Our answer: absolutely. You may not notice the difference immediately in the first few months, but in the longer term, this choice can be crucial for your risk, tax, growth opportunities and professional image.
Choosing your company form is not a simple administrative formality. It forms the legal and financial basis of your business. A wrong choice could lead to higher taxes, unexpected personal liability or missed investment opportunities. If you choose correctly, you will build a solid and future-proof foundation from day one.
Below, we summarise the main differences, explain what you should pay particular attention to and give some practical examples.
Why your company form has so much impact
In a sole proprietorship, you and your business are one and the same. There is no separate legal entity, so profit and liability run directly through your private assets. Are you starting small, with limited risks and do you want to get started quickly? Then the sole proprietorship is often a smart choice.
A BV, on the other hand, is an independent legal entity with its own assets. This distinction is crucial: it determines who is liable as well as how you are taxed. Do you expect larger investments, faster growth or want to protect your private assets? Then a BV is generally wiser.
The main differences at a glance
- 1. Liability
With a sole proprietorship, you are personally liable for all debts of your business. This means that even your private assets, such as your savings account or home, can be used to cover business debts. You are therefore at greater financial risk if the business goes bad or debts mount up.
With a private limited company (BV), the situation is different: liability is basically limited to the capital you have contributed to the company. Your private assets are therefore protected against business creditors. However, an important caveat applies: as a director or founder, you can still be held personally liable under certain circumstances, for example in case of gross errors, mismanagement or non-compliance with legal obligations. This is called director's or founder's liability.
- 2. Taxation
Profit from a sole proprietorship is taxed through personal income tax, which rises progressively the more you earn. This means that with higher profits, you also fall into a higher tax rate, which is often less favourable.
A BV pays corporate tax on its profits. The standard rate is 25%, but for small companies there is a reduced rate of 20% on the first €100,000 of profit. This can be more tax advantageous once your company is structurally profitable.
Moreover, corporate tax offers opportunities to reinvest profits within the company at a more favourable rate.
- 3. Establishment and administration
You can set up a sole proprietorship quickly and cheaply, without much red tape. Accounting obligations are limited, which is ideal for start-ups that want to focus on their core business.
A BV requires a more formal and costly incorporation, with notarised deeds and a financial plan demonstrating that the company is viable. In addition, double-entry bookkeeping applies and you have to meet more extensive administrative and legal requirements. On the other hand, a BV has a more professional image and offers a structure that is easier to transfer, for example when selling or when investors join.
Quick decision aid - ask yourself these questions
- Do I expect external investment or want to issue shares? → BV
- Am I at high risk substantively or financially (construction, hospitality, consultancy)? → BV
- Do I start small, as a freelancer or secondary income? → Sole proprietorship
- Do I want to easily sell or transfer shares later? → BV
- Do I want as little administration as possible in the beginning? → Sole proprietorship
Some concrete examples
A freelance designer with a few initial clients often chooses a sole proprietorship: this way you can start quickly, with low start-up costs and limited administration. If you mainly provide services, need little investment and your risk remains limited, this is usually the easiest route.
A tech start-up, on the other hand, usually opts for a limited liability company (BV). This legal form allows you to issue shares and thus attracts investors more easily. Moreover, the BV is legally separate from your private assets, which is crucial for ambitious growth plans and higher financial stakes.
For a construction company or consultancy firm with contractual liabilities, a limited liability company (BV) is usually the safest choice. In sectors where risks are high and claims can be high, this structure better protects your private assets and exudes extra professionalism to larger clients and public authorities.
Common misconception
"You can always convert later."
True, but converting a sole proprietorship to a BV takes time, money and brings with it tax and contractual concerns. So start with the structure that suits your risk profile and growth plans.
Important to know
Since the company law reform, there is no longer a mandatory minimum capital for a private limited company.
However, you must demonstrate through a financial plan that the company can survive for at least three years. If that plan is insufficiently substantiated, you can still be held personally liable as a founder. So a private limited company is not a licence to start unprepared.
Tip: In doubt about the right structure? Have your business plan reviewed by a lawyer and an accountant. That way you will immediately know which form will really help your business.
Do you have any questions or want tailor-made advice? Please contact us via info@bannister.be or call 03/369.28.00.
