What you need to know before setting up a general partnership
Starting a business with a business partner is enjoyable and exciting. You can start a business with your life partner, but also with a friend, a child or a former colleague. A general partnership can also consist of more than two people. However, it is not a decision to take lightly. Owning a business together also means taking responsibility for it.
You cannot start a business today and stop a month later. Technically, you can, but that certainly should not be your intention. In this article, we explain what you need to know if you want to set up a Dutch general partnership, known as a VOF.
What is a VOF?
VOF stands for vennootschap onder firma, the Dutch general partnership. You establish it with one or more other people and register the business with the KvK under a single name. The VOF receives its own VAT number and keeps a single set of accounts. All partners are responsible for the business as individuals. This makes clear agreements particularly important.
An advantage of a VOF is that the entrepreneurs can go to the KvK, register their business and start working as soon as that is arranged. There is no need for shares, articles of association or other formalities of that kind. It is straightforward and flexible, but only suitable for people who trust each other and can make clear agreements about responsibilities and other important matters.
If debts arise, for example, a creditor will approach the partners directly. They are jointly and severally liable for the business and therefore for any debts.
Does a general partnership suit me and my plans?
You can consider setting up a VOF if you plan to run a business with someone else or with a small group. It is important to have clarity and agreement about the plans and responsibilities. You should only establish a VOF if you intend to work together for the longer term, not simply to build a house together or produce a theatre show that ends after one season.
Examples include a couple starting an accountancy practice together, a father and son running a painting business, or two sisters who are both dentists and want to open a practice together.
When a general partnership is not a good idea
A VOF is less suitable if substantial investments are required or if there is a high risk of claims from clients. It is also not a good choice if one partner contributes significantly more than the others. An exception might be a parent and child working together with the intention that the younger generation will continue the business later.
It must also be clear how much capital each participant contributes. Contributions can differ. A 60/40 split, or even a somewhat less balanced division, is possible, but it should not be a situation where one partner participates for only 10% or 20%. That partner is equally liable for the business as someone who contributes much more.
In situations like these, a private limited company (BV) is a more logical choice because it allows for limited liability and an allocation of shares. With a BV, you are also not directly responsible as a private individual if the company encounters financial problems.
As a rule of thumb, ask yourself the following: is it a small business with a clear structure whose partners trust each other? If so, a VOF can be a suitable legal structure. If it is a larger business with employees and major projects involving substantial sums of money, setting up a BV is a wiser choice.
Getting started with a general partnership
Suppose you and your life partner want to start an accountancy practice. You make clear agreements about dividing the work and decide to work from home. That can work well, because you need little more than a desk, a laptop or PC and a reliable internet connection. The finances are manageable: you send invoices to the few dozen clients you hope to attract for services such as filing VAT returns, advising on business finance or preparing profit and loss accounts.
You come up with a memorable business name and commission a web designer to create a professional website. You arrange the VOF’s registration with the KvK and can, in principle, start work straight away.
Your partnership’s registration address
When you work from home, your residential address must be supplied to the KvK as your business postal address. This is not always convenient. A client who is angry about a supposedly excessive invoice or an alleged mistake resulting in additional tax could turn up at your door on a Saturday evening to demand an explanation, just as you are about to have dinner with your children.
In that situation, you can apply for a postal address at a virtual office. You continue working from home, but the new address appears in the KvK Business Register, on your website and in your correspondence. Your home address remains private. For more information about applying for a virtual business registration address, contact MrKantoor.nl. You can find more information about business address providers here.
