From eenmanszaak to BV, conflicting opinions. Looking for some experience here.

[Edward222]

I have been an eenmanszaak (sole proprietorship) for some time, and things are going well. Now, I have the opportunity to expand and take on larger clients. Due to the nature of my business, liability and insurance considerations are complex. In addition, I will need to hire staff, which makes transitioning to a BV (private limited company) much more appealing from a risk perspective (and also from a tax perspective, though that's less critical).

 

The challenge I'm facing is conflicting advice regarding the Director/Major Shareholder (DGA) salary. This year, the minimum salary is €56K (or possibly higher, depending on factors like business area and employee salaries), and there may be changes soon. My current accountant/tax advisor believes it's extremely difficult, if not impossible, to obtain a waiver for this requirement. However, others I’ve consulted believe it's feasible with the right requests.

 

I have also found some evidence online regarding the feasibility of this. 

 

This presents a significant barrier to scaling up from a one-person operation to a larger business. I need to focus fully on growth and reinvestment, rather than paying myself a large salary.

 

Edit: I am not planning some tax optimization or anything, I just need to be ready for a 1st lean year where I scale the business focusing in expenses and employees, not my salary. If there is enough profit, I am ok with any salary.

 

I discussed with KVK, they told me that if I turn my zzp into BV, won't work as it is existing business, but if I create a "new" BV, there are better chances. 

 

I discussed with Belastingdienst and they told me they cannot give me advice on this, and I should consult with my accountant/tax advisor (but they shared legislation and info that is not clear).

 

Has anyone had first-hand experience with this?

 

What can I expect if the 1st year comes, business is moving and active according to the business plan but there is no 100k for my salary?

 

(Thanks for the English, my Dutch is not yet up to speed)

[StevenK]

If can't pay the minimal salary, then you'd better consider that starting a BV from a risk avoiding perspective won't work: if the BV is not able to pay a minimal director's salary, that you, as a director, could be liable for the fact that the BV is not able to pay the creditors if things go wrong. 

 

This is because of the fact that as a director, your first and foremost responsibility is towards the continuity of the BV. 

[Edward222]

4 minutes ago, StevenK said:

If can't pay the minimal salary, then you'd better consider that starting a BV from a risk avoiding perspective won't work: if the BV is not able to pay a minimal director's salary, that you, as a director, could be liable for the fact that the BV is not able to pay the creditors if things go wrong. 

 

This is because of the fact that as a director, your first and foremost responsibility is towards the continuity of the BV. 

 

I disagree. I have founded 3 companies in my life, in Europe and Asia, and in all cases the first 1-2 years were very lean and I took minimal salary while building and scaling, reinvesting etc. In tech startups, this is an absolute must, I dont see how to start a company in NL under this restrictions. There must be a way. 

[StevenK]

1 uur geleden, Edward222 zei:

 

I disagree. I have founded 3 companies in my life, in Europe and Asia, and in all cases the first 1-2 years were very lean and I took minimal salary while building and scaling, reinvesting etc. In tech startups, this is an absolute must, I dont see how to start a company in NL under this restrictions. There must be a way. 

If you know better than someone having studied Dutch law, why bother asking?

 

One of the basics of a BV is that it should be financially sound. In the past we had the obligation of a minimal capital, now those basics imply that you might run into director's liability if the basis for the BV is not sound. And not being able or willing to pay the taxes due for the minimal director's salary (there's no obligation to actually pay the salary, but there is the obligation to pay the taxes due for that salary)  is a good indication that the directors are not running a financially stable business. 

[Hans van den Bergh]

17 minuten geleden, StevenK zei:

If you know better than someone having studied Dutch law, why bother asking?

+1👍🏻

[Edward222]

Law and business operations are different things. Could be law compliant and business regressive, like in this case. 

[Ward van der Put]

4 uur geleden, Edward222 zei:

This presents a significant barrier to scaling up from a one-person operation to a larger business. I need to focus fully on growth and reinvestment, rather than paying myself a large salary.

 

You simply cannot scale if you can't even provide for a team of one.

 

That's one of the reasons why this Dutch law exists: it prevents the abuse of free labour by co-workers who own a share in something that's actually not worth sharing.

[Joost Rietveld]

Still these principles are very simple;

- mandatory DGA-salary, based on market comparison, first. 

- re-investing profit in to growth, second.

 

If you need more capital to expand, then taking a pay cut isn't what a normal director (not a shareholder) would be willing to do. So why should the tax authorities be lenient about this? 

 

The two options: 

- hold a part of your net wages in the BV (do note that this becomes a debt from the BV to you);

- find capital elsewhere;

 

Just out of curiosity: what profit and expected DGA salary are we talking about?

 

[Edward222]

Let me share some situations that this law blocks. 

 

Case 1. Tech startup, 3 co founders, in NL = DGAs, in USA, Asia or the rest of Europe we shall run for 1 to 3 years paying ourselves minimum $, and using the existing cash for developers, sales and infrastructure, it is common that the first engineers take 100k home, and the founders 20k, 30k, 40k or even less if they can afford it. Even if they are funded by an angel or seed or pre seed, the money is used to scale under this conditions. Large salaries for founders is possible, but optional. 

 

Case 2. Service consulting, scaling from 1-man operation to first employee in staffing mode, requested per one client. This implies hiring, more risk, and incorporating. In the Dutch situation, this jump would require this employee #1 revenue to provide to the company with enough cashflow to cover his salary PLUS the now required DGA. The deal would secure the employee, but not the employee + DGA. IMO this is unnecessary interventionism.  

 

I understand where this is coming from, but I think is an over-interventionist approach. Can be done better -as almost everywhere else, while protecting the employee.

 

 

 

 

[Edward222]

1 hour ago, Joost Rietveld said:

So why should the tax authorities be lenient about this? 

 

Why not? 

 

In UK can be 0, unless you have a contract with your company and could be minimum wage. In Spain could be 0. In Belgium, same. Hong Kong, same. Argentina, 0. 

 

This does not mean there is 0 tax, or that the employees are not protected. 

 

10 september 2024 aangepast door Edward222

[Joost Rietveld]

That might be and I agree with you to some extent, but posting about it on this forum won't help, sadly.