Change sole proprietorship to LLC
Are you considering switching from your Dutch sole proprietorship to a limited liability company (bv)? Find out how we can guide you through this important step, offering expert advice and personal support for a smooth transition.
- In 99% of the cases our advice leads to considerable tax benefits.
- Transparent about our costs and working method.
- Quickly and easily arranged. You provide the requested documents, we do the rest!
Why convert a sole proprietorship to a limited liability company?
There are several reasons for converting a sole proprietorship to a limited liability company (bv), depending on the entrepreneur's specific situation and business objectives. Some of the reasons why a person might choose to convert a sole proprietorship to a limited liability company are:
As the owner of a sole proprietorship, you are personally liable for all debts and liabilities of the company. By switching to a limited liability company (bv), liability is limited to the capital contributed, which means personal assets are better protected in case of bankruptcy or legal disputes.
In some cases, the tax rate for a LLC may be more beneficial than that for a sole proprietorship.
Having a limited liability company can have a more professional appearance than a sole proprietorship. For some entrepreneurs, this can help attract customers, partners and investors, as it gives the impression of an established and solid business.
If you plan to grow and attract investments, having a limited liability company may be more attractive. Investors are often more inclined to invest in a LLC because of the clearer structure and rules involved.
Transferring a limited liability company to a new owner or arranging the transfer to heirs can be easier than with a sole proprietorship, because of the clear shareholder structure and transfer options inherent in a limited liability company.
| Sole proprietorship (or general partnership) | Limited Liability Company (bv) in the Netherlands | |
| Founding | Registration in the CoC | Notarial deed of incorporation + registration in the CoC |
| Property | Personal | Shareholders |
Legal act | Owner (or partners) | Board/director |
| Liability | Risk private liability | Shielded private assets |
Tax | Mandatory | Payroll tax, sales tax, corporate income tax and dividend tax |
| Financial annual report | N/A | Mandatory |
| Participation in other companies | N/A | Yes, the LLC can hold shares in other companies |
The difference between a sole proprietorship and LLC
There are many differences between the various legal forms. The limited liability company is a legal form with legal personality, which means that directors are not liable with their private assets for any business debts. The limited liability company can therefore assume obligations completely independently. The sole proprietorship has no separate legal personality and therefore no separate assets.
A transfer of assets subject to tax
With a transfer of assets subject to tax, the company is sold to the limited liability company, as it were. The assets and liabilities of the sole proprietorship must be sold for a fair value. If the assets represent a capital gain above the book value, this can be taxed. For tax purposes, this results in the business being discontinued. The cessation profit is taxed in income tax.
If you convert your sole proprietorship to a LLC with a transfer of assets subjet to tax before March 31 this year, you will still retain the option to avail of the current year's tax scheme.
A transfer of assets subject to tax-free
In the silent variant of contribution to a limited liability company (bv), the bv takes over the book values of the sole proprietorship (or Vof) and the company is continued (without cessation). In contrast to the no-closing variant, no cessation profit arises and no tax payments are made. Hence the designation 'silent continuation' that is often used.
The silent contribution has advantages when the sole proprietorship has a lot of hidden reserves or goodwill which means there can be a lot of cessation profit when the assets and liabilities have to be transferred for a fair value but the book value is low. Goodwill is not something you get straight from the figures. Consider the value of the customer base or the good name of your business. We can help determine the tax value of your company's goodwill. This variant also has an important limitation that the shares of the limited company may not be sold in the first three years.
If you want to make use of the silent contribution, you must have sent the declaration of intent to the tax authorities before 1 October of the year in question. If you have done this on time, you have until 1 April of the following year to convert your company to LLC (bv).
Asset-liability transaction
Bij de activa-passiva transactie worden bij de omzetting een deel van de activa (zoals inventaris, voorraden, machines, debiteuren) en passiva (zoals eigen vermogen, crediteuren, schulden) overgenomen tegen de boekwaarde. Dit biedt voordelen zoals het selectief overdragen van bezittingen en minimaliseren van risico’s voor de koper. Nadelen zijn onder andere de noodzaak van toestemming voor contractovername en mogelijke resterende verplichtingen voor de verkoper. Een adviseur kan helpen bij de waardebepaling en het proces begeleiden.
Three ways of converting sole proprietorship to LLC
There are three variants for the tax contribution of a conversion, namely: the passive contribution, the silent contribution and the asset-liability transaction.
Consultancy fee conversion of sole proprietorship into a LLC
In 10 clear steps, we guide you through the process of converting a sole proprietorship into a limited liability company. We carry out the first 3 steps for a fixed amount starting from € 1,500 excl. 21% VAT, assuming a single-person company (sole proprietorship).
Frequently asked questions about conversion of sole proprietorship to LLC
Find here the answers to frequently asked questions by self-employed people about converting a sole proprietorship into a LLC.
This depends on the desired guidance. We carry out the first 3 steps (introductory meeting, stock-taking of the figures, analysis of the conversion test and advisory memo LLC) for a fixed amount starting from € 1,500 excl. 21% VAT, whereby we assume that it concerns a single company (sole proprietorship). If you would like us to supervise the entire conversion, please contact us for a quotation.
Because taxes change every year, the turning point also changes. In 2024, the turning point is around a profit of €80,000 a year. However, this depends on different circumstances and is not the same for every sole trader. Therefore, get proper advice on this.
This depends on several factors. Consider the expected profit, possible investments, nature of the activities, etc. Want to know what is most advantageous for you? Then get in touch with us.
This depends on several factors, including the entrepreneur's income, expected profit, the nature of the business' activities and the entrepreneur's personal situation and more.
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Convert sole proprietorship?
Let's get in touch.
Do you think you are ready to bring your company into a limited liability company and do not know where to start? Then contact us.
- (040) 3035112
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Stratumsedijk 6
5611 ND, Eindhoven (NL)
