Routes to Market in Holland
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Holland Routes to Market
So you've decided to expand your business in the Netherlands and researched your market. Now it's time to decide how you will register and set up a business in the Netherlands. What is the best, most viable option for your company, your products, and yourself? Which is the path of least resistance?
Here are your typical options when expanding a business into the Netherlands:
You may consider this type of business should you wish to register a business in the Netherlands. This type of company is set by and owners by one person. They may employ others within the company. As the owner you are entitled to the profits your company makes.
The owner is liable for paying income tax on the profits and may be entitled to the self-employed tax allowance under certain circumstances.
There is no distinction between your business and personal assets. If you have business obligations, your creditors can demand that you pay these from your personal assets. If you have personal obligations, your creditors can make a claim on your business assets.
When setting up a business in the Netherlands you may consider this business formation. The limited partnership (CV) is a special form of the General partnership (VOF). There are two sorts of partners:
limited or sleeping partners.
The active partner tends to be the entrepreneur, while the sleeping partner tends to finance the business but does not run it. The active partner can use their name in the partnership while the sleeping partner cannot.
A limited partnership tends to develop from a sole trader or general partnership when a sleeping partner enters the business to provide extra finance for growth.
The active partner may be considered self-employed and therefore benefit from tax allowances. They are responsible for paying income tax on their share of the profits. The sleeping partner, if only being a financial benefactor, will be taxed in a different way.
The active partner is liable for the obligations of the business whereas the sleeping partner has no liability to third parties and only risks is losing the amount of money he has invested.
Partnership under common firm (VOF)
This type of set up of business in the Netherlands is run with one or more partners. Each partner brings finance, goods or manpower into the business.
An agreement should be drawn up and will state the length of the limited partnership, the contribution, authority, profits share and the arrangements for resignation of the partners. Profits are allocated in line with a formula set out in the partnership contract.
Each partner maybe consider to be self-employed and will therefore pays tax on their profits. They may also be eligible for tax allowances.
The partners are each liable for the obligations of the business. In some cases if there is insufficient assets within the business, creditors can make a claim on the personal assets of the partners.
Private limited liability company (BV)
The private limited liability company is a legal person. This limits the risks of joint and several liability. This type of company must have a capital of Euro 18,000 in money.
The capital of the business will be divided into shares but cannot be transferred. The shares are registered by name and you cannot simply trade them. When you establish a private limited liability company, a civil notary has to draw up the Articles of Association. Then there must a proof of conduct from the Ministry of Justice must be obtained. This is to check for any cases of fraud or bankruptcy.
In this type of business set up in the Netherlands means the owner(s) are not entitled to tax allowances for the self-employed. Corporation tax is charged on the profit; income tax is charged on the managers' salaries.
Creditors can only make claims on assets of the company, not the assts of the directors or shareholders. Of course the liability of the shareholders is limited to the initial amount for their investment.
You may want to set up in The Netherlands in a partnership. This type of business is often used by professional such as doctors, lawyers and graphic designers. It is important to draw up some kind of partnership agreement in order to state rights and obligations within that partnership.
Due to the nature of this partnership, each partner will be considered as self-employed and pay tax accordingly. Each partner is liable for the partnership obligations but may only enter into obligations towards third parties on his own behalf.
Licensing a business in the Netherlands is the permission for someone else to use your intellectual property rights: either a patent, trademark, trade secret, or copyright. Different types of license include:
Non-Exclusive License - A non-exclusive license implies that your intellectual property rights can be awarded to more than one licensee.
Exclusive License - A little more complex because, although the license may not be exclusive to one licensee, it may be exclusive to a geographic location, a certain product, or limited area of use. For instance, you may grant a licensee exclusive use of the rights in France, yet grant another licensee its use in Germany.
Patent License - The allowance of another party to use your patented product, design or process.
Trademark License - Trademark licensing means permission is awarded to a licensee to sell a product or service. However, the licensor retains more control in order to ensure that quality is maintained. Quality control is in place to uphold the image of the brand / product / service / licensor, and therefore sustain customer confidence and satisfaction.
Franchising In The Netherlands
Franchising is the licensing out of a business name, product, technique, philosophy, trademark, etc, for a percentage of the income. Instead of setting up new outlets as part of your expansion, you license your existing business blueprint out to franchisees who then set up and manage it for you.
The benefits of franchising your business in the Netherlands include: more freedom, as the franchisee takes on major responsibilities; minimal expense; lower cost and higher profits; potential for fast growth; brand building.
Disadvantages of franchising a business in the Netherlands: although few, rely predominantly on your franchisees. They include: poor quality franchisees; franchisees not declaring all income; poor performance.
Franchise in the Netherlands is relatively straightforward and follow EU regulations. For a more comprehensive view it may be worth while contacting the NFV, the Dutch Franchise Association who is a member of the European Franchise Association and the World Franchise Council.
Organisations that can assist with Routes to Market
Do you need advice from an expert in your field, on the ground? Need help finding the best route to market for your product or service?
MFFA Tax Advice is a Dutch based tax and accounting boutique (one stop shop) with offices in Amsterdam, Amstelveen and Eindhoven. We provide forward-thinking and tailored Dutch tax advice for individuals and foreign companies operating cross border.