Legal forms and liability
Liability is an important issue for businesses. It means that you have to pay for costs and damages if something goes wrong. The extent of your personal liability depends on the legal form of your business.
Personally liable or not
There are legal forms with and without legal personality. In a legal form without legal personality, there is no difference between your personal property and your company's property. This can mean that you have to use your personal property to pay off your company's debts. And also your partner's property, unless you have made arrangements in advance to avoid that. Legal forms without legal personality are sole proprietorship, general partnership, professional partnership and limited partnership.
In legal forms with legal personality, you are not personally liable for your company's debts. The legal entity is liable.However, there are exceptions. Legal forms with legal personality include the private limited company (bv) and public limited company (nv).
Legal forms without legal personality
Eenmanszaak (sole proprietorship)
The owner of an eenmanszaak (sole proprietorship) is 100% personally liable. So, if you cause any damage, you pay the costs with your own money. If the business goes bankrupt, the owner goes bankrupt too. Are you married in community of property(gemeenschap van goederen)? Then your partner will also be financially liable for debts incurred by the business. You may be able to avoid this by signing a prenuptial agreement.
VOF (general partnership)
In a vof, (vennootschap onder firma) every partner is 100% personally liable for business debts, regardless of which partner incurred them.
CV (limited partnership)
The managing partner of a cv (commanditaire vennootschap) is 100% personally liable. Silent partners can only lose their contribution to the partnership.
Maatschap (professional partnership)
In a maatschap, every partner is usually liable for an equal share. This depends on what was laid down in the partnerschip agreement.
Legal forms with legal personality
Bv, nv, vereniging (association), and stichting (foundation)
In a bv (besloten vennootschap, private limited company), nv (naamloze vennootschap, public limited company), vereniging (association), or stichting (foundation), liability lies with the legal entity itself. So with the bv, nv, association or foundation. Not with the director who signs agreements on behalf of the legal entity. However, there are exceptions to this that could still expose you to personal liability.
Vereniging van Eigenaars, (VvE, Owners’ Association)
In a VvE, the legal entity is liable. Directors are not liable for the debts of the legal entity unless there is mismanagement. The owners within a VvE (the members) may be liable if they cause damage.
Coöperatie (cooperative) and onderlinge waarborgmaatschappij (mutual insurance society)
In a coöperatie or onderlinge waarborgmaatschappij, you as a director are not liable for the company's debts. Unless, for example, you fail to perform your duties properly. The letters used in the acronym of the Dutch name, tell you who is liable:
- WA (Wettelijke Aansprakelijkheid, meaning civil liability among members),
- BA (Beperkte Aansprakelijkheid, meaning limited liability among members),
- UA (Uitgesloten Aansprakelijkheid, meaning excluded liability among members).
Questions relating to this article?
Please contact the Netherlands Chamber of Commerce, KVK