If you want to convert your eenmanszaak (sole proprietorship, hereafter EZ) into a BV (a limited company), there may be issues that you have not thought about before. There are three ways to contribute an EZ in a BV: by means of an ‘asset-liability transaction’, a ‘smooth contribution’ or a ‘silent contribution’. This article is about the first option.
Assets/liabilities transaction
The asset-liability transaction is the fastest and easiest way to move from an EZ to a BV, but not always the cheapest.
You make a sum of all assets and all debts of the EZ. Possessions are, for example, all the stuff in the office, all the computers, the goodwill or the machines that you have in your EZ, but also your stocks, the money in all your bank accounts and the money you still expect to receive from customers. With debts you have to think of loans that you still have to pay off and the suppliers you still have to pay. By adding up all assets and subtracting all debts, you arrive at a total. The company must pay this amount upon acquisition. In addition, you still have to calculate the ‘discontinuation profit’; that is the difference between the tax value and the actual value of your company at the time of termination.
If you subsequently set up a BV at a notary, the BV can pay the total of all assets and debts to the EZ to be dissolved. The BV must therefore have money or borrow money to be able to pay it. Once the EZ has received the money, you can close it. Do not forget that you still have to settle with the tax authorities, both the money you received from the BV and the discontinuation profit.
Calculating the discontinuation profit is often difficult; you must declare the discontinuation profit in your income tax return. If you have received a lot of money from the BV or if the discontinuation profit is considerable, this can lead to a high tax sum. To calculate the discontinuation profit, it is advisable to engage an advisor, such as a tax specialist or a civil-law notary.
An asset-liability transaction is only beneficial if the goodwill is low, if you have few reserves, if you have no real estate on the balance sheet, if you have not made use of the investment deduction and if you have not built up a taxable retirement reserve. If so, the smooth or silent contributions are better options.
In subsequent articles I will discuss the ‘smooth contribution’ and the ‘silent contribution’.