As soon as a creator has a good year, the question comes: shouldn't I start a BV? Usually that question comes from a colleague, an account manager or a video, and usually the answer is still no. But not always, and the reasons for doing it are sometimes different for creators than the fiscal ones.
This article sets out the trade-off, without naming a tipping point in euro that will be wrong next year.
The difference in one paragraph
With a sole trader business you are the business. The profit is your income and you pay income tax on it, with entrepreneur allowances and the SME profit exemption reducing your taxable profit.
With a BV, a Dutch private limited company, the BV is a separate legal person. The BV pays corporation tax on its profit. What you take out of it happens in two ways: as salary, on which you pay payroll tax, and as dividend, on which you pay tax in box 2. Two layers, then.
Those two layers are why a BV is less favourable at a lower profit. You lose the self-employed allowance and the SME profit exemption, and you get two levies in return.
The customary salary is the bottleneck
This is the rule that sinks most BV plans and that rarely features in the stories. If you work for your own BV, you have to pay yourself a salary that is customary for the work you do. A minimum amount applies, and it is set annually.
That means you cannot choose to distribute your whole profit as dividend at the box 2 rate. A salary has to come out first, on which you simply pay payroll tax, roughly as with a job.
The consequence is that a BV only starts working when your profit is substantially higher than that mandatory salary. If your profit sits around that level, you take on all the disadvantages of a BV and none of the advantages. And the exact level shifts, because both the minimum amount and the rates change. That is why we name no tipping point here: it is a calculation per year and per situation, and an out-of-date figure from a blog is genuinely damaging here.
The extra costs and obligations
A BV costs money and work, every year, regardless of your profit:
- Incorporation through a notary, once
- Annual accounts that have to be drawn up and filed
- A corporation tax return, alongside your own income tax return
- A payroll administration, because you are an employee of your own BV
- Higher bookkeeping costs, because it is more work
That is not an argument against a BV, it is a fixed amount you have to take off the fiscal advantage before you compare. At a profit where the advantage is a few thousand euro, this eats that advantage up.
The non-fiscal reasons, and why they weigh more for creators
Here it becomes interesting for this profession. There are three reasons to consider a BV that have nothing to do with the tax rate, and two of them are more relevant for creators than for the average entrepreneur.
Liability
With a sole trader business you are liable with your private assets for the debts of your business. With a BV that is in principle shielded, with exceptions for improper management.
For a creator with no staff, stock or large commitments that risk is limited. Take on commitments with a longer term, rent a studio, hire people, and it shifts.
Privacy and visibility
With a sole trader business your own name is in the trade register as the owner, and that cannot be shielded. With a BV visibility is built up differently: the BV is the business, and your position as a shareholder is not public in the same way as ownership of a sole trader business.
For creators who do not want to be in there under their name that is a real argument. It is not anonymity, and details are recorded, but the picture is different. In our conversations this weighs more often than the rate. See also KVK registration and your privacy, which sets out the cheaper solutions to the same problem: a separate business address and a neutral trading name often solve most of it without a BV.
Leaving profit in the company
With a sole trader business you pay tax on your full profit in the year you make it, whether you draw it or not. With a BV you can leave profit in the company and distribute it later. That is not a tax saving but it is deferral, and for someone with a strongly fluctuating income that is valuable.
That last point is not an edge case for creators. Income can double in one year and halve the next. A structure in which you do not have to settle a peak year entirely in the top bracket is then more than a rate trick.
What goes into the calculation
If you want to work this out seriously, and that is the only way to decide it, you need:
- Your expected profit for the coming three years, with a realistic range
- The amount you need privately each year to live on
- The customary salary that applies in your situation
- The fixed extra costs of a BV per year
- Whether you currently meet the self-employed allowance, because you lose it. See the hours criterion
Point 2 gets skipped and is decisive. If you need your whole profit to live on, you have to distribute everything and the advantage of leaving profit in the company disappears completely. The BV works above all when you structurally earn more than you draw.
What is wrong with the stories
Three things we regularly have to put right:
- That you can deduct more in a BV. Not true. The question of what is business is the same in both forms. See what can you deduct as a content creator.
- That a BV changes your VAT position. Not true. VAT follows from what you supply and to whom. See VAT on your platform income.
- That a BV makes you completely anonymous. Not true. Visibility is built up differently, not absent.
What changes practically in your year
The calculation is one thing, the yearly rhythm another. With a BV your year looks like this:
- Monthly a payroll return for your own salary, with payroll tax you remit
- Quarterly the VAT return, just as before
- Annually annual accounts that are drawn up and filed with the KVK
- Annually a corporation tax return for the BV
- Annually your own income tax return, showing your salary and any dividend
That is more work, and it is predictable work. What people underestimate is not the quantity but the irreversibility: a BV that exists cannot be parked halfway through a year because things are quieter.
Taking money out of the BV: three routes, three treatments
With a sole trader business you draw money and that is that. With a BV the money is the BV's, and there are three routes to you:
- Salary. Mandatory up to at least the customary salary. Payroll tax, as with a job.
- Dividend. Out of the profit after corporation tax, taxed in box 2. This is the route the stories are about, and it only comes into view above the mandatory salary.
- A loan from your own BV. Possible, and the place where it most often goes wrong. A current account debt that mounts up is at some point treated as a distribution, and then an assessment follows on an amount you have already spent. There is also a limit above which a debt to your own BV is taxed.
That third one is why we actively watch the current account with BV clients. It is the easiest thing to let run up and the most expensive to repair.
What you leave behind in the sole trader business on a conversion
Convert an existing sole trader business and more moves than just the activity. Your equipment, your receivables from platforms, any losses from earlier years: those are all items with a fiscal value that does not move across automatically.
Losses from your sole trader business are the most important point here. They are in principle set off against your own income, not against the BV's profit. If you have losses still outstanding, the question is whether you want to use them before converting. That is exactly the kind of consideration that has to be made beforehand, because after the conversion the room is gone.
Frequently asked questions
Can I convert my sole trader business into a BV?
Yes, and there are routes where you do not have to settle immediately on the hidden reserves in your business. Which route fits depends on your situation, and it is work that has to be set up in advance.
Can I go back from a BV to a sole trader business?
That is possible, and it is laborious. So do not count on it as an escape route: take the decision for the longer term.
What if I have one very good year and less after that?
Then setting up a BV for that one year is usually not a good move, because the fixed costs and obligations remain. There are other ways to cushion a peak year, and they are worth discussing before the year is over. Once 31 December has passed the room is a good deal smaller.
Does a BV have consequences for my mortgage?
Yes, banks assess a director-shareholder differently from an entrepreneur with a sole trader business, and the first years after a conversion can be harder because there is no history yet. If you want to buy a house within two years, that is a reason to discuss the timing.
In closing
For most creators a sole trader business is the right form for longer than they think, and the customary salary is the reason. If your profit becomes structurally high and you keep more than you draw, it tips. And if privacy weighs heavily, the conversation is broader than the rate, but start with a separate business address: that is the same gain for a fraction of the cost.
We work this through for our clients with their own figures rather than with a rule of thumb. See how we work.