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Written by Tim Carapiet-Petit, Lisette Oosterveen and Bart Dreef
Many founders start out as a sole proprietorship (eenmanszaak) or as general partnership (VOF). It’s fast and easy – no notary needed, and you can start operating as soon as you’re registered at the Dutch Chamber of Commerce (KvK). But as your business grows, the limits of a sole proprietorship or VOF become clear. No liability protection, no legal separation between you and your business, and no scalable structure for attracting investment. See [this link] for more information on the sole proprietorship or VOF. That’s when many entrepreneurs start considering converting their sole proprietorship into a private limited liability company (besloten vennootschap or BV).
What does “converting into a BV” mean?
Legally, there is no such thing as simply “converting” a sole proprietorship into a BV. What actually happens is that the assets and liabilities of the sole proprietorship or VOF are transferred into a newly incorporated legal entity – the BV.
Depending on how the transfer is structured, this can be done by means of:
- Sale of assets (activa-passiva transactie),
- Conversion without rollover (ruisende inbreng)
- Conversion with rollover treatment (geruisloze inbreng)
Sale and transfer of assets (activa-passiva transactie)
Under this method, the business sells and transfers its assets and liabilities to a BV, typically at fair market value. The sole proprietorship (i.e. the founder) or VOF is taxed on the difference between the book value and the fair market value (i.e. hidden reserves and goodwill are realised). This way of transfer is the easiest, as it involves no notarial deed and only an asset purchase and transfer agreement and some separate transfer requirements (which are required to be undertaken in the other scenario’s too, if any). It is however best used only in case value of the assets are limited, otherwise payment constructions like deferred payment of (convertible) loans may be required.
Conversion without rollover (ruisende inbreng)
This is a legal contribution of a business onto the shares of the newly incorporated BV without applying rollover relief (i.e. no tax facility). The assets are transferred at fair market value, and the resulting gain (e.g. from goodwill or revalued assets) is subject to immediate income tax. If the value of the contribution exceeds the nominal value of the shares, the surplus is treated as share premium (agio) and added to the company’s share premium reserve. This route is similar in outcome to a sale of assets, but structured as a contribution rather than a sale. In cases involving multiple shareholders contributing assets of unequal value, it is recommended to maintain ‘ring-fenced’ share premium reserves per shareholder to avoid unintended value transfers. Also in this case, it is best used only in case value of the assets are limited given the possible tax implications.
Conversion with rollover treatment (geruisloze inbreng)
This method is tax facilitated and this tax-neutral. The business is contributed onto the shares of the new BV at book value. Taxation on reserves and goodwill is deferred: the BV takes over the book values and continues the business without immediate tax consequences. Prior approval from the Dutch tax authorities is required. This rollover is particularly attractive for entrepreneurs seeking to incorporate their business while maintaining continuity, however it comes with certain restrictions, such as the takeover of assets at book value, retention of profit entitlement, timely completion within 15 months, and potential retroactive taxation if shares are sold and transferred within three (or in some cases 5) years.
Common pitfalls
First of all, one needs to understand that your assets and debts (and, those of a sole proprietorship and partly that of a VOF) are not owned by a BV, and vice versa. The assets and liabilities are strictly separated, which is the very purpose of a BV to shield oneself from company risks.
Furthermore, underestimating the role of legal formalities in this process creates problems; founders sometimes believe that because the business consists of “just them”, and they can easily declare as of tomorrow that the business belongs to the BV. In practice, you need a transfer instrument, and failing to legally transfer specific contracts, IP rights or licenses can lead to ownership issues, unenforceable agreements, or even personal liability.
Structuring your startup for the next phase
Switching from a sole proprietorship to a BV is often the first real legal structuring moment for a growing startup. It’s the point where you stop being personally and fully liable, and where your business becomes a separate legal entity that can attract capital and investors, enter contracts independently, and scale beyond the founder.
But doing it right means more than just going to a notary. It means thinking through what exactly is being transferred, how the structure will look going forward, and how the legal continuity of the business will be ensured.
We advise founders on the legal structuring of their conversion into a BV, including incorporation, transfer of assets, contract assignments, and planning looking ahead with knowledge of how startups and scaleup develop. If you’re considering this step, or if you’re unsure whether your current setup is still fit for growth, give us a call.
