Convert one-man business to eg: how to do it!

The one-man business is a popular legal form among start-up entrepreneurs. But sometimes the moment comes when, due to growth, you want to transform your one-man business into a private limited company. How to approach it?

As a starter, you choose a one-man business because this legal form has many tax benefits for starters. Think, for example, of self-employment deductions, SME profit exemption and start-up deductions. And if you really want to keep it small, you can take advantage of the simplified small business scheme.

Why convert one-man business to e.g.

But if it goes well and you continue to grow, it can become attractive to choose a BV instead of a one-man business. Why can a BV be more attractive than a one-man business?

  • More fiscally attractive with higher profits (> € 150,000)

  • Low personal liability (because BV is a legal form with legal personality)

  • Clear organizational structure

  • Risk diversification (using several BVs)

  • Continuity better facilitated

  • For example, after your company name is good

In short, for the more ambitious entrepreneur, BV is a logical transition from the one-man business. But how does one do that?

Convert one-man business to eg: 3 ways

You can turn your one-man business into a private limited company in 3 ways Which approach is best for you depends on your situation. The 3 ways in a row:

Active-passive transaction

With this method, you discontinue your one-man business and start BV. With an asset-liability transaction, you “sell” the sole proprietorship’s assets and liabilities to the newly established BV. The assets are the assets and the liabilities are the debt of your Company.

The asset-liability transaction is the fastest and easiest way to turn your sole proprietorship into a corporation and a great option if there are no valuable items in your sole proprietorship. The asset-liability transaction is less advantageous if there are (many) hidden reserves and goodwill because you have to pay income tax on them due to termination gains. You may be better placed to choose one of the following options.

Advantage

Disadvantage:

2. Silent input

With the silent contribution, everything is transferred from your one-man business to your new BV, so also added value and reserves. The new company continues with the same book values ​​as the sole proprietorship. In other words: the final amount in the sole proprietorship is the opening balance in the new BV The advantage of this is that you do not pay tax on the profit in your sole proprietorship.

With a quiet contribution from the one-man company to BV, you have a retroactive effect of 9 months. You must then send a letter of intent to the tax authorities before 1 October this year. You then have until 1 April of the following year to set up the BV with the notary.

Advantage:

Disadvantage:

Rattling input

In the case of urgent deposits, the debt and assets are “sold” to the new company. The value is not transferred 1-to-1 from the sole proprietorship, but is deposited at the current market value. Therefore, in this case, the BV starts with new book values, which can then be depreciated.

You can make an emergency contribution with retroactive effect for 3 months. You cease your sole proprietorship for tax reasons. Therefore, just as with the asset-liability transaction, one must settle with the tax authorities.

This method is interesting if you 1) want to start your business retroactively and 2) if you plan to sell the business within 3 years. With an urgent contribution, there are no restrictions if you want to sell your business.

Important to know: If you want to bring in the one-man business without interruption, and you want to do so retroactively from 1 January, you must submit a letter of intent to the Danish Tax Agency before 1 April. With this method, you save tax because the results you then post end up on the BV’s balance sheet. In addition, you do not have to keep separate administration and annual accounts for the first months of the year. You then have until 1 October of the same year to arrange everything: the establishment of the BV and the contribution from the one-man business in the BV.

Advantage:

Disadvantages:

What does it cost to convert to BV?

To create a BV, go to the notary. There are costs involved. So you should at least take into account notary fees (from € 350). But in addition, you also have costs such as preparing a letter of intent (in case of quiet and silent input) and possibly advice from a financial adviser.

How do you convert your one-man business?

The active-passive transaction is the fastest, easiest and therefore most popular method. But that approach is less attractive from a tax perspective if you have a lot of added value in your one-man business. The silent contribution is more interesting if you have built up more reserves and goodwill, because you do not have to settle for these reserves and goodwill for tax purposes. In practice, the rattling input is chosen the least. As with the asset-liability transaction, you must settle the termination profit, but you can use this form retroactively for 3 months and easily sell your business. In short, if you are turning your sole proprietorship into a private limited company, get good advice on which method best suits your situation.

Author

Job Jansen

As a freelance copywriter and SEO consultant, I have almost daily contact with companies. Over the years, I have worked with countless inspiring entrepreneurs, which has given me a great affinity with SMEs. Based on that experience, as an editor at MKB Servicedesk, I try to write articles that are really useful for entrepreneurs.

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