Week 2: Legal forms
Legal personality
First thing to decide is whether to opt for a corporate legal form with or without legal personality.
With a legal personality it’s called a legal entity. This is an independent legal organ, this means
that like a natural person, it can take on obligations. The legal entity can enter into agreements;
employ people, lease a building etc. If someone buys something from a legal entity it has an
agreement with this legal entity and not with the manager of the company. If you buy from a
businessperson who doesn’t have a legal entity, the person himself, take on the obligations.
The company and the businessperson are considered to be one. A contract is concluded with
the people who make up the company. If the company doesn’t meet its obligations, the creditor
may draw on the personal assets of the businessperson.
All companies that participate in economic transactions are registered in the Business Register
of the Chamber of Commerce. Searches in the Business Register can be easily conducted
online.
One-man business, sole trader (Eenmanszaak )
A one-man business is a sole owner, a single responsible person. A one-man business has
no legal personality and is not a legal entity. This means that the businessperson himself is
responsible for all debts and takes all the risks. The operational liability is the responsibility of
the businessperson. The owner of the one-man business is fully and personally (including his
personal assets) liable. (The employees are employed by the owner of the one-man business).
Setting up
Advantage of the one-man business is in the requirements for establishment. It can be
established in little time with little effort. The only real requirement is registering the company
in the Business Register at the local Chamber of Commerce. There are certain restrictions
regarding the company name and specific permits may be required.
Taxes and social security
The owner of the one-man business pays income tax. If the Tax Authorities deem the owner
to be an entrpreneur, she might be entitled to the following allowances, namely: entrepreneur’s
allowance, investment allowance and tax-deferred allowance.
An owner of a one-man business is not eligible for social benefits under the Sickness and
Benefits Act, the Work and Income Act and the Unemployment Insurance Act. Therefore, she
needs to ensure that she is covered for these risks by taking the appropriate steps.
Partnerships
When a businessperson wants to start a company together with others, but does not want to
opt for a legal personality, another legal form is available: a partnership. The three forms are:
- General partnership (VOF)
- Limited partnership (CV)
- Professional partnership (maatschap)
General partnership (partnership under common firm, VOF)
In this cooperation you run a business with one or more business partners. You and your
partners are the associates or members of the general partnership. In this legal form each
parent contributes something to the business: capital, goods, efforts (work) and goodwill.
Legal personality
First thing to decide is whether to opt for a corporate legal form with or without legal personality.
With a legal personality it’s called a legal entity. This is an independent legal organ, this means
that like a natural person, it can take on obligations. The legal entity can enter into agreements;
employ people, lease a building etc. If someone buys something from a legal entity it has an
agreement with this legal entity and not with the manager of the company. If you buy from a
businessperson who doesn’t have a legal entity, the person himself, take on the obligations.
The company and the businessperson are considered to be one. A contract is concluded with
the people who make up the company. If the company doesn’t meet its obligations, the creditor
may draw on the personal assets of the businessperson.
All companies that participate in economic transactions are registered in the Business Register
of the Chamber of Commerce. Searches in the Business Register can be easily conducted
online.
One-man business, sole trader (Eenmanszaak )
A one-man business is a sole owner, a single responsible person. A one-man business has
no legal personality and is not a legal entity. This means that the businessperson himself is
responsible for all debts and takes all the risks. The operational liability is the responsibility of
the businessperson. The owner of the one-man business is fully and personally (including his
personal assets) liable. (The employees are employed by the owner of the one-man business).
Setting up
Advantage of the one-man business is in the requirements for establishment. It can be
established in little time with little effort. The only real requirement is registering the company
in the Business Register at the local Chamber of Commerce. There are certain restrictions
regarding the company name and specific permits may be required.
Taxes and social security
The owner of the one-man business pays income tax. If the Tax Authorities deem the owner
to be an entrpreneur, she might be entitled to the following allowances, namely: entrepreneur’s
allowance, investment allowance and tax-deferred allowance.
An owner of a one-man business is not eligible for social benefits under the Sickness and
Benefits Act, the Work and Income Act and the Unemployment Insurance Act. Therefore, she
needs to ensure that she is covered for these risks by taking the appropriate steps.
Partnerships
When a businessperson wants to start a company together with others, but does not want to
opt for a legal personality, another legal form is available: a partnership. The three forms are:
- General partnership (VOF)
- Limited partnership (CV)
- Professional partnership (maatschap)
General partnership (partnership under common firm, VOF)
In this cooperation you run a business with one or more business partners. You and your
partners are the associates or members of the general partnership. In this legal form each
parent contributes something to the business: capital, goods, efforts (work) and goodwill.
