Working together as entrepreneurs in a Dutch cooperative

If you are an entrepreneur in the Netherlands, or if you are working as a self-employed professional, then it can be useful to collaborate with other entrepreneurs. Together you can take on bigger assignments, guarantee continuity for your clients or better focus on your specialism.

Working together in a cooperative or ‘coöperatie’

The Dutch legal system has a good solution for this, the ‘coöperatie’, or co-o-pe-ra-ti as you pronounce it. The English word is a cooperative. On the one hand it is a separate legal entity, just like the Dutch BV or a Limited Company, so it can have assets and go bankrupt. On the other hand it is a sort of association, where you can easily add members and terminate membership, and where members jointly decide about the activities in the cooperative.

The Dutch cooperative comes in three versions: the ‘Coöperatie U.A.’, the ‘Coöperatie B.A.’ and the ‘Coöperatie W.A.’. The two letters at the end designate what happens when the cooperative goes bankrupt. Only in case of the ‘Coöperatie U.A.’ the members are excluded from any liabilities, so that is the most used version.

Doing projects through the cooperative

Most groups of entrepreneurs that we help use the cooperative to work under a common name. Not the names of the individual entrepreneurs, but the (brand)name of the cooperative is communicate to the clients, and the member/entrepreneurs execute the assignments that the cooperative takes on. This can both be individual assignments, or projects that you execute as a group.

As soon a the work is done, the cooperative will invoice the client, and the members who were involved in the project will invoice the cooperative for their share. A small amount is left in the cooperative, and can be used for covering administrative expenses or can be paid out as a profit at the end of the year.

What about the tax authorities?

If you work as an entrepreneur or self-employed professional in the Netherlands and the tax authorities classify you as a ‘ondernemer voor de inkomstenbelasting’, then please be careful. You can not do all your activities through the cooperative. Apart from the invoices to the cooperative, you should also send invoices to other clients and for those activities classify as an entrepreneur who carries the risk of non-payment.

Also if you work through your own BV, you still have to take care that you execute your activities in an independent way, and that you are responsible for the results. If your working hours are closely determined, or somebody is guiding you all day, then this may be seen as fictitious employment. But this is no different than if you would work directly for a client, not through the cooperative.

The formal structure

We have created a structure how you can work in a cooperative, without much risks, and without much hassle. There are two important documents:

The articles of incorporation

The articles of incorporation, or in Dutch ‘de statuten’ are a legal document created with a deed being passed at the notary public. You can only change these articles by going back to a notary public. The articles stipulate:

  • The name of the cooperative and where it is based.
  • How you can become a member and how membership is terminated.
  • The way the members jointly make decisions.
  • How you can elect a board and what the responsibilities of the board are.
  • Whether you have to pay contribution and how any profit is being distributed.
  • How you can change the articles of incorporation, or terminate the cooperative.

The members agreement

The members agreement is being concluded between the cooperative and each of its members. Where the articles of incorporation are more generic, the members agreement should really be tuned on the activities of the cooperative. We have drafted an concise members agreement with the purpose of doing projects together. You can adjust this draft yourself to your own needs, only consult a lawyer if you make big changes!

Our members agreement for entrepreneur cooperatives stipulates that:

  • This is a so-called ‘Wet DBA’ agreement as approved by the tax authorities. Working according to the agreement gives you the certainty that your work won’t be seen as fictitious employment.
  • The members work together in projects for a client. Members will (jointly) make a proposal for the client, and then guarantee to the cooperative that they will execute the project under these conditions. Only after this guarantee (which can be an email) the board of the cooperative will bring out the proposal or sign an agreement with a client.
  • Members who acquire projects for other, will be rewarded with a percentage of the project fee. Note: you can jointly decide on this percentage.
  • Only when the client has paid, the members involved will be paid for their share, less a small percentage
  • If the client doesn’t pay, or the client claims money back afterwards, the members involved in the project will only be held liable for the amount that would get for their work.
  • Intellectual property that jointly is being generated during a project, will be made available for each of the members in the project.
  • The agreement ends when the membership of the cooperative ends, but project-related obligations will continue.

The whole idea behind this agreement is that members are responsible for the work they do, but that they can’t suffer big losses due to mistakes that the other members make. With good general terms and conditions the cooperative can also reduce a lot of risk, and as a last resort the cooperative can go bankrupt. In that case the members are not liable for the debt.

Steering the cooperative

The members come together at least once a year to discuss the budget, contribution and to adopt the annual accounts. This can also the moment to confirm new members or to elect new board members.

In principle every member has one vote, but you can also differentiate in types of membership. For example you can arrange that founding members have more than one vote, or that they always keep the majority of votes.

In a cooperative with limited members, the role of the board lies more in the execution. The members set the policies, the board represents the cooperative towards third parties.

Our package for setting up an entrepreneurs cooperative

De Coöperatie expert had helped hundred of groups in setting up their coöperative. For a cooperative of entrepreneurs, with the purpose of doing projects under one common name, we have a complete package that costs you 1.290 euro excl. VAT.  It consists of:

  • A two-hour meeting in which we look at the activities that you want to do together and where we explain the concept that we have.
  • The (standard) articles of incorporation. If necessary, we can customise these at an hourly rate. Please note that the deed of incorporation needs to be in Dutch, we are currently working a an English translation.
  • Passing of the deed of incorporation with the notary public. You don’t have to visit our notary public, we can work with a power of attorney.
  • The members agreement, to arrange the way you can jointly do projects. Also this is a Dutch document, for which we are working on an English summary.
  • A tax manual, explaining all the specific fiscal arrangements for the cooperative. You can give this document to your bookkeeper.

For more complicated types of cooperatives, extra Q&A sessions or revisions we charge at an hourly rate.

If you have any questions, or if you want to set up a cooperative, please contact Alfred Griffioen, on +31 6 2477 6865, or email alfred.griffioen@cooperatieexpert.nl.

 

Financing your business with a Netherlands cooperative

The Dutch law know a specific type of legal entity, which is the ‘Coöperatie’, or cooperative. It is comparable to a BV, but has much more flexibility. The concept of the ‘coöperatie’ is based on the association, but it is meant to run a business in. You don’t have shareholders, as with a BV of Ltd, but members. And this brings many possibilities for flexible financing.

Two main advantages of the Dutch cooperative:

  • You can add members and terminate membership without going to a public notary, this in contrast to a BV. This will save you time and costs if you have a group of investors that varies.
  • You can attribute voting rights and profit rights in a flexible way, as long as the way to calculate it is clear. Voting rights may for example vary with the number of years that you are a member, and profit rights can be attributed according to investments, yearly turnover or number of locations, or many other aspects.

Further basic knowledge on the cooperative

The law on cooperatives (‘coöperatie‘) as a legal entity (‘rechtsvorm‘) in the Netherlands is extremely short and mostly refers to the (also relatively short) law on associations. There are only few functional limitations and the best news is: even foreigners and foreign legal entities can incorporate a cooperative or be a member. Once established, the cooperative keeps its own record of members.

For the rest the coöperative is comparable to the BV: it is a separate legal entity, you can transfer the ownership and if the cooperative goes bankrupt, you will only loose the capital you brought in. At least, if you use the variety ‘Coöperatie U.A.’, the one with excluded liability for the member, with most people do.

Less formalities and more privacy

If you want to become shareholder in a BV, you will have to identify yourself with the notary public, or at least provide a power of attorney that is signed by a notary public in your own country. Or if you represent a company, you will have to prove that in a similar way. If you want to become a member of a cooperative, the board of the cooperative may decide on how you should identify yourself.

If you or your company are a shareholder in a BV, this will always be visible in the records of the Chamber or Commerce, which is the Dutch company registry.  A cooperative doesn’t have to publish who are the members. Only the board of the cooperative needs to keep a record, although under Dutch law they need to make sure that they know the Ultimate Beneficial Owner (UBO), and also the bank may ask for this information.

Usage in corporate financing

There are several ways how you can use the flexibility of the coöperative for financing your company:

1. As a direct alternative for the BV:

In this case you structure the coöperative comparable to the BV, with member accounts to record the investment of each of the members. The higher the investment, the more voting and profit rights. What mostly counts here is the flexibility and the privacy.

2. As a start-up cooperative

The interesting thing about the cooperative is that you can assign profit rights also according to non-financial investments, such as investments in time. Especially for a start-up, where cash is tight but the time of the founders is available, it can be useful to build your equity in the company on basis of the hours that you make.

We have developed a model for this: the start-up cooperative.

3. As a structure for crowdfunding

If you don’t want a big group of investors directly involved in your company, but you want to let them share in the profits, you can use a cooperative to group them. The cooperative will collect their money and use it to buy shares in the company, which then mostly is a Dutch BV. The members of the cooperative will elect a board, who will execute the voting rights (if any) connected to the shares.

This structure is comparable to a ‘STichting Administratie Kantoor (STAK)’ that was previously used to issue certificates of shares.

Questions?

There is much more to know about the Dutch cooperative and its applications. Just call Alfred Griffioen, +31 6 24776865, and he will tell you all about the options. Or email him: alfred.griffioen@cooperatieexpert.nl.

The Dutch cooperative as flexible alternative for the BV

If you are not so familiar with Dutch law and you want to incorporate a legal entity for your start-up, most probably you’ll think that a Besloten Vennootschap (BV) is the right solution. The BV is comparable with a Private Limited Company in other countries, has one or more shareholders and profit distribution and voting rights are connected to the number of shares.

This may work well if you are the only founder, or in case it is clear from the beginning onwards how much each founder will contribute. But that is hardly the case with start-ups. Mostly there is a team of people and at the start you don’t know how much you need to invest before you get to break-even, and what kind of investments you need.

The Dutch ‘Coöperatie’ is a good alternative to the Dutch BV

The ‘Coöperatie’, or cooperative, is a legal entity that is comparable to a BV, but has much more flexibility. Profit rights and voting rights can be attributed to the members in different ways, and this can change along the way, without going to the notary. And especially if you plan to move out of the Netherlands in due course, there is another advantage: you may be exempt of dividend taxes.

The law on cooperatives (‘coöperatie‘) as a legal entity (‘rechtsvorm‘) in the Netherlands is extremely short and mostly refers to the (also relatively short) law on associations. There are only few functional limitations and the best news is: even foreigners and foreign legal entities can incorporate a cooperative or be a member. Once established, the cooperative keeps its own record of members.

For the rest the coöperative is comparable to the BV: it is a separate legal entity, you can transfer the ownership and if the cooperative goes bankrupt, you will only loose the capital you brought in. At least, if you use the variety ‘Coöperatie U.A.’, the one with excluded liability for the member, with most people do.

Coöperatives for investments

In a cooperative you can make voting rights and profit shares dependent on the capital that you put in the coöperative. This way the legal entity works like a BV (or limited company), but is much more flexible where it comes to injecting more capital and adding investors.

The concept of the start-up cooperative

A lot of start-ups end because of internal disagreement about how to split the shares. For example if you both have 50% of the shares and one of the founders gets ill, goes on honeymoon or pursues a different venture. Or it turns out that you need an additional team member, who also would like to have shares.

The concept of the start-up coöperatieve is this: the more you invest in time and cash, the more ‘shares’ you get. This way each founder or team member can build up shares up to the moment that your venture is break-even and you have sufficient income to pay all costs and salaries. Every month the team sits together to determine how much every team member contributed. The cumulative investments of each member determines his or her share in the profit and can also determine the voting rights.

If you need to add a new team member, you can just decide on that together, there is no need to go to a notary. And in case you want to sell (part of) your venture, and the buyer prefers a BV, you can easily transfer the cooperative into a BV during that transaction.

How about taxes?

In general it makes sense to incorporate in the Netherlands if you live here or if at least a part of the activities of the start-up will be in the Netherlands.

As the cooperative will be incorporated in the Netherlands, the Dutch tax authorities will treat it as a Dutch legal entity, and you have to pay the Dutch company tax (Vennootschapsbelasting). For start-ups this will be 20% of your profits. For founders living in the Netherlands, any dividend may either be treated as part of your income as an entrepreneur, or as ‘Aanmerkelijk belang’, which means that you pay an additional 25% on the payouts.

If you live outside of the Netherlands, any dividend payouts will be taxed according to the laws of your country. Please note that if the board members of the cooperative live abroad, the tax authorities of that country may also think the coöperative is under their jurisdiction. Or there may be a tax treaty that arranges this. So please check this in advance.

The proces of setting up a cooperative

De Coöperatie expert is a team of 9 specialists on cooperatives. We work with our own public notary and we helped over 800 groups with incorporating cooperatives. Although part of the documents will be in Dutch, we can do the explanation and further communication in English.

We always start with a consultation of about two hours, in which we check whether the cooperative really covers your needs and what specific things we need to keep in mind. We will answer all your questions and explain the concept in detail. At the end of the consultation you can directly fill out power of attorney for the incorporation, you don’t have to go to the notary then any more.

If you want to incorporate as a private person, you just need to bring your valid passport. It helps if you already have a BSN number in the Netherlands. If you want to incorporate as a company, you’ll need an extract from the companies registry (in the Netherlands: de Kamer van Koophandel) that you can act on behalf of that company. In case the extract is not in English, you need a certified translation. Please consult with us in advance. 

Within two days after the consultation we will email you the draft for the articles of incorporation. You can check these, amend where necessary and after your approval and payment everything goes to the public notary. Incorporation will then take about three working days.

After incorporation you will also receive the set of rules for the valuation of time, cash and other contributions that you and the other team members will make. This set of rules also covers a number of points that would otherwise be in a shareholders agreement, e.g. about setting hourly rates, what kind of expenses are reasonable and also ‘drag along’, ‘tag along’ and non-competition statements.

The whole package as describe above will cost you 1490 euro excluding VAT. The VAT you can claim back if you are registered as an entrepreneur in the Netherlands or you can claim it back through the cooperative after incorporation.

Please contact us for any questions

If you want to know more, please contact Alfred Griffioen, +31 6 2477 6865. He will be happy to answer your questions and to explain more about the incorporation process.