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
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.
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 start-up cooperative
De Coöperatie expert is a team of 11 specialists on cooperatives. We work with our own public notary and we helped over 600 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.