ENTREPRENEURSHIP

Holding bv: what is it and what are the benefits?

Why set up a holding company and how exactly does it work? Read more about it in this blog.

What is the difference between a holding bv and a regular bv (Dutch Limited Company)? This is a question we often get asked. In this article, we explain the differences and advantages of having a holding bv.

What is a holding company structure?

The holding bv is also called the parent company that holds the shares in a subsidiary or operating company, a normal bv. In the normal bv, the company is placed and the day-to-day operations take place.

The shares in the holding bv are held privately by the entrepreneur (director-major shareholder) and the holding bv in turn holds the shares in the operating company bv Shown below in a diagram.

At the bottom, the most risk is taken and therefore the companies with related risks are placed in. As higher up the pyramid, the entrepreneur wishes to keep the risk as low as possible. The holding bv houses important assets, builds up pensions and makes investments. The entrepreneur is usually employed by his own Holding B.V. and receives a salary for this (Box 1). Any profits the entrepreneur distributes as dividends (Box 2) or reserves in the holding bv.

The benefits of starting a holding bv

The first advantage mentioned above is a limitation of the entrepreneur's private liability. In case of bankruptcy, the operating company in which the company is placed fails and not the entrepreneur so that creditors cannot recover from private assets. Furthermore, there are numerous other benefits to name including:

Lower tax burden
Tax benefits (participation exemption)
Tax benefit on sale of shares
Multifarious function of holding bv including financier, investor, pension and/or management bv.

What do you need to start a holding structure?

A bv should be incorporated through a notary public. The deed of incorporation act as the bv's articles of association. If more parties participate (with their own holding bv) in the company (work bv), it is recommended that a shareholders' agreement be concluded. Also, a management agreement will be needed between the holding bv and operating company and an employment agreement between the holding bv and the entrepreneur. Finally, it is advisable to draw up a current account agreement between the various bv’s.

Advice on setting up a holding bv

For advice and guidance on setting up a holding structure or converting the sole proprietorship or VOF into a holding structure, please contact us. We will be happy to provide insight into the possibilities and draw up the agreements for you.