Sole proprietorship, BV or holding: what fits your startup?

One of the first choices when starting a company: which legal form? For the average freelancer it's a tax calculation, but for a startup other things matter: investors, shares and liability. Here's how the legal forms differ and why most startups choose a BV (almost) right away.

The short answer

If you're building a company that wants to grow with investors, staff and shares, you almost always end up with a BV, often with a personal holding above it. If you're first testing an idea on your own, without major risk and without funding plans, a sole proprietorship (eenmanszaak) can be a fine and cheap starting point. Here's why.

What's the difference in liability?

With a sole proprietorship you ARE the business: there is no separation between your business and private assets, so you are personally liable for business debts. A BV is a separate legal entity: the business risk in principle sits with the company, not with you privately. Note that this protection isn't absolute. In cases of mismanagement you can still be liable as a director, and banks sometimes ask young companies to co-sign privately.

What's the difference in taxes?

With a sole proprietorship you pay income tax on the profit, and as an entrepreneur you're entitled to deductions such as the self-employed deduction and the SME profit exemption. One caveat: the self-employed deduction has been scaled down step by step for years, so this advantage keeps shrinking.

With a BV, the company pays corporate income tax on the profit, and you pay tax on what you take out: salary and possibly dividend. Important to know: as a director-major shareholder (DGA) you are required to pay yourself a salary that fits your work, with a legal minimum that is set annually. That's called the customary salary rule. So you can't simply 'take out nothing' to save tax.

Which form works out better fiscally depends on your profit and situation; there is no single tipping point. For startups, the tax comparison is rarely decisive anyway, and here's why.

Why startups almost always choose a BV

• Investors invest in shares. An investor wants shares in exchange for capital, and shares only exist in a BV (or NV). No BV, no round.
• Employee participation. Options or certificates for your team require a company with shares.
• Multiple founders. A BV arranges the relationships between founders properly through shares and a shareholders' agreement.
• Risk. A startup takes risk by definition; you don't want to carry that with your private assets.

Incorporation happens through a notary, and unlike in the past no large starting capital is required.

And the holding?

Many founders put a personal holding above the operating BV: shares and built-up value then sit in the holding, while the business risk stays in the operating company. That gives flexibility at a funding round or exit. It does mean two administrations.

Can you switch later?

Yes. Many entrepreneurs start as a sole proprietorship and convert to a BV once the business grows or funding approaches. Such a conversion can be guided fiscally, but it is a project: count on a notary, new registrations and transferring contracts. If you already know you're taking the startup route, with investors and staff, starting with a BV right away saves you that exercise.

In short

• Sole proprietorship: simple and cheap, but personally liable and no shares.
• BV: separate legal entity, corporate tax plus a mandatory DGA salary, and the only route to investors and participation.
• The tax comparison is rarely decisive for startups; the shares and the risk are.
• A holding on top gives flexibility, but means two administrations.
• Converting later is possible, but starting right saves hassle.