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 to a BV: by means of an asset-liability transaction, a smooth contribution or a silent contribution. This article is about the third option.
Silent contribution
If the EZ still has a decent value, such as accrued reserves, goodwill or real estate, or if you have not yet or not fully made use of the investment deduction or if a fiscal old-age reserve (FOR) has been built up, the discontinuation profit can increase and the tax consequences can become significant. To avoid the discontinuation profit, it is best to opt for a silent contribution. An important condition for the silent contribution is that you are not going to sell the company for the next three years. If you do that anyway, the discontinuation profit comes into play again and you still have to settle with the tax authorities.
Although you are not allowed to sell your company for three years, you are allowed to issue shares to add new shareholders. Keep in mind that you also need a notarial deed for this.
When setting up a BV, the prospective shareholder pays money to the BV for the shares. This is called full deposit and must also be reported to the KvK (Chamber of Commerce). When converting an EZ to a BV, you do not pay with money, but with the EZ to be contributed. You are, as it were, handing in the EZ for shares. A notarial deed is also required for this contribution. All in all, the notary earns a lot from the conversion from EZ to BV, especially with the silent contribution.
If you do not yet have an EZ and are considering setting up a BV without the contribution of an EZ, that is a lot easier and cheaper than the detour via an EZ. I know many entrepreneurs who sighed that they should never have started an EZ or a VOF (general partnership), but would have started a BV right away with the knowledge of now.
In previous articles I have described the asset-liability transaction and the smooth contribution. This is the third article about the conversion from EZ to BV. A final article follows with a brief summary of all three conversion options.