Many entrepreneurs start out as a sole proprietorship or general partnership due to the simplicity and flexibility, but as your business grows, it can become more complex. Choosing to switch to a PLC can be driven by several considerations:
At Brand Boekhouders, we understand the challenges and opportunities that come with this change. Our expertise ensures a smooth conversion, handling every detail for you. This way, you’re fully supported and can focus on growing your business.
If you would like to convert your sole proprietorship or general partnership into a PLC, there are three ways to do it, each with its own characteristics and implications:
In this method, you transfer (sell) the assets and liabilities of your sole proprietorship to the new BV. It’s a quick and straightforward process but can lead to immediate taxation on any hidden reserves and goodwill.
Ruisende inbreng is a Dutch-specific method for converting a sole proprietorship into a private limited company (PLC). In this taxable transfer, you formally discontinue your sole proprietorship and contribute it to the PLC at fair market value. This can be done with retroactive effect of up to 9 months, only if you submit a declaration of intent to the Dutch Tax Authority within three months.
The value of your business is determined based on a balance sheet and profit and loss account. You’ll pay tax on the added value of assets such as hidden reserves and goodwill, similar to an asset transfer.
Certain Dutch tax benefits, such as the entrepreneur’s retirement allowance (stakingsaftrek), can help reduce the tax burden. It’s essential that all administrative and tax-related adjustments are properly executed to ensure a smooth conversion.
Each method for converting a general partnership or sole proprietorship into a PLC involves important considerations. Read more alongside this section about the key steps and what to keep in mind.
Prefer personal advice from an experienced specialist? We’re here to help. We are happy to be there for you.
If you want to carry out a tax-neutral conversion (geruisloze omzetting) and take advantage of the tax benefits, you must submit a declaration of intent to the Dutch Tax Authority by October 1st. This declaration indicates that you wish to apply the conversion retroactively to the start of the financial year.
When transferring assets to the PLC, a tax settlement takes place. The Dutch Tax Authority treats this as if you are selling the business, which can have tax consequences. That’s why it’s important to assess the fiscal impact in advance, so you’re not faced with unexpected costs later on.
You’ll need to engage a notary to establish the PLC. The notary will draw up a deed of incorporation, which sets out key details such as the contribution balance sheets, articles of association, and the allocation of share ownership. Additionally, contribution balance sheets are prepared to formally transfer the business to the BV.
Make sure your business is properly aligned with its new legal structure. This involves several important steps, such as setting up accurate payroll administration with an appropriate director’s salary (DGA-salary), drafting a current account agreement between you and your PLC, and preparing and filing a formal annual financial statement with the Chamber of Commerce (KvK).
It’s also crucial to prepare the corporate income tax return accurately. These are complex matters that often require specialized knowledge, but they can easily be handled by an accounting specialist.
In the case of a tax-neutral conversion (geruisloze omzetting), all steps, including the notarial deed and administrative adjustments, must be completed before March of the following year. From that moment, your sole proprietorship is officially a BV, and you can operate under the new structure.
For a taxable conversion (ruisende omzetting), these steps must be completed before you officially switch to a BV structure, allowing you to immediately benefit from the new setup.
Converting to a PLC involves complex matters, but at Brand Boekhouders, we make sure they don’t become obstacles. Our team:
With a personal and solution-oriented approach, we provide clarity so you can fully focus on what truly matters: growing your business.
Considering a conversion? Feel free to schedule a consultation with one of our experts. Together, we’ll determine the best structure for your situation and ensure the process is smooth and efficient.
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