If you’re starting or growing a business in the Netherlands, one of the first and most consequential decisions you’ll face is choosing between a sole proprietorship (eenmanszaak) and a private limited company (besloten vennootschap, or BV). The structure you choose shapes taxation, access to entrepreneurial deductions, and mandatory director salary rules.

Below, we’ll describe how a sole proprietorship and a BV work in the Netherlands, the main structural and tax differences, and how to evaluate the tax break-even point for your business.

What’s in this article?

• What is a sole proprietorship?
  
• What is a BV?
  
• What’s the difference between a sole proprietorship and a BV in the Netherlands?
  
• When does a BV or sole proprietorship make sense?
  
• What is the tax break-even point between a BV and a sole proprietorship?
  
• How Stripe Atlas can help
  

What is a sole proprietorship?

A sole proprietorship is the most straightforward way to run a business in the Netherlands. That structure is designed for speed, low costs, and full personal control.

Here are the defining features of this business structure:

• No separate legal entity: Legally, there’s no distinction between you and the business. All contracts, rights, and obligations attach to you as an individual.

• Fast, inexpensive setup: You can register with the Netherlands Chamber of Commerce (KVK) for about €85. There’s no notarial deed, no share capital, and no formal incorporation process.

• Complete control: You’re the sole owner and decision-maker. There are no shareholders and no boards.

• Unlimited personal liability: Because the business isn’t separate from you, you’re personally liable for all debts and claims. If the business fails, creditors can pursue your private assets, including savings and your home.

• Personal income tax with deductions: All profits are taxed as personal income in box 1 at progressive rates. In return, you might qualify for entrepreneurial tax benefits such as the private business ownership allowance (zelfstandigenaftrek), tax relief for new companies (startersaftrek), and the small and medium-sized enterprise (SME) profit exemption (MKB-winstvrijstelling). These can reduce taxes in the early years.

• Light administrative obligations: You must keep proper records and file value-added tax (VAT) returns if applicable, but there are no corporate tax filings and no published annual accounts.

What is a BV?

A BV is a fully separate legal entity and the Dutch equivalent of a private limited company. It introduces more structure, higher costs, and stronger liability protection but far more flexibility as a business grows.

Here’s what defines a BV:

• Independent legal entity: A BV exists separately from its shareholders. It can own assets, enter into contracts, and incur liabilities in its name.

• Limited liability: In normal circumstances, shareholders aren’t personally liable for the business’s debts. Your risk is typically limited to what you invest in the BV, except for cases of fraud, improper management, or personal guarantees.

• Share-based ownership: Ownership is divided into shares. You can be the sole shareholder or bring in cofounders, investors, or employees. That makes a BV well suited for growth and raising capital.

• Formation process: A BV must be set up via a notarial deed and registered with the KVK. Though the minimum share capital is symbolic (as low as €0.01), notary fees and ongoing accounting costs make this structure more expensive than a sole proprietorship.

• Director structure and salary rules: The BV is managed by one or more directors. If you’re the director and majority shareholder, you must pay yourself a customary salary aligned with market norms. As of 2026, this benchmark is €58,000.

• Corporate taxation and profit planning: The BV pays corporate income tax (a low rate of 19% or a high rate of 25.8%). Salary is taxed as personal income, and dividends are subject to a separate dividend tax. Profits can also be retained in the BV, which defers tax.

• Compliance: A BV must keep formal financial records for at least 7 years, file corporate income tax returns, and publish annual financial statements using the Standard Business Reporting (SBR) system.

What’s the difference between a sole proprietorship and a BV in the Netherlands?

A BV and a sole proprietorship can run the same type of business. The difference is how risk, tax, and ownership are handled.

Here’s how they differ:

• Legal identity: A sole proprietorship and its owner are legally the same. A BV stands apart as its own legal entity.

• Liability: Sole proprietors have unlimited personal liability. A BV typically limits liability to the business’s assets.

• Taxation: A sole proprietorship is taxed through personal income tax with access to entrepreneurial deductions. A BV pays corporate tax, while the owner pays personal tax on salary and dividends.

• Profit access: In a sole proprietorship, all profits are the owner’s immediately and taxed accordingly. In a BV, profits can be split among salary, dividends, and retained earnings.

• Costs and complexity: A sole proprietorship has a minimal up-front cost and is easy to run. A BV has higher setup costs and ongoing compliance obligations, and it must file corporate tax returns and publish annual financial statements using the SBR digital filing system.

• Ownership flexibility: A sole proprietorship has one owner and no share structure. A BV can have multiple owners and investors.

When does a BV or sole proprietorship make sense?

A sole proprietorship is often the right choice in the early stages of a business because it is simpler and more efficient.

Here’s why you might set up a sole proprietorship:

• You’re starting small: It will help you keep costs low and make arrangements as straightforward as possible.

• Your profit is modest or uncertain: The tax burden is lower than that of a BV, especially with the entrepreneurial deductions.

• Your business risk is limited: If you’re not taking on substantial debt, signing high-liability contracts, or operating in a legally exposed industry, personal liability is typically manageable.

• You want minimal administration: Compared with a BV, a sole proprietorship has a lighter compliance requirement. You keep records and file VAT, but you don’t need to publish annual financial statements or file corporate income tax returns.

• You don’t need investors or partners: Equity structuring isn’t a priority.

A BV becomes more compelling when your business outgrows the simplicity of a sole proprietorship. The shift usually occurs when risk, profit, or long-term strategy demands more structure.

Here’s why you might operate as a BV:

• Your financial risk is growing: If you’re entering large contracts, taking on debt, hiring employees, or operating in a higher-liability sector, you’ll want to limit personal exposure. A BV shields your personal assets and contains liability at the business level, except in cases such as improper management and personal guarantees.

• Your profits are increasing: If your taxable income is rising and personal income tax rates are approaching the top bracket, the BV’s corporate income tax rates can become more efficient.

• You plan to bring in investors or partners: A BV can issue shares and allocate equity, which makes it structurally suited for cofounders, external capital, or employee equity participation.

• You’re building for scale or long-term planning: A BV enables more advanced structures such as a holding company for asset protection or exit planning.

• You need credibility in certain markets: Larger clients, financial institutions, and international partners often expect to contract with a distinct legal entity.

What is the tax break-even point between a BV and a sole proprietorship?

The tax break-even point is when a BV becomes more tax-efficient than a sole proprietorship. There’s no defined number, but several factors drive the calculation.

Here are the main factors that determine when you’re likely to reach it:

• Income tax pressure: In a sole proprietorship, profits are taxed at progressive rates up to 49.5%. As profits grow, entrepreneurial deductions become less impactful.

• Corporate tax mechanics: A BV benefits from lower corporate income tax, but there’s also a personal tax on salary and dividends.

• Mandatory director salary: If you’re the shareholder and director, you’re typically required to pay yourself a customary salary. This is taxed under personal income tax.

• Profit retention strategy: If you plan to retain profits inside the business, a BV can save on taxes because corporate tax rates are lower than the top personal income tax rates.

The best structure won’t be the same for everyone. It depends on your risk profile, growth plans, and how you use your profits.

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