Cooperative

What is a cooperative?

A cooperative is a form of association in which at least 2 people work together. You benefit from the advantages of a collective such as joint marketing and purchasing. And if one member becomes ill, the other member(s) can take over the work.

The cooperative consists of members. Members can enter or leave the cooperative without jeopardising its continued existence. This is different from, for example, a general partnership (vof) or professional partnership (maatschap), where partners are not allowed to just leave. The most important decisions are taken at a general meeting of members (Algemene Ledenvergadering, ALV).

Board of directors

One of the ALV's tasks is to appoint a board of directors to manage the cooperative's affairs. The board is mostly made up of members and enters into agreements with and for the cooperative. All members have voting rights. The general meeting may decide to also appoint a supervisory board. This must be set out in the articles of association (statuten). A supervisory board monitors the board of directors. It is not mandatory to appoint a supervisory board.

Profits

You distribute the cooperative’s profit in proportion to the work that a member has carried out for the cooperative. The members make agreements about this themselves. Members can bring money into the cooperative through separate member accounts. This member capital is not tradable, unlike shares in a private limited company (bv).

Two common forms of cooperative are the business cooperative (bedrijfscoöperatie) and the entrepreneurs' cooperative (ondernemerscoöperatie).

Business cooperative

A business cooperative supports the business interests of its members in certain areas, for example, procurement, advertising, or jointly processing products in a factory. Well-known examples in the Netherlands are the large dairy cooperatives. The members are affiliated dairy farmers who share in the cooperative's profits.

Entrepreneurs' cooperative

The members of an entrepreneurs' cooperative work independently but can also join forces to take on certain projects. This legal form is ideal for self-employed people without their own employees (zelfstandige zonder personeel, zzp'er). Members can take on assignments or projects that they would not be able to tackle on their own. This also has benefits for the customer who then has a single contact person. An entrepreneurs' cooperative is ideal for small-scale and/or short-term collaborative ventures.

Setting up a cooperative

You can set up a cooperative with 1 or more members. You must get a civil-law notary to draw up a notarial deed including the articles of association. The notary then usually takes care of registering the cooperative in the KVK Business Register (Handelsregister). You do not need startup capital. You pay a fee to register with KVK. The costs for incorporation by a notary are not fixed and range on average from €500 to €1,000.

All directors must be registered in the Business Register. Do you act on behalf of the cooperative before it is registered? Then you are personally liable.

Foreign co-operatives

If you run a cooperative abroad and want to start a branch office in the Netherlands, you do not need to register at KVK. This is not necessary for a branch as the foreign legal structure is recognised in the Netherlands. If you want to start an independent subsidiary of your foreign cooperative in the Netherlands, you do have to register a Dutch legal structure at KVK. This can be a cooperative, but you can also opt for another legal form. Read more about Setting up a branch office or subsidiary in the Netherlands.

UBO register: report your UBOs

Most businesses that register in the Dutch Business Register (including several European legal structures) have to include their 'ultimate beneficial owner(s)' or UBOs in the UBO register. For more information see the article What are UBOs?

Administration

You are legally required to keep records. A cooperative must file financial statements with KVK. The information you have to submit depends on the size of your cooperative. The average annual administration costs range from €600 to €1,800.

Taxes

The cooperative’s profit consists of 2 parts. The first part comes from members’ activities and is 'distributed profit’ (verlengstukwinst). This profit is shared proportionally by the members. So if a member did a third of the work, they get a third of this distributed profit. The second part is the profit of the cooperative itself.

Distributed profit

Members with a sole proprietorship pay income tax (inkomstenbelasting) on the profits that they make from their business. This includes their distributed profit from the cooperative. The Netherlands Tax Administration only considers you an entrepreneur if you also have other clients. If the Tax Administration regards you as an entrepreneur for income tax, you are entitled to an SME profit exemption (mkb-winstvrijstelling). If you also meet the hours criterion, you are entitled to more tax benefits, such as the private business ownership allowance (zelfstandigenaftrek). Starters may also be eligible for tax relief for new companies (startersaftrek). Read more about tax deductions and tax schemes.

Corporate income tax

The cooperative itself also makes a profit. A cooperative has to pay corporate income tax (vennootschapsbelasting) on its profits.

Are you a member of a cooperative with a private limited company (bv)? And do you receive distributed profits from the cooperative? Then the cooperative pays corporate tax on the profits distributed to you. Your bv can use the participation exemption scheme (in Dutch). This means your bv will not have to pay corporate tax on the profits received.

VAT

If the cooperative's activities are subject to VAT, it will get a VAT identification number and a VAT tax number from the Tax administration. The cooperative then charges and remits VAT. In addition, individual members may also be entrepreneurs for VAT. If that applies to you, you charge VAT when you invoice the cooperative. Whether you are an entrepreneur for VAT depends on your specific situation.

Director’s salary

As a director, you may be employed by the cooperative. The cooperative deducts payroll tax from your salary. Do you have 5% or more voting rights in the members' meeting? Then you have a ‘substantial interest’ and the customary pay regulation applies to you. This means you may not receive no or very little salary. Your salary must be in line with the market rate. Read more about the exact rules and conditions of the customary pay regulation (in Dutch).

Liability

A cooperative is a legal entity, which means that its directors are not usually liable for any debts. There are exceptions to this rule. For example, mismanagement, negligence, or failure to list the cooperative in the Business Register.

Read more about directors' liability.

You agree when setting up the cooperative whether or not members are liable. There are 3 options to choose from:

• UA: Cooperative with excluded liability (coöperatie met uitgesloten aansprakelijkheid). Members are not liable for any debts. This also applies after bankruptcy.
• BA: Cooperative with limited liability (coöperatie met beperkte aansprakelijkheid). Members are liable for debts up to an agreed amount.
• WA: Cooperative with legal liability (coöperatie met wettelijke aansprakelijkheid). Members are equally and jointly liable for shortages of the cooperative.

If you choose for WA or BA, the board has to submit a list of its members to KVK every year. This way, creditors know who they can claim their money from.

Signing authority

The board as a whole is authorised to sign. This means that members may either jointly or individually sign contracts or perform certain legal acts on behalf of the cooperative, such as reporting a change in the Business Register. These agreements are laid down in the articles of association.

The board can also choose to appoint power of attorney to someone else. This person is then authorised to act on behalf of the company. It can be useful to register this person in the Business Register. This way your business partners also know who is allowed to act on behalf of the company.

Personnel

A cooperative can employ staff. You then have to pay payroll taxes and social contributions for your personnel. If you are hiring an employee for the first time, you must register as an employer with the Tax Administration. You must also report this to KVK. Read the checklist Employing staff in the Netherlands for more information.

Social security and national insurance contributions

As a member of a cooperative, you are entitled to a basic old-age pension (AOW) when you reach retirement age. You must supplement this pension yourself. Start as soon as possible to keep your contributions affordable.

Since you are not an employee, you are not entitled to any of the benefits available to regular employees, such as sickness, unemployment, or disability benefits (ziektewet, WW and WIA, respectively). It is up to you to take out disability insurance as soon as you start your business. If you are pregnant, you are entitled to maternity pay for 16 weeks or more. You can apply for this at the Employment Insurance Agency (UWV). Read about the terms and conditions for maternity pay.

Health insurance is mandatory and basic cover is sufficient. You pay a premium to your health insurance company and a contribution as part of your tax return.

Depending on your type of business, it can be wise to take out additional insurance.

Ending a cooperative

When dissolving your cooperative, you require a formal decision from the general meeting of members. A cooperative ceases to exist once all outstanding debts are paid. This is called vereffening in Dutch.

Read more about the dissolution of a legal entity.

Mutual insurance society

The mutual insurance society (onderlinge waarborgmaatschappij) is a cooperative in which the members make insurance agreements with each other and the company, so that all members can profit from the agreements. A mutual insurance society has the same characteristics as a cooperative and you register it in the Business Register in the same way.