Limited Liability Company (Ltd)

A practical alternative, legally equivalent to the Dutch BV

The English Private Company Limited by Shares (Limited of Ltd) has to be recognised and allowed as a legal person in all EU member states (directive 68/151/EEC of the Council of the European Communities.

The Dutch government has tried to prevent this by applying the BV's € 18.000 minimum capital requirement to the English Limited that is registered in the Netherlands by enacting the "Law on Corporations that are Formally Foreign" (Wet op de Formeel Buitenlandse Vennootschappen). However, in a remarkable case, the European Court of Justice reproved the state of the Netherlands on the issue. Since its judgement [Kamer van Koophandel en Fabrieken voor Amsterdam v Inspire Art Ltd., Case C-167/01, September 30th 2003] the Limited can be used without risking any challenge to its use by the Dutch government.

Benefits

  • Full legal equivalence to the Dutch BV.

  • No € 18.000 minimum capital requirement.

  • Shareholder's liability limited to the minimum capital requirement of 1 British Pound. (In practice we usually issue one hundred shares of 1 Pound each, to accommodate more than one shareholder.)

  • Low formation costs.

  • Short formation period of up to two working days.

  • Prospective BV-founders are not subject to an often protracted screening procedure (antecedentenonderzoek) to obtain the so-called verklaring van geen bezwaar from the Ministry of Justice; bankrupt persons are not barred from setting up a Limited.

  • Any share transaction or change in the articles of association can be effected swiftly and cheaply by private contract, without notarial deed.

  • Substantial changes in ownership and management are allowed during the first year. This enables us to sell recent ready-made Limited companies 'from the shelf '.

  • International appeal, a legal form well-known the world over, recognised in all EU member states.

All the following traditional BV advantages apply

  • The shareholder's liability is limited to the capital provided at the formation (£100 instead of €18.000). The company's debts cannot be recovered from the director's personal assets either, unless he has acted negligently or in bad faith.

  • Tax on the capital gain on transferring a going-concern business into a BV can be avoided (geruisloze overgang).

  • Ultimately a capital gains tax of 25% is due in box 2 upon the sale of the shares, as against 52% in box 1 over the proceeds from the sale of a sole-proprietorship or general partnership (VoF).

  • The Limited’s profits are subject to Corporation Tax (vennootschapsbelasting) (with a maximum rate of 29,6% in 2006), instead of the personal income tax (inkomstenbelasting) of up to 52%. By not paying out dividends the 25% box 2 tax on dividends can be postponed for years, generating cash flow for growth and investments.

  • Saving for a pension plan in a "retirement" Limited is more advantageous, tax-wise, than using the tax facility available to sole-proprietors (fiscale oudedagsreserve (FOR)).

  • The director can be employed by his Limited; as long as the company does not make profits, the BV need not pay him a salary, nor pay income taxes.

  • The continued existence of the company after the retirement or death of the owner is better safeguarded than in a one-man business or partnership.

  • A business can be transferred by simply transferring the shares without elaborating on the several assets and liabilities.

  • New capital can be raised by issuing new shares.

  • Only one officer or board member is required by law.

  • A Limited can be integrated into a holding structure under a Trust, allowing for tax planning and estate planning, and protecting the company's assets against personal claims. Combined with an English holding company, taxation on income from dividends, capital gains, wealth, and inheritance can be avoided altogether. This makes the Limited fiscally competitive with the sole-proprietorship or general partnership (VoF) at pre-tax profits of € 20.000 and more.

Drawbacks

  • Annual fees (€ 295).

  • Less well known within the Netherlands.

A Limited company operating in The Netherlands needs to meet several important stipulations of English company law:

  • Maintaining a Registered Office in England, a statutory seat registered with the English Chamber of Commerce, where all official mail can be delivered.

  • Paying Companies House’s annual fee.

  • Filing an Annual Return with Companies House, comprising updated details on the directors, shareholders, address, share capital, and business objectives.

  • Filing an Annual Account with Companies House, often limited to a succinct balance sheet.

  • Appointing a Secretary, responsible for filing tax returns and the annual documents mentioned above. For €100 a year we can provide a nominee secretary.

Shelf Companies

With a so-called Shelf Company or Ready-made Company one can start doing business immediately. A shelf company's statutory name can easily be changed to suit your objectives (€ 115). Most clients leave the names unchanged, since they use (free to choose) trade names; besides, many Limiteds merely serve as a holding company. The obligatory mention of the statutory name on company documents is usually done in small print in the lower margins, while the trade name figures more prominently in the letterhead.

We strongly advise against ever buying a used Shelf company because the company may have been exposed to unknown risks which might lead to claims in the future. All our Shelf companies are new, never used, and free of debt or (fiscal) claims. We form and maintain them ourselves, leaving them dormant on the shelves right until we hand the papers over to you; most of them are a few weeks to a few months old. Also, we sign a declaration of indemnity, which is our guarantee that the companies have never been used in the past.

Costs

€ 600, including all formation costs, first year’s costs for the statutory headquarters (our registered office in Kent), the handling of Companies House's mail, the filing of annual accounts and annual returns in England, and the annual contribution to the English Chamber of Commerce. For these services we will invoice € 295 per annum from the second year onwards.

Limited Liability Partnership (LLP)

A UK Limited Liability Partnership is a Corporate body: it has a continuing legal existence independent of its Members.

A UK LLP's members have a collective ("Joint") responsibility, to the extent that they may agree in an "LLP agreement", but no individual ("several") responsibility for each other's actions. As with a limited company or a corporation Members in an LLP cannot, in the absence of fraud or wrongful trading, lose more than they invest.

A UK LLP is tax transparent, that is to say it pays no UK tax but its Members do in relation to the income or gains they receive through the LLP. It is a unique entity in its synthesis of collective and individual rights and responsibilities and its infinite flexibility - there is in fact no requirement for the LLP agreement even to be in writing because simple partnership-based regulations apply by way of default provisions.

Recently, the UK LLP legislation was closely replicated by the financial centres of Dubai and Qatar.

Home