In this blog we will show you why having two LTD’s is beneficial for every company, we will show you how this works and how you can set it up yourself.
When starting an enterprise in the Netherlands it is recommended to set up two LTD’s in stead of one (in dutch called BV, from now on we will refer to it as BV), in this article we will tell you why you should also consider doing this.
What does this actually mean, having two BV’s? What benefits does this bring along?
When setting up two BV’s one BV is seen as your holding BV and one is seen as your working BV. This may sound a little bit over the top when owning a small business, but even for small enterprises this could bring a lot of benefits.
A lot of entrepreneurs set up a BV to avoid joint and several liability, but this still means that any money that is stored in the company can be lost. Therefore, having two BV’s can be beneficial, because it takes away the risk of losing the money earned in your company. The way it works is simple, with your work BV you do all the work, you hire staff and take on contracts. In this BV you should have just enough money to do this. This BV does not own anything which is worth a lot of money, things like cars, buildings or machines. That’s because this will be owned by the holding BV, like the name already suggests the holding BV holds everything of value.
But how does this work, can you just own things with the holding company and use it with the working company? Well, you could, but it is recommended to rent, lease and sell this to your working company. That way you bring the money earnt in the working BV to the holding BV where it is ‘safe’.
Here is an example to make it clear: you own a small clothing company which produces its own clothes. With your work BV you make use of machines, these machines are owned by the holding BV. The holding BV leases these machines to your working BV, that way profit that is made with the working BV is going towards the holding BV where it is safe. When your working BV can’t pay its bills and has to go bust (in the worst case) you do not lose the profit made over the past years.
We don’t see any reason why you would not use this structure instead of a one BV structure.
The only downside to this structure is that the start-up costs are little bit higher since you have to register two companies instead of one. Also this structure is a little more complex which might look intimidating, but once it is al set up it isn’t as complex as it would seem. Therefore it is definitely worth using this structure.
Does this article bring up any questions about how this structure works or on how you can set up a BV in the Netherlands, don’t hesitate to call or email us. The accountants and financial specialists at SFAA are here to help you with any kind of questions.