Setting up a BV offers benefits that go beyond just tax
Many entrepreneurs start with a sole proprietorship. This is simple, cheap and quickly arranged. Yet the question is growing among many entrepreneurs: should I switch to a BV? People often look at the fiscal tipping point, but there are more factors involved. In this article the reasons for a switch and possible pitfalls.
Why do entrepreneurs choose a BV?
A BV is a legal entity. This means that the BV concludes contracts, is liable and distributes profits. With a sole proprietorship, you do it all yourself. The difference is therefore big, and you will especially notice it when your company is growing or changing.
Below are the most common reasons for switching.
Less private liability
With a sole proprietorship you are fully liable privately. Debt from your business can also affect your private assets, including your home or savings. A BV largely shields that risk.
- If the BV goes bankrupt, you will in principle only lose your invested capital.
- Exceptions: in the event of mismanagement or personal guarantees, the director may still be liable.
Practical example
A self-employed person who works as a carpenter runs a greater risk of damage claims or non-payment as a sole proprietorship. In a BV, these risks are limited to the BV itself.
Selling your company
If you want to sell your company later, a BV is almost always the logical choice.
- You can sell shares instead of individual business units.
- That makes it easier and more attractive for buyers.
- The proceeds are paid out through the BV, which is often more tax-efficient.
Attracting financing
Banks and investors prefer to finance a private limited company than a sole proprietorship. A BV has a clearer structure and more options to provide security.
- You can issue shares or admit new shareholders.
- A BV radiates stability and continuity to financiers.
- A BV is therefore often necessary for growth plans.
Professional appearance
In some industries the legal form makes a big difference. Large clients often prefer to work with a BV rather than a sole proprietorship.
- It inspires confidence: a BV shows that you seriously invest in your company.
- It can open doors to larger contracts or long-term collaborations.
Customers ask this
Sometimes the pressure doesn’t come from the bank, but from your customers. Especially in large corporates or governments, you see that a BV is made a condition for cooperation.
The reason? These companies want to run less risk of liability. They also see a BV as a more stable party.
Building wealth
In a sole proprietorship, profits are immediately subject to income tax. With a BV, the profit is taxed with corporate tax. You can use the money that remains in the BV to build capital.
- Investing in new machines or personnel.
- Create reserves for future growth.
- Invest or invest through the BV.
- Borrow money to yourself as a DGA for a mortgage, for example.
This way you can use the BV as a building block for long-term plans, instead of all profits being immediately taxed privately.
Tax benefits
Although this is often the first argument entrepreneurs mention, it is not always the most important.
- With a profit of around € 100,000 per year, a BV can be more tax-efficient than a sole proprietorship.
- You pay corporate tax instead of income tax.
- In addition, there is the mandatory salary of the director-majority shareholder (DGA), on which wage tax is due.
Please note: The precise turning point varies per situation. Taxes are complex and depend on deductions, industry and private circumstances. Read more about the possible tax benefits in this article:
Pitfalls when switching to a BV
The advantages are clear, but there are also disadvantages or points of attention that are often forgotten.
Only look at profit
Many entrepreneurs switch as soon as their profits exceed a certain amount. That is too short-sighted. You must also take into account the liability, future plans and costs of the company.
For example, a one-off high profit is not a good reason to immediately convert your sole proprietorship to a BV. If you have a lower profit the following year (for example € 80,000), you will actually pay more tax with a BV than with a sole proprietorship.
Higher formation and administration costs
- Setting up a BV costs at least €400–600 at the notary.
- You spend more on administration every year because you have to file annual accounts. You also pay annual corporate tax returns.
Mandatory DGA salary
As the owner of a BV, you must pay yourself a normal salary. In 2025, this will be at least €56,000 per year, unless you can demonstrate that a lower salary is customary.
No more entrepreneurs’ deduction
With a sole proprietorship you are entitled to self-employed person’s deduction and SME profit exemption. These tax benefits expire in a BV.
More complex structure
With a sole proprietorship you decide for yourself and you can easily arrange the administration. With a BV you have to deal with shareholder meetings, formal decisions and more obligations. Moreover, you cannot ‘simply’ transfer more money from your business account to your private account as you are used to in your sole proprietorship.
Checklist: when is a BV interesting?
- You want you better protect private assets.
- You think about sale or transfer of your company.
- You search financing or investors.
- Customers or partners request one BV structure.
- You want build equity within the company.
- You structurally expect one higher profit.
Tips for a smooth transition
- Get advice by an accountant or tax specialist. Every situation is unique.
- Make a cost-benefit analysis: what does set-up and administration cost, and what does it yield?
- Look beyond tax benefits: also consider liability and growth plans.
- Plan the timing wisely: sometimes it is advantageous to switch as of January 1.
- Take the administration into account: prepare yourself for more obligations.
Want to know more about the conversion methods? Read it in this article: Converting a sole proprietorship to a BV: this is how you do it!
Slot
A BV offers many advantages: protection of private assets, better opportunities for financing, and a more professional image. But the switch also requires preparation and additional costs. Therefore, look beyond just the fiscal tipping point and make a well-considered choice that suits your company and your future plans.
Want to know more? Also read: The tipping point of sole proprietorship or BV in 2025.
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