Recording partnership relationships: what is a partnership agreement?

A General Partnership (VOF) is a form of collaboration between 2 or more entrepreneurs — not a separate legal entity, with joint and several liability for debts. The VOF agreement governs arrangements regarding capital contributions, profit distribution, powers, withdrawal, and conversion into a Private Limited Company (BV). While there is no statutory formal requirement, a written deed is highly recommended. For SME startups with partners: often a transitional form to a BV. Below are characteristics, pitfalls, and points of attention.

The short answer

• What: VOF = general partnership without legal personality, 2 or more entrepreneurs together.
• Liability: joint and several — each partner for debts of the general partnership.
• General Partnership Agreement: regulates agreements between partners.
• Taxation: fiscally transparent — profit taxed at the partners' personal level.
• Conversion: often to a BV structure after 3-5 years.

Characteristics of a General Partnership

• Not a separate legal entity.
• Joint and several liability of all partners.
• Tax transparent: profit taxed directly at the partners level (Box 1 or Corporate Income Tax for BV partners).
• Chamber of Commerce registration required.
• Free in design (no articles of association like a BV).
• Easy to set up and dissolve.

General Partnership Agreement — what is in it?

1. Parties: all partners with identification.
2. Purpose of the General Partnership: sector, activities.
3. Name and registered office: VOF name and office address.
4. Contribution: money, goods, and labor of each partner.
5. Profit distribution: percentages or formula.
6. Loss sharing: how losses are distributed.
7. Authorities: who is allowed to sign what on behalf of the general partnership.
8. Management: daily decision-making.
9. Meetings: frequency, quorum.
10. Withdrawal: how a partner can leave, share valuation.
11. Admission of new partner: conditions.
12. In the event of death: The General Partnership terminates automatically unless otherwise agreed.
13. Termination of General Partnership: grounds and procedure.
14. Restriction of competition:during and after the general partnership.
15. Dispute resolution:mediation, arbitration, court.

Joint and several liability — risk

Each partner is jointly and severally liable for the debts of the general partnership. In practice:

• Creditors may hold each partner liable for the total debt.
• Private assets affected by non-payment of general partnership.
• Other partners may reimburse the partner held liable later (pro rata).

For high-risk activity: BV structure safer.

Profit distribution

Freely selectable. Default equal distribution, often specified:

• Fixed salary for partners: per month.
• Remaining profit pro rata: according to contribution or agreed ratio.
• Bonus structure: for goals.

For tax optimization: not only splitting profits — possibly compensation for labor, loan, or capital.

Tax aspects

A general partnership is fiscally transparent:

• Partner who is a natural person: profit taxed in Box 1 (Income Tax), with self-employment deduction possible.
• Partner BV: profit taxed under corporate income tax at the BV level.
• No separate corporate income tax on a general partnership.
• VAT: The General Partnership has its own VAT number.

When to convert to a BV?

Many general partnerships are later converted into private limited companies:

• Profit > €100,000 — Corporate tax rate more favorable than income tax progression.
• Attracting an external investor.
• Limit personal liability.
• Set up a holding structure.
• Preparing to sell the company.

Conversion: taxable or tax-free (tax-related). See VOF to BV.

Withdrawal of partner

Upon departure of partner:

• Partnership agreement regulates share valuation.
• Other partners buy out (or a new partner joins).
• In the event of death: The general partnership terminates unless otherwise agreed.
• Debts incurred during the general partnership remain liable (even after withdrawal).

Honest recommendation

A general partnership (VOF) offers a low barrier to entry — simple to set up, no notary required. However: joint and several liability and tax limitations make it less suitable for growth. For SME startups with partners: a temporary form (1-3 years), followed by conversion to a private limited company (BV). Invest in a sound general partnership agreement (€1,000-€3,000 from a legal expert) — this prevents conflict during growth or departure. For high-risk activities: a BV immediately.

For other topics: VOF to BV, what is a BV and cooperation agreement ..

Frequently Asked Questions