When you set up a private company, you should choose a specific legal form. The choice of legal form is important because there are major differences, both in terms of taxes as well as liabiliies. The simplest and the most common business form is the sole proprietorship. The simplicity in terms of incorporation and running and the tax benefits are the main advantages of working through a sole trader in the Netherlands. You should also take in account that you are liable as an entrepreneur with your personal assets for the company's debts.
What is a sole trader in the Netherlands
A sole trader is a legal form in which only one person has the full and direct responsibility for the company. The sole proprietorship shall not be confused to a legal arrangement in which an abstract entity or organization can act as a natural person for the protection of rights and duties. Instead, a sole trader defines an economic activity of a natural person who drives the company. The assets and liabilities of the company are often kept separate from those of the private owner. However, the owner is liable with all his assets for the company's debts.
The registration procedure
An important advantage of working through a sole trader in the Netherlands consists in the simple registration procedure.
The only thing you need to do when setting up a sole proprietorship is to register the company in the Commercial Register of the Chamber of Commerce. You can choose from different trade names and business activities. Moreover, there is no initial capital needed and the registration at the Chamber of Commerce is free since 2013.
To make it easier for you, here are the main steps for incorporation of a sole trader:
- Choose a company name and write a brief description of the activities of the company;
- Check the company name in the trade registry;
- Fill in a digital form for registration;
- Make an appointment at a Chamber of Commerce office in your region and make sure you have the proof of identity (ID card) when you go to to register your business.
- After answering a series of control questions, you are officially the owner of your business.
- You get home a copy of the key papers showing your Chamber of Commerce number and VAT number.
- You should also register for tax purpose: VAR.
Financial advantages of working through a sole trader
When choosing the legal form for running a business, you should also take in account another advantage of working through a sole trader in the Netherlands: tax benefit. As the owner of a sole proprietorship, you pay income tax, but there are deductions for self-employed to reduce the tax burden: the most important is the self-employed entrepreneurs or deduction, which can be up to EUR 10,000 per year.
Moreover, you don't have to spare the profit with nobody and you are the only entitled person to make decisions for your company.
Contact our Dutch accountants to find out more advantages of working through a sole trader in the Netherlands!
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