ENTREPRENEURSHIP

Sole proprietorship to bv 2024: when to switch to a BV?

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But where is the tax tipping point for a conversion from sole proprietorship to BV in 2024 and what should you look out for?

Many entrepreneurs start their business in the Netherlands in the form of a sole proprietorship. Usually because it is easier and fiscally advantageous in the start-up phase. As your business grows, you expand and/or you generate more profit, it may be wise and advantageous to convert your sole proprietorship into a BV. The point at which it is fiscally advantageous to transform your business from Convert sole proprietorship or vof to a bv we call the taxation "turning point". But where exactly is this tipping point and what should all be considered?

Tax differences sole proprietorship and BV

There is a big difference in how a bv is taxed compared to a sole proprietorship. A sole proprietorship is taxed in Box 1 of income tax as "Profit from business," where a BV is taxed at the corporate income tax rate. The income tax rate is a lot higher than the corporate tax rate. However, as an entrepreneur for income tax purposes, you are entitled to several tax deductions, these deductions are the: self-employment deduction, start-up deduction and the small business profit exemption. These deductions ensure that the sole proprietorship and vof in the initial phase is often more fiscally advantageous than the bv.

Where is the fiscal turning point in 2024?

As mentioned earlier, from the so-called turning point it is fiscally more advantageous to establish a limited liability company in The Netherlands versus a sole proprietorship. This turning point can already be at a profit of €82,500 per year. This turning point depends on your personal situation, whether you are a starting entrepreneur and how much dividend you pay out. By reducing the deductions for sole proprietorships, the tipping point has become a lot lower in recent years, making it increasingly fiscally attractive to convert the sole proprietorship to BV. In the coming years, too, the deductions for self-employed entrepreneurs will continue to be reduced, making the tipping point lower and lower.

Converting sole proprietorship to LLC

If you think converting your sole proprietorship into a Dutch limited liability company (BV) is advantageous for your situation, or if you would like more information about whether converting your sole proprietorship into your limited liability company is a smart choice, please take contact with us. We will guide you through the entire process from the moment with whether it is advantageous until the limited liability company is established and if necessary further with the administration and tax returns.

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