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your own business as a sole proprietorship is quick and inexpensive to arrange, but legally you run more risks than many start-ups realize. The key point: a sole proprietorship does not have legal personality, so you are liable for business debts with your private assets. The ten most important legal considerations are: proper preparation, the right permits, limiting your liability through contracts and general terms and conditions, appropriate insurance, agreements against defaulting debtors, potential prenuptial agreements, preventing bogus self-employment, protecting your intellectual property, a legally correct website, and the question of whether a sole proprietorship is the best legal form for you. Below, we elaborate on each of these points individually, including the risks, consequences, and concrete next steps.
What is a sole proprietorship and where does the risk lie?
A sole proprietorship is a business run by a natural person. You establish it without a notary, without start-up capital, and with a simple registration at the Chamber of Commerce. This makes it the most popular legal form in the Netherlands. Moreover, there are tax benefits for entrepreneurs, such as the self-employment deduction, provided you meet the conditions.
The crucial legal difference compared to a BV (private limited company) is that a sole proprietorship does not have legal personality. Legally, there is no separation between you and your business, and therefore none between your business and private assets. If things go wrong business-wise, creditors can, in principle, also turn to your private possessions: your savings, your car, or even your home. That is precisely why a solid legal foundation is not a luxury for a sole proprietorship, but a necessity. The ten tips below will help you lay that foundation.
Tip 1. Ensure thorough preparation
Because setting up a company is so simple, startups often skip the preparation phase. That is a risk. Before starting, map out the risks you face: liability, debtors, contractual obligations, and whether your legal structure suits your plans.
Seek advice from multiple specialists: your bookkeeper for the tax aspects, a marketer for your positioning, and a lawyer for your contracts, terms and conditions, and liability. Good preparation takes time, but prevents costly corrections later on.
Tip 2. Arrange the correct permits and registrations
Many entrepreneurs require one or more permits or notifications. Examples include an environmental permit if you wish to renovate business premises, or municipal conditions for a home-based business. Specific requirements also apply to certain sectors, such as hospitality, transport, and financial services.
During your preparation phase, inquire with your municipality and the relevant supervisory authority about the conditions you must meet. Without the proper permit, you risk a penalty payment order or an injunction prohibiting you from continuing your activities.
Tip 3. Limit your liability
The main disadvantage of a sole proprietorship is that you liable for business debts with your private assets . In the event of damage, those debts can mount up rapidly. You can limit this risk in two ways.
- In terms of content: deliver quality, make clear agreements, and document what you deliver and agree upon.
- Contractual: include a good liability-limiting clause (exoneration) in your contracts and in your general terms and conditions.
Please note: an exemption clause must be validly agreed upon and may not be unreasonably burdensome. Stricter rules apply to consumers than to other businesses. A judge may set aside a clause stating that you did not properly present your terms and conditions, or that they go too far. Therefore, have your terms and conditions drafted or reviewed.
Tip 4. Choose a suitable insurance
An exemption clause never offers full protection; in some cases, you remain liable. Therefore, also take out suitable business liability insurance . The coverage you need is determined by the risk analysis you conduct during the preparation phase. Liability insurance is often part of a broader package, for example, together with legal assistance or professional liability insurance. If you primarily provide knowledge and advice, professional liability insurance is often the most important.
Tip 5. Arm yourself against non-payers
Business debts arise not only from damage, but also because customers pay late or not at all. Therefore, take preventive measures.
- State a clear payment term on your invoice.
- Include safeguards in your general terms and conditions, such as a retention of title clause or a clause regarding collection costs and interest.
- Respond quickly to overdue payment: a reminder, a formal demand, and, if necessary, a professional debt collection process.
The sooner you act, the greater the chance you will still receive your money. If you wait too long, the risks accumulate and collection becomes more difficult.
Tip 6. Consider a prenuptial agreement
In the worst-case scenario, creditors may still come knocking at your private account, despite favorable terms and insurance. If you are married under a system of full or limited community of property, (part of) your partner's assets may also be affected, and you could even lose your owner-occupied home.
With a prenuptial agreement, you can shield your partner's private assets from business risk. You draw up such an agreement with a notary. Keep in mind that prenuptial agreements drawn up during your marriage generally only take effect for the future; you may remain jointly liable for debts incurred prior to that. Therefore, seek advice in good time.
Tip 7. Prevent bogus self-employment
If you work as a self-employed professional for clients, it must be clear that you are genuinely independent and not actually employed. False self-employment means that you formally work as a self-employed person, but that the employment relationship in practice has the characteristics of an employment contract. If the Tax and Customs Administration classifies the relationship as an employment contract, this can lead to additional assessments for payroll taxes.
Since 2025, the Tax and Customs Administration has been enforcing regulations against bogus self-employment more actively again. In the first phase, a so-called soft landing applies, whereby corrections do not automatically result in a fine, but this scope is being phased out gradually. The rules surrounding self-employment and enforcement are constantly evolving; base your specific situation on the most up-to-date information from the Tax and Customs Administration. Therefore, ensure that your situation is also correct in practice: preferably work for multiple clients, determine yourself how you perform the work, bear entrepreneurial risk, and record your agreements in a proper contract for services. A correct agreement alone is not enough: the actual execution is decisive.
Tip 8. Protect your intellectual property
Many companies fail in the first few years, partly due to inadequate preparation, the wrong legal structure, an unsuitable business partner, or the lack of proper contracts. An underestimated cause is the insufficient protection of intellectual property.
Startups often have a strong, unique idea but a limited budget, so protection is lacking. The consequence: a larger player snatches it up. Therefore, think early about trademark registration, copyright, confidentiality agreements, and licensing agreements. Moreover, good protection increases your value to investors and lenders.
Tip 9. Have your website legally screened
Virtually every startup has a website. That digital business card must comply with legal requirements, particularly regarding privacy. Think of a proper privacy statement (GDPR) and the correct handling of cookies.
A good web developer is not necessarily a lawyer. Therefore, have your website legally screened regarding privacy, cookies, general terms and conditions, and your right of withdrawal when selling to consumers. This limits the risk of enforcement action and fines from the Dutch Data Protection Authority.
Tip 10. Check whether the sole proprietorship is the best legal form
The previous tips show that a sole proprietorship entails legal risks, particularly regarding liability. Therefore, carefully consider whether a sole proprietorship truly suits you, or whether, for example, a BV (private limited company) would be a wiser choice. A BV is a legal entity and offers liability benefits, but also involves more administration and costs.
You make the choice based on several arguments: your expected revenue and profit, your risk profile, your growth plans, and your tax situation. Discuss this not only with your accountant but also with a lawyer who can assess the legal implications. Read more about the legal aspects of corporate law and legal structures.
Frequently asked questions about starting a sole proprietorship
Am I personally liable as a sole proprietorship?
Yes. A sole proprietorship does not have legal personality, so there is no separation between your business and private assets. In principle, you can also be held liable for business debts with your private assets. You limit this risk with good contracts, general terms and conditions, insurance, and possibly a prenuptial agreement.
Do I need a notary to start a sole proprietorship?
No. You do not need a notary to set up a sole proprietorship; you register with the Chamber of Commerce. However, a notary can be advisable for matters such as prenuptial agreements. A legal expert helps you with contracts and terms and conditions.
What is the difference between a sole proprietorship and a BV?
A sole proprietorship is simple and inexpensive to set up, but you are personally liable. A BV is a legal entity, which means your liability is generally more limited, but the incorporation and administration are more complex and expensive. Which legal form suits you best depends on your turnover, risks, and growth plans.
How do I avoid bogus self-employment as a freelancer?
Ensure that you are effectively working as a self-employed person: preferably with multiple clients, your own working method, entrepreneurial risk, and a sound contract for services. The actual execution of the work outweighs the contract alone. The Tax and Customs Administration has been enforcing this more actively again since 2025; consult the Tax and Customs Administration for the current rules.
Which insurance do I need as a start-up?
That depends on your risks. Business liability insurance is important for many entrepreneurs. In addition, professional liability, legal assistance, or disability insurance may be relevant. Determine this based on a risk analysis.
Get off to a legally safe start with your own business
Starting a sole proprietorship is quick, but you are in a stronger legal position with sound contracts, clear terms and conditions, and the right liability arrangements. At MKB Juristen, we help start-ups and entrepreneurs with this every day, from general terms and conditions to custom contracts.
Do you want to know which legal matters are most important for your business? View our options for legal assistance for entrepreneurs or schedule a no-obligation intake directly. We will then discuss together how to get off to a safe, legal start.
