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 liabilities. 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. There are also certain aspects that you should be aware of, such as the liability implied by a sole proprietorship. One of our Dutch accountants can be your guide in the formations of your business in the Netherlands.
Many freelancers in the Netherlands decide to invest in a sole trader, also called ZZP-er, which 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. The sole trader is suitable for persons who want to be self-employed, and who can manage to be the only owners of a business. This does not mean that they cannot employ other people.
In matters concerning the profit, the owner receives it in its entirety. Nevertheless, the assets and liabilities of the company are often kept separate from those of the private owner. You can rely on our Dutch accountants to give you more information on the legal status of a sole trader in Netherlands.
A sole trader is pretty easily manageable from the point of view of the accounting practice required from the owner. The only obligation of the proprietor is to give a clear picture of the financial situation of the business, since there are no particular balance sheets that need to be filled out. Moreover another advantage for which entrepreneurs prefer a sole trader is that it is a very flexible form in which a business can be organized.
An important advantage of working through a sole trader in the Netherlands consists in the simple registration procedure. The saving of money and time makes many investors to prefer a sole trader to other business legal structures.
The only thing needed 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.
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.
The initial costs are also minimal when starting a sole trader in the Netherlands. Moreover, you don't have to spare the profit with nobody and you are the only entitled person to make decisions for your company.
Another important aspect when opening a sole trader is to prepare a set of documents based on which you can enter in the national business evidence. These are minimal requirements such as identification documents (copy over your ID or passport), proof of the registration with the municipality, and a residence permit.
During your business activities the documents that you will need to elaborate for administrative purposes are also fewer and much simpler than those required from other sort of legal structures operating in the Netherlands.
Contact our Dutch accountants to find out more advantages of working through a sole trader in the Netherlands!