When starting a private limited company (BV), you need to consider whether you want to set up one BV or a holding structure. In corporate law, there is an expression that says, “One BV is not a BV.” I believe in keeping things as simple as possible, and I certainly don’t always agree with this statement! However, there are certainly reasons to choose a holding.
A holding is nothing more than a BV that owns shares in one or more other BVs (the operating companies or subsidiaries). The holding is then the top of the Christmas tree, with the other BVs hanging below. The underlying BVs are often referred to as operating companies. These are the BVs where the actual businesses are conducted. Through a holding, you can achieve various advantages, such as participation exemption and risk diversification of your assets.
For example, if you want to sell your company, the participation exemption can be beneficial. If you sell the shares in the operating company held by the holding, you do not have to pay tax on the profits you make. These profits fall under the so-called participation exemption. If you hold the shares in the operating company without a holding, you must immediately pay 26.9% tax on profits you make on a sale. With the holding, you only pay the 26.9% income tax when you pay yourself from the holding as a dividend.
A BV can have multiple shareholders who have different interests and make choices as entrepreneurs. To prevent this from affecting the execution of the underlying business, it is wise for shareholders to hold their shares through a holding structure. This way, they can make personal choices without affecting others. In matters that could affect business operations, you can think of:
• One shareholder may choose an expensive car, while another chooses a cheap one. • Pension savings are personal, which is why they fit better in the holding.
• If you want to provide yourself with a mortgage from the BV, it is better to do this from your own holding. Otherwise, you will hit the operating company with potential risks.
A holding structure can also be useful if you want to diversify your assets. This is particularly relevant when you run a business that carries certain risks. By transferring the wealth you earn from the operating company to the holding, you can, in simple terms, isolate the wealth you have built up in your business from the risk sphere of the business. This ensures that the accumulated wealth is not initially included in case the BV goes bankrupt; Diversification also plays a role when a BV has intellectual property or real estate. It may occur that a business is being prepared for sale, but where the mentioned assets should not be sold along with it. In that case, for example, the intellectual property is placed in a holding. Nowadays, this is particularly relevant for software producents.
Another advantage of a holding structure is that it can lead to a tax advantage in corporate tax. A BV pays corporate tax on the profits earned by the business, with the BV paying 19% on the first €200,000 of profit and 25.8% on the remainder.
By sending invoices from the holding company to the operating company for certain services, a portion of the operating company’s profits can be transferred to the holding company. Possible reasons for the holding company to send invoices to the operating company include management services, licensing expenses (such as for the use of certain brand names), or the rental of real estate. Of course, a market price must always be agreed upon for the above, but there is always a certain range within which to work.
Despite the fact that the holding structure entails more costs, it still has its advantages over a single BV in certain cases. A single BV works particularly well if you are the sole shareholder and the business is not easily saleable.
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