the Commercial Registry.

Members of the committee and staff

Associations are free to employ staff. The members of its committee, however, are usually not employees. Therefore they are not covered by any schemes for employee insurance.

Dissolution of the association

Dissolution of the association is possible when the General Members Meeting votes in favor, there are not any members left or bankruptcy is declared. The procedures and rules for dissolution are laid out in the statutes.

Homeowner associations

All owners of apartments in Holland must be members of homeowners associations (VVE or vereniging van eigenaars). These associations represent the mutual interests of all apartment owners regarding matters of building service and maintenance. VVEs have several obligations. They need to hold at least one members’ meeting per year, to keep reserve funds and prepare yearly financial statements. VVEs have to be listed in the National Commercial Registry.

Do you have any questions about establishing an association or another company type? Our company formation agents can help you open a company in the Netherlands.

If you are an owner of a Dutch business but at some point, you become unable to cover your company’s debts, you may petition for bankruptcy in front of the Dutch court. For this purpose, you need to fill out a form (in Dutch) either personally or on behalf of the company that you represent. The application can be submitted without hiring a lawyer.

Creditors filing for bankruptcy

If your company has more than two creditors, they may hire a lawyer to file documents for declaration of your bankruptcy. There are certain conditions which determine whether it is worthwhile to apply for bankruptcy, including the amount of money loaned and the particular claims of the creditors. The creditors may suggest mediation in order to agree on terms acceptable for all partiers, instead of requesting the court to declare you bankrupt.

Assets

When you are declared bankrupt, the court seizes your assets. Personal bankruptcy is also possible if the type of legal entity you chose for your business allows it.

Bankruptcy and liability of officers and directors

Directors and officers of private limited companies (BV) or public limited companies (NV) that have become unable to cover particular employee / retirement contributions or taxes (insolvency) are required to report the situation as soon as possible to the National Customs and Tax Administrations, the Dutch Agency for Employee Insurance (UWV) or the respective pension fund. Lack of reporting may lead to personal liability.

Further steps

If your company is declared bankrupt by the court, an authorized receiver will be appointed. The receiver has exclusive rights to administer the company after the declaration of bankruptcy. The receiver can divide proceeds among creditors and sell assets. They decide if you need to stop work immediately or after a certain time period. They are also able to grant permissions for activities that are allowed. These activities may include conclusion of contracts, selling, collecting and paying bills, etc.

Starting fresh

If you plan to start a new business as an entrepreneur, you still need to cover any outstanding debts or accounts to the creditors and the authorities (e.g. the Customs and Tax Administration).

Bankruptcy of customers

If a customer goes bankrupt while owing you money, the appointed receiver will notify you of the bankruptcy. In case you do not receive a written notification, then you should contact the receiver yourself. A meeting will be held with the receiver to discuss the outstanding debts and then you will have the opportunity to explain your claims.

Creditor ranking

When bankruptcy is declared, creditors are ranked in a particular order. The ranking is partially dependent on the nature of their claims. The receiver determines the ranking and prepares a (conclusive) distribution list.

Please note: We cannot assist with bankruptcy cases.

Holland has a good standing with respect to energy efficiency and renewable energy and leads the charts for greenhouse farming, processing of biomass and wind energy in marine environments. The energy industry provides a substantial part of the national income, employment and exports of the country. Therefore the Dutch government has adopted a modern industrial policy in order to take better advantage of any economic opportunities related to grey and green energy.

In case you are interested in opening an energy company in the Netherlands, please contact our experienced incorporation consultants. They will assist you with company establishment and legal advice.

Affordable, reliable and clean

Economic development and social well-being, in general, are largely dependent on the provision of robust and sustainable energy that is affordable, reliable and clean. The achievement of these fundamental goals is inextricably bound to the reduction of carbon dioxide emissions and the globalization of energy markets. The ever-increasing demands for sustainable sources of energy open various opportunities for energy trade, transport and generation in the margins of the sector. Holland has strong prerequisites for continuous growth in the global energy industry. Thanks to its geographic location it has a long coastline for harvesting wind energy. It hosts two of the key harbours in Europe: Rotterdam and Amsterdam. Furthermore, it has significant reserves of natural gas and a developed gas infrastructure. Hence the country possesses a firm basis for development with the aim to become a top European energy hub.

Five strengths of renewable energy in the Netherlands

1. Bold expectations for 2050

Holland has an ambitious plan for the future: it aims to develop a system for affordable, reliable and sustainable energy by 2050. In this respect, the country expects to decrease the emissions of carbon dioxide by 50% and to generate about 40% of its electricity in a sustainable manner by harvesting wind power and producing energy from biomass. The CO₂ emissions can be reduced through the use of renewable and nuclear energy, energy saving, and capture /storage of carbon. The European Directive on Renewable Energy foresees that, by 2020, 14% of the energy used in the EU will be renewable.

2. Decentralised energy

Holland experiments with energy generation from waves, biomass and algae. It has found innovative solutions concerning on-site energy generation in greenhouses, “recycling” of carbon dioxide and utilization of waste heat in horticulture. Therefore the share of distributed energy in Holland is considerably higher in comparison to many other countries.

3. European leader in the production of green gas

Holland is an established key player in the gas market of Europe. It is a major producer of natural gas, develops advanced technologies in the field and is the top gas broker on the continent. The country has five decades of experience with the organization of partnerships between the public and private sector in the business with gas and is currently considered a European hub. The Netherlands has an unparalleled capacity to handle the seasonal changes in demand and to ensure the flexibility in supply sought by northwest Europe. Famous institute, e.g. the Energy Delta in Groningen, educate students from all over the world. Additionally, Holland is also becoming a leader in the area of green gas.

4. Extensive experience in efficient energy and solid reputation in the field of renewable energy research

The Dutch energy industry and the government have a long-lasting tradition of voluntary multiannual agreements regarding energy efficiency that has led to the accumulation of extensive experience. This is why the Dutch industry is among the most efficient worldwide in terms of energy use. The Netherlands is internationally recognized for its research in the area of renewable energy, such as solar energy, performed by the institutes ECN, FOM and a number of universities. The University of Technology in Delft has won 7 times the biennial solar car world competition (Solar Challenge) since 2001.

5. Extensive expertise in harvesting wind energy offshore and plans to become the biofuel hub of Europe

The Dutch are leading experts in harvesting wind energy at sea, biomass co-combustion in power plants fired with coal, methods for pre-treatment of biomass, landfill gas use, and heat pumps with cold and heat storage. The Netherlands is also conveniently located in the middle of the European continent and has a state-of-the-art petrochemical, industrial and logistics centre around Rotterdam. It is not surprising that the country has the ambition is to become the biofuel hub of Europe.

Read here to explore the Dutch chemical industry.

 

Advantages of working in a cooperative

In case you are planning to use the advantages of cooperative work, such as pooled marketing and purchasing efforts, one of the options is to register an entity called “coöperatie” or cooperative. This form of entity is also useful if you are dealing with increasing workloads or have health problems. The other participants in the collective can handle some of your work.

Definition and types of cooperatives

The cooperative is an association concluding specific contracts with its members and on their behalf. Two of its forms are “bedrijfscoöperatie” or business cooperative and “ondernemerscoöperatie” or entrepreneur cooperative.

Read more on associations in the Netherlands. 

Business cooperative

This type of collective works in support of the members’ interests in particular fields, e.g. advertising or procurement. A popular Dutch example of such a cooperative is Friesland Campina; it is a substantial cooperative uniting dairy farmers, where each member contributes to the collective profits.

Entrepreneur cooperative

This type of cooperative has members who work independently and may decide to collaborate on particular projects. This form of entity is suitable for persons who are self-employed and do not have employees of their own (zzp'er or zelfstandige zonder personeel). The entrepreneur cooperative allows members to work together on projects or assignments that would otherwise be too bulky for them to complete on their own. The customers also benefit from the situation by having one contact person and more certainty that the deadlines of their projects will be kept.

Please note, that all participants in common projects working in the capacity of natural (not legal) persons need to have other clients outside the project to be considered as entrepreneurs for the purposes of income tax collection (ondernemer voor de inkomstenbelasting). The distinction is important for the Customs and Tax Administration (Belastingdienst).

All members of the cooperative have the right to vote and are free to leave or enter the collective, as long as this does not jeopardize its long-term existence. Entrepreneur cooperatives are suitable for short-term or small-scale collaborative projects.

Mutual insurance companies

Companies with mutual insurance (onderlinge waarborgmaatschappij) are cooperatives whose members conclude insurance contracts between themselves and with their companies aimed at mutual profits.

Establishment and management of a cooperative

A cooperative may include two or more members. The entity is controlled by an Algemene Ledenvergadering or General Members Meeting (GMM). The GMM appoints a management board to handle the affairs of the cooperative. You will have to use the services of a Latin notary to prepare a deed for the establishment of the entity and to register it at the National Commercial Registry (Handelsregister).

The members of the cooperative cover the costs of its setup and functioning. Any generated profits are distributed with respect to the shares of the members in the general turnover of the collective. The members are free to negotiate particular arrangements with respect to profit sharing.

Liability

The collective is held accountable in its capacity of an entity, but in case its members plan to dissolve it at a time when it has outstanding debts, all of them owe equal shares. Still, liability can be excluded by establishing a limited liability cooperative (BA or beperkte aansprakelijkheid) or an excluded liability cooperative (UA or uitgesloten aansprakelijkheidcooperative).

In entrepreneur cooperatives, partners collaborating in projects carry the responsibility for their outcomes.

Tax

Cooperatives pay corporative tax (or vennootschapsbelasting) with respect to their profits. Their individual members owe income tax (or inkomstenbelasting) with respect to the income they obtain through the cooperative.

Please, refer to this article on Dutch taxes for additional information.

Yearly accounts and reports

Cooperatives are required to prepare and publish yearly financial accounts and reports.

Social security

Regular and board members of self-governing cooperatives have effective fictitious employment relationships (fictieve dienstbetrekking) with the entity. In this case, the salary deductions are the same as for regularly employed persons.

Our legal agents can help you register a cooperative in the Netherlands. Read here if you would like to explore other Dutch company types.

A sole proprietorship is also called a one-man business or sole trader. Registering such a business guarantees your full independence as its owner and founder. The proprietorship can have more members working for it and employ staff, but its owner is only one.

Establish a Sole Proprietorship in the Netherlands

A sole proprietorship can be established without a deed prepared by a notary. It is mandatory, however, to register the business at the Trade Registry. Each private individual can establish only one sole proprietorship, but the proprietorship can have several trade names and perform various activities using the different names. These business operations can be performed at the registered address or at a branch of the sole proprietorship located elsewhere.

Company liability

The owner of a sole proprietorship carries the responsibility for everything relevant to the enterprise, i.e. all its legal acts, liabilities and assets. The law makes no distinction between business and private property. Therefore business creditors are free to require the recovery of any debts from personal property and vice versa – private creditors can require recovery from business property. In case the proprietorship faces bankruptcy its owner goes bankrupt as well. In case the owner is married under a regime of common property, the creditors are also eligible to claim the spouse’s property. Spouse liability may be avoided through an agreement prepared by a Latin notary and concluded before or after the marriage. Spouses, however, are generally asked to co-sign loan-related documents and the mentioned agreement may fail to provide the expected protection. Our agents in company incorporation can help you with further details regarding liability.

In order to decrease liability risk, many sole traders change their company type to a limited liability company, also known as B.V. Read our article: Establishing a Dutch company: Sole Proprietorship or B.V. 

Tax & social security

For taxation purposes, the profit of sole proprietorships is considered as income. If the Tax Service considers the owner an entrepreneur, then he is entitled to investment, entrepreneurship and retirement allowances. The owner is not entitled to benefits for sickness, income and work, and unemployment insurance. It is best to cover such risks by taking out insurances. Sole proprietorship owners can use any of the national schemes for insurance listed below:

Tax & social security

With sole proprietorship, the law makes no distinction between business and private property. If the owner of the sole proprietorship dies, both his/her private and business property will be inherited by the heirs. It is advisable to ensure the continuity of your business in advance. Our tax experts can give you more information on the matter. Our experienced incorporation agents can consult you on company formation Netherlands.

Characteristics of the Dutch Professional Partnership

In the context of the Dutch law, the “maatschap” or professional partnership is different from the other forms of partnership (general and limited) as it represents a cooperation of professionals, e.g. accountants, physicians, lawyers, dentists or accountants, and its main goal is not the joint performance of business activities. The partners in this form of cooperation are called “maten”. Each “maat” participates in the partnership by contributing personal assets, effort and/or capital. The aim of the cooperation is sharing both the earned income and the incurred expenses.

Establishing a Professional Partnership in the Netherlands

For the establishment of professional partnerships, the law does not require the conclusion of a contract between the partners. However, it is in the partners’ best interests to draft an agreement. The partnership agreement can include provisions related to:

• the contributions made by each partner;
• the profit distribution proportionally to the contributions (it is not possible to transfer all profits to a single partner);
• the distribution of powers: all partners can act as managers unless agreed otherwise. Since July, 2008, professional partnerships need to be listed in the Commercial Registry. This requirement is not relevant to internally acting partnerships, e.g. where expenditures are pooled together.

Partnership liability

Authorized partners can sign contracts binding the whole partnership. Each of the partners may be held equally responsible. Generally, if a partner acts beyond his authority, the remaining partners are not liable for his actions. Only the responsible partner is held liable. Professional partnerships do not have a capital that is separate from the partners’ personal assets. Creditors with claims towards the partnership may seek recovery of a proportionate part from each partner; such creditors are not ranked above ones with claims on the personal assets of any partner. Married professional partners are in the same position as general partners in VOFs or CVs. It is in their interest to conclude pre- or postnuptial agreements. Read more on Dutch bankruptcy law.

Social security and tax

Each partner is liable for income tax with respect to his/her share of the profit. If a partner is considered an entrepreneur by the Tax Service, then he/she can receive allowances for entrepreneurship, investment and retirement with deferred taxes. With respect to social security payments the rules for partners – entrepreneurs are the same as the ones for owners of sole proprietorships.

In case you would like to read on the Dutch general partnership click here.

Franchising is a contractual mechanism through which an entity (franchisor) issues a paid license for use of its business practices and systems and/or its commercial name to another entity (franchisee).

Dutch laws on franchise agreements

The Dutch legislation does not address franchise agreements specifically, so the general provisions of the law on contracts and competition applies. Franchising agreements are usually complex and are therefore concluded in writing. One should consider the following common principles when preparing a franchise agreement under the laws of the Netherlands:

1. Franchise contracts are not a subject to specific national regulations.

2. The general Dutch law on agreements stipulates the guiding principle of fairness and reasonableness (“billijkheid en redelijkheid” in Dutch).

3. The party from the Netherlands has to provide information about its business to the Trade Registry (also known as the Commercial Chamber of Commerce).

Obligations and rights of the franchisee / franchisor

The franchisor carries specific obligations of care under the agreement because of the peculiar nature of the franchising mechanism. These obligations include the provision of some assistance and advice to the franchisee. The Dutch legislation does not require mandatory disclosure of pre-contractual information. The principles of fairness and reasonableness, however, still apply. As a consequence, the parties are required to take all reasonable measures to prevent the other contracting party to conclude an agreement on the basis of misleading information.

Furthermore, the franchisor does not have to provide exploitation forecasts to the franchisee. Please, keep in mind, that once provided, any information is deemed truthful by the other party. Thus the provision of exploitation forecasts that are overly optimistic or not substantiated by a thorough research of the market may result in franchisor liability.

The law in the Netherlands does not include specific provisions with respect to franchise fees, royalties, clauses to prevent competition, advertising and reporting obligations, so the contracting parties have the freedom to determine the extent of the franchisee’s obligations.

Example case study: Franchise

Some very well known examples of famous franchise chains include big names, such as Starbucks, Mcdonalds, KFC, Subway and Hertz. The big names have been featured in many media, articles, movies and are famous succes stories.

However, how often do we hear about the smaller franchises? The ones that fail, or the ones that never really take off?

One such example is Taxexpertz. Which was a small franchise chain for tax preparation that started in 2014 in the United States. The cost for startup of one branch was around 50.000 USD. Taxpertz is not an active franchise anymore, and halted its operations.

To start a Taxexpertz is a fraction of the cost of opening a McDonalds, which is between 1.000.000 USD and 2.200.000 USD for the initial investment (2019).  As well as a franchise fee of 45.000 USD per year, and a service fee of 4% of the sales turnover.

What is the difference between these two concepts? Why did McDonalds conquer the globe? Despite much higher investments?

Learning curve
The learning curve of managing a McDonald is arguably much lower than that of a Taxexpert. The relevant tax legislation in each state, country and year has to be known by the franchisees.

Quality management
Because of the specific knowledge required for each Taxexpertz branch, the managements task to create some uniform quality level, and build an expert name is much more difficult.

In the accounting and tax branch, we have seen that all multinationals in the big 4 are partnerships, not franchises.

Perhaps this indicates that it is much easier to work with a central structure in expert branches.

Brand name

With Mcdonalds, you are investing currently in a well known concept, a brand name that every household in (at least) the Western World knows. You are guaranteed to have a steady amount of customers. You profit from the collective marketing budget of McDonalds.

Succes rate
You can reliably predict beforehand how the franchise will perform. The franchise organisation will have market research statistics, branding, supply contracts and branding in place. Your succes with opening a Mcdonalds is nearly guaranteed before you even install the first grill.

Keep in mind before starting a franchise, what does the franchise bring to the table. And does it provide enough value for your business to succeed.

Agreement termination under the Dutch law

The contracting parties are free to determine the grounds on which agreement termination is allowed. If they have not drafted any rules for termination, fixed-term agreements cannot be cancelled unless unforeseen circumstances arise. Agreements concluded for indefinite periods can, in principle, be terminated with reasonable advanced notice. The period considered reasonable for advanced notification may vary depending on the particular circumstances.

Annulment is another way to terminate a contract. Art. 6:265 in the National Civil Code states that default by one of the parties gives the other the option to cancel the agreement if the nature of the default justifies annulment. Art. 6:228 of the same Code also gives the option to declare the contract void on the grounds of an error (“dwaling” in Dutch).

It should be noted that even when an agreement is legally terminated some losses may be considered outside of the margins of the franchisee’s acceptable business risk and may require compensation.

In case you have questions regarding franchise agreements under the law of the Netherlands, please, feel free to contact our Dutch law firm. We can assist you with company incorporation, tax preparation and drafting your franchise agreements.

You can also check our article on use and protection of intellectual property in the Netherlands. In the article, you will find information on patents, trademarks, trade names and copyrights in the Netherlands.

The Venootschap Onder Firma (VOF) or General Partnership is a company established by a minimum of 2 members through an agreement registered with the Commercial Chamber (Trade Registry). This entity is commonly translated as “company with partners”. The General Partnership should not be confused with the Professional Partnership which represents cooperations of professionals where the main goal is not the joint performance of business activities.

Main features of the Dutch VOF (General Partnership)

Each of the partners must make a contribution to the common business, e.g. goods, money, labour or knowledge. In contrast to other entities in the country, the VOF is not required to have a minimum capital to operate.

Another important feature of the Dutch General Partnership is connected with the liability of its members. Each involved partner is liable for the company’s debts even when they are created by another partner in the VOF. For this reason, the partnership contract needs to be drafted and concluded in the presence of a notary.

As regards taxes, the contract needs to be submitted to the Commercial Chamber. Each of the partners has to pay income tax with respect to their profit share much like an independent entity. Therefore each partner has separate tax deductions and allowances.

The VOF agreement must state the authority, contributions, shares and resignation arrangements with respect to the profits. It also needs to include a formula for profit allocation. Such contracts can be drafted by a notary or the members of the partnership with the help of a model agreement.

Dutch VOF: Company Liability

The partners in a VOF carry joint and several liability with respect to the debts of the company. If the partnership’s assets are insufficient to cover the debts, creditors have the right to claim its members’ personal assets.

If the partners are spouses with no marriage settlement, creditors have the right to claim the assets of both spouses. If a settlement exists, only the assets of the spouse in debt are considered to fall in the scope of the business. In a business partnership between a husband and wife, both spouses can claim allowances if they undertake to perform equal shares of the tasks.

If you would like to receive further details regarding the Dutch General Partnership, please, contact our local company advisors.

Dutch VOF: Records and accounts

With respect to records and accounts, the Dutch law states that all persons involved in business or exercising independent professions are obliged to keep financial records and accounts and to store documents, books and other information carriers connected to those records and accounts. In a VOF, each partner has to prepare a yearly balance table and a statement of income.

Read here if you would like to explore other company types, such as the sole proprietorship and the private limited company in the Netherlands.

When registering a Dutch company investors have the option to set up either a branch or a subsidiary.

The particular circumstances regarding the interests of the international firm may definitely determine the final choice of legal entity. However certain aspects have to be considered when choosing between a Dutch subsidiary and a Dutch branch.

The general characteristics of Dutch subsidiaries and branches are listed below.

Dutch branches

Branches are permanent establishments forming single entities with the international companies that register them.

This option brings advantages and drawbacks.

Advantages of opening a branch:

• it is fairly easy to incorporate and the involved costs are generally lower;
• remitted earnings are not subject to withholding tax;
• no requirement for publication of the branch’s financial statements (there are exceptions);
• losses of the branch in the Netherlands can be compensated by profits/taxes of the main office;
• no tax for capital registration.

Disadvantages of opening a branch:

• the branch does not have a Dutch identity and functions as an international company;
• the establishing company carries full liability with respect to the obligations and debts of its branch in the Netherlands;
• it may be more difficult to gain the acceptance of the locals due to the branch’s international identity;
• permanent branch establishment may lead to double taxation problems

Read more on Dutch branches.

Dutch subsidiaries

The most important advantage of opening a subsidiary in the Netherlands is that the liability of the shareholder(s) is limited. However other aspects should also be considered. Below is a list of some pros and cons with respect to establishing a subsidiary:

Advantages:

• the liability of the shareholders is limited to their actual contributions to the capital;
• the mother company does not carry liability for its subsidiary in the Netherlands unless specified otherwise;
• the amortization of any intangible asset can be allocated for tax purposes in the Netherlands;
• nationals are likely to prefer conducting business with subsidiaries rather than branches;

Disadvantages:

• more costly and complicated procedure for establishment;
• remitted earnings are subject to withholding tax;
• large and medium companies are required to publish financial results;
• the law requires the company to appoint a director.

Read more on Dutch subsidiaries.

International entrepreneurs are advised to consider the main pros and cons listed above before deciding whether to open a Dutch branch or subsidiary. In case you require further information or support to decide which option is best for you, please, get in touch with our incorporation agents in the Netherlands. If you would like to explore other company types in the Netherlands, please visit our designated article on the Dutch company types.