Starting a Sole Proprietorship? These Are the First Steps to Organize Your Administration

Are you planning to start a sole proprietorship? Setting up proper administration is a crucial step in building a successful business. As a self-employed entrepreneur, you are legally required to keep your financial records in order. In this article, we’ll guide you through the process, from registering with the Chamber of Commerce (KvK) to choosing the right accounting tools.

eenmanszaak starten

1. Register with the Chamber of Commerce (KvK)

Starting a business begins with registering at the KvK. Before you register, it’s essential to decide whether a sole proprietorship or a private limited company (PLC) is the best fit for your situation. If you expect significant growth in a short period and want to limit personal liability, a PLC might be the right choice for you. While you can always change your legal structure later through a conversion, it’s helpful to consider this in advance. During registration, the KvK representative will also assign an SBI code that describes your business activities. The KvK will pass your details to the Tax Authorities, who will send you a VAT ID and VAT registration number within two weeks.

2. Set Up Proper Administration

As an entrepreneur, you are legally required to keep your financial records for seven years. A well-organized administration provides insight into the financial health of your business and simplifies tax filing. You can choose to handle your accounting yourself or outsource it. 

Key components of your administration include:

  • Invoices: Ensure your invoices meet the requirements of the Tax Authorities.
  • Receipts and expenses: Keep records of all business-related receipts and expenses.
  • Bank transactions: Use a separate business bank account for clear financial tracking.
  • Contracts and agreements: Store agreements with clients and suppliers.
  • Mileage records: Track business mileage for tax deductions. This is only necessary if you use your personal car for business purposes. Unsure whether it’s better to register your car as a business asset or keep it private? Check out our article on this topic.

Maintaining proper administration is vital. Incomplete records can lead to issues such as a reversal of the burden of proof, allowing the Tax Authorities to estimate your income and profits, potentially resulting in higher taxes. Without proper administration, you may also miss out on benefits like the Small Business Scheme or investment deductions. Read more about how long you should retain your financial records.

3. Manage Your Taxes

As a sole proprietor, you will deal with VAT (sales tax) and income tax. It’s crucial to set aside funds regularly to cover your tax obligations. If your annual revenue stays below €20,000, you might qualify for the Small Business Scheme, which can reduce your administrative burden.

4. Choose the Right Tools

Good administration starts with the right tools. Consider using online accounting software to create invoices, track income and expenses, and file VAT returns easily. Many programs also offer integrations with your bank account. Ensure you store digital files and software as required by the Tax Authorities.

5. Minimize Your Risks

Protect yourself from unexpected costs and liabilities. Draft general terms and conditions and take out essential insurance policies, such as:

  • Liability insurance
  • Disability insurance
  • Business interruption insurance

6. Keep Track of Retention Periods

Administrative records, such as general ledgers, inventory records, and payroll records, must be kept for at least seven years. For real estate documents and certain international transactions, the retention period is ten years. Ensure your records remain organized and accessible so the Tax Authorities can review them within a reasonable timeframe.

7. Maintain an Overview with a Business Plan

A business plan isn’t mandatory but can help you clarify your financial goals and strategies. It serves as a roadmap for setting up your administration and determining your rates. It also provides a clear picture of your expected income and expenses.

Starting a sole proprietorship requires a solid foundation, especially when it comes to administration. By registering with the KvK, organizing your bookkeeping, and managing your taxes, you lay the groundwork for a successful business. Minimize risks, use tools to streamline your work, and stay mindful of retention periods.

Ready to get started? Contact us for advice on your administration and take the first step toward building a successful business!

More blog posts