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There are three ways to switch from a self-employed professional to a private limited company (BV): an asset-liability transaction, a taxable contribution, or a tax-free contribution. Such a transition can offer benefits, such as reduced personal liability, tax optimization, and a simpler transfer of your business. Which method suits you best depends on your situation and the tax implications. The three routes are explained below.
Why switch from self-employed to a private limited company?
As a self-employed professional or freelancer, you may at some point consider converting your business into a private limited company (BV). Possible benefits:
- limitation of your personal liability;
- tax optimization (depending on your profit and situation);
- easier transfer or sale of the company via shares.
TODO_VERIFY: whether a BV is more tax-efficient depends on current rates and regulations (such as the break-even point between income tax and corporate tax). Have this calculated by a tax specialist on a case-by-case basis.
1. Asset-liability transaction
In this process, you sell your self-employed business to the newly established BV. The BV acquires all assets (such as machinery, inventory, and accounts receivable), liabilities (such as loans and accounts payable), and intangible assets. You first establish a BV (the notary handles the Chamber of Commerce registration), arrange an asset and liability agreement , and the sale takes place. A notarial deed of contribution is not required. Please note that ceasing the sole proprietorship may result in cessation gains.
2. Noisy input
With a "noisy contribution," you transfer your sole proprietorship—including all assets and liabilities—into the BV with retroactive effect. This makes the business easier to sell. You draw up a letter of intent (preferably with your bookkeeper) and send it to the Tax and Customs Administration. Subsequently, you establish a BV, and the notary draws up a deed of contribution regarding the assets and liabilities. Here too, a cessation profit may arise because you are ceasing the sole proprietorship.
3. Silent entry
The silent contribution is the most complex method. Here too, you convert the sole proprietorship into a BV retroactively, but the difference is that you continue with the same book values. The advantage: you pay no tax on the capital gains of the sole proprietorship, because the opening balance of the BV is equal to the closing balance of the sole proprietorship. Here as well, you draw up a letter of intent for the Tax and Customs Administration together with your bookkeeper, after which the notary draws up a deed of contribution based on the description of the contribution and the balance sheet.
Which method suits you?
- Asset-liability transaction: relatively simple, but settlement may apply to cessation profit.
- Noisy contribution: convenient to sell, retroactively, possibly settling on the capital gain.
- Silent contribution: deferral of tax on capital gains due to the same book values, but more complex and subject to conditions.
Frequently Asked Questions
What is the difference between noisy and silent input?
With a noisy contribution, the capital gain (cessation profit) can be settled; with a silent contribution, you continue with the same book values and defer that tax. Silent is more complex and subject to conditions.
Do I need a notary to switch to a private limited company?
It is required for the incorporation of the BV. In the case of a taxable or tax-free contribution, the notary also draws up a deed of contribution; this is not necessary for an asset-liability transaction.
What is strike profit?
The profit arising upon the termination of your sole proprietorship, for example on hidden reserves and goodwill. Tax may be payable on this, unless you make a tax-neutral contribution.
Is a private limited company always more advantageous than a sole proprietorship?
Not necessarily. Whether a BV is advantageous depends on your profit, situation, and current tax regulations. Have this calculated in advance.
Need help switching to a BV?
We guide entrepreneurs in establishing a private limited company (BV) and restructuring their business, and advise on the best course of action. This ensures a smooth and efficient transition.
View our corporate law or schedule a no-obligation intake consultation.
