As an entrepreneur, you often start small. A sole proprietorship is quick to set up, simple to manage, and fiscally attractive in the early stages. But as your business grows, the question often arises: is it time to switch to a private limited company (BV)?
The answer depends on several factors, such as your profit level, personal situation, and how much risk you’re willing to take. This article explains when it can be fiscally smart to convert your sole proprietorship into a BV, what advantages and disadvantages come with it, and how to make the transition carefully.
1. When is a BV fiscally beneficial?
The tipping point at which a BV becomes more fiscally advantageous is around €105,000 in profit per year (in 2025), based on a minimum required salary (DGA salary) of €56,000 gross per year. Note that this refers to profit, not turnover.
Beyond this level, you’ll often pay less tax with a BV because the tax structure differs.
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Sole proprietorship: You pay income tax (box 1) on your profit, up to 49.5%. You are eligible for deductions such as the self-employed allowance, start-up allowance, and SME profit exemption.
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BV: You first pay corporate tax (19% up to €200,000 and 25.8% above that in 2025). Then, if you distribute profit to yourself, you pay dividend tax (24.5% or 31%).
At higher profits, the combined tax burden for a BV is often lower than income tax, making the BV structure more attractive.
However, this is a rule of thumb — the exact tipping point depends on your costs, deductions, and personal financial needs.
2. The required salary: mandatory income for directors (DGA)
As a director-major shareholder (DGA) of a BV, you must pay yourself a market-rate salary. The Dutch Tax Authority sets this “customary salary” at a minimum of €56,000 gross per year (2025).
This rule exists to prevent entrepreneurs from paying themselves unrealistically low wages to avoid taxes.
Key salary rules:
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It must be at least equal to your company’s highest employee salary.
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It must align with what’s typical for comparable roles in the market.
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It cannot be lower than €56,000 unless you can justify a lower amount.
You’ll pay payroll taxes and social contributions on this income. The higher your salary, the higher the profit level at which a BV becomes fiscally beneficial.
3. Fiscal advantages of a BV
Lower tax at higher profits – Beyond €105,000 profit, a BV may result in lower total tax. The combined corporate and dividend tax rates are often less than the highest income tax bracket, allowing you to retain more profit or reinvest in your business.
Flexible use of profit – You can keep profits within the BV without immediately paying dividend tax. This helps if you plan to invest, save, or grow your business. You can also lend funds to yourself or your holding company (e.g., for a mortgage).
Professional image – A BV appears more established and reliable, which can help attract clients, banks, and investors. It conveys maturity and stability, which is useful for larger contracts or partnerships.
4. Legal advantages of a BV
Limited liability –
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In a sole proprietorship, you’re personally liable for business debts.
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In a BV, the legal entity itself bears liability, protecting your personal assets — unless there’s mismanagement or personal guarantees.
This protection makes the BV structure appealing for entrepreneurs taking on significant contracts, employees, or investments.
5. Disadvantages and obligations of a BV
No more self-employed deductions – You’ll lose tax benefits like:
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Self-employed deduction
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Start-up deduction
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SME profit exemption
If your profits aren’t high enough to offset this loss, your total tax burden could increase.
Mandatory salary – Paying yourself a required DGA salary means monthly payroll taxes, affecting cash flow.
Higher fixed costs – Running a BV is more expensive. You’ll face:
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Notary fees (€600–€1,000) for incorporation
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Payroll administration
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Corporate tax filing
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Annual financial statement filing (KVK)
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Accountant or tax advisor fees
A BV structure typically costs several thousand euros more per year than a sole proprietorship, especially with a holding company.
More complex administration –
A BV has stricter accounting rules, including payroll and corporate tax filings and annual reports. Entrepreneurs with both a holding and an operating BV must manage double bookkeeping.
Less freedom to withdraw money –
In a sole proprietorship, you can freely use business funds privately. In a BV, withdrawals must be via salary or dividends, both taxable. Excessive private withdrawals may trigger tax penalties or a current account issue with the Tax Authority.
6. VAT: no difference between structures
When it comes to VAT (sales tax), nothing changes. Both sole proprietorships and BVs must charge VAT and file quarterly returns. Only the VAT registration name changes, as it’s tied to the legal entity.
7. Other advantages of a BV
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Easier growth and investment: You can issue shares or bring in investors.
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Continuity: The BV continues to exist even if you stop or pass away, which is key for succession.
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Financing: Banks often view BVs as more stable due to their formal structure and annual reporting.
8. Other disadvantages of a BV
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Double taxation: You pay corporate tax first, then dividend tax on distributions.
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Lower personal liquidity: Profits remain in the BV until paid out as dividends.
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More regulation: You must comply with corporate law and report transparently to the Chamber of Commerce and shareholders.
9. Practical tips before switching
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Calculate your real benefit – Compare the total tax and costs of both structures. Include lost deductions, required salary, and higher admin costs.
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Think long-term – A BV pays off if profits grow steadily or if you plan to hire staff or expand.
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Choose the right moment – You can backdate incorporation to January 1 using a declaration of intent (usually filed before October 1).
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Weigh all factors – Liability, reputation, growth plans, and admin load are just as important as tax savings.
10. How Balancify can help
At Balancify, we understand that converting from a sole proprietorship to a BV is a major decision. Our experts help you evaluate financial and tax implications and set up an efficient BV administration.
With our fixed monthly fees, you’ll know exactly what to expect — no hidden costs.
Conclusion
Converting your sole proprietorship into a BV can be both financially and strategically advantageous, especially if your profit exceeds €100,000, you want to limit personal risk, or you seek a more professional image. However, it’s not always the right choice.
A BV involves higher costs, more administration, and mandatory payroll. The decision should be based on facts, not just the desire to pay less tax.
Want to know if a BV is the right step for your business? Balancify can help. Our team of modern accounting experts will calculate your tax advantage, guide your transition, and set up your BV administration properly from day one.
👉 Book a free consultation today and discover how we can bring your bookkeeping into balance — so you can focus fully on growing your business.
