Sole proprietorship or BV: when do you make the switch?

Sole proprietorship or BV: when do you make the switch?

Many entrepreneurs start with a sole proprietorship. That makes sense: it is cheap, simple and low on admin. But at some point you start wondering whether a BV might be smarter. In this article you will read when making the switch is genuinely worthwhile and when you can wait a little longer.

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The most important difference in one sentence

With a sole proprietorship, you and your business are legally one. With a BV, they are not. That sounds simple, but it has major consequences for your liability and your tax bill.

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Reason 1: your profit is high enough

For most entrepreneurs, this is the deciding factor. As a sole proprietor, you pay income tax on your profit. At higher profit levels, that rate rises to 49.5%.

A BV pays corporate income tax:

• Up to €200,000 profit: 19%
• Above €200,000 profit: 25.8%

That is a significant difference. However, you do need to pay yourself a salary as a DGA of at least €58,000 gross per year in 2026. You pay regular income tax on that salary.

The point at which a BV becomes genuinely cheaper is, in most cases, between €100,000 and €120,000 in annual profit. Below that, the extra costs of a BV often outweigh the tax savings.

Note: this is a rule of thumb. Your exact tipping point depends on your personal situation, available deductions and whether you leave money in the BV or take it out to your personal account.

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Reason 2: you want to protect your personal assets

As a sole proprietor, you are personally liable. If your business goes bankrupt or you are held liable for a mistake, creditors can come after your personal assets. Your savings, your car, in the worst case your home.

With a BV, that is different in principle. The BV is a separate legal entity. The BV’s debts are the BV’s debts, not yours personally.

There are exceptions, such as if you personally stood as guarantor or if a court finds that you acted negligently as a director. But in most cases, a BV offers solid protection of your personal assets.

This argument carries extra weight if you:

• Take on large contracts where things can go wrong
• Have or want to hire staff
• Work in a sector with high liability risks such as construction, healthcare or consulting
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Reason 3: you want to keep money in the business

As a sole proprietor, you pay tax on all profit, even if you do not take the money out personally. You essentially pay tax on money that is still sitting in the business.

With a BV, it works differently. You first pay corporate tax on the profit. Want to take money out to your personal account after that? Then you pay tax again via salary or dividend. But if you want to leave the money in the BV to invest or as a buffer, you do not have to settle up until later.

That gives you much more flexibility in how you deploy your money.

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Reason 4: you want to sell your business one day

Thinking about selling your business at some point? Then a BV is almost always smarter. The proceeds from selling shares in a BV are tax-free in the holding company, thanks to the participation exemption.

With a sole proprietorship, you simply pay income tax on the profit you make from the sale. That can rise to 49.5%.

A BV therefore gives you a significant tax advantage when it comes to selling.

When is it not yet necessary?

A BV sounds attractive, but it is not always the smartest choice. Hold off if:

• Your annual profit is structurally below €80,000
• You have just started out and are not yet earning much
• You are still making full use of the self-employed deduction and starter’s deduction
• You run little risk in your work

In those cases, the costs of a BV (at least €1,500 to €3,000 per year) do not outweigh the benefits.

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A common mistake

Many entrepreneurs wait too long. They think a BV is only for large companies. But if your profit has been above €100,000 for several years and you still have a sole proprietorship, you are probably paying more tax than you need to.

On the other hand, we also see people switch too early, purely because it “sounds more professional.” A BV is not a status symbol. It is a fiscal and legal choice that needs to make sense.

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Making the switch: how does it work?

If you decide to make the switch, there are three ways to do it:

Silent contribution (geruisloze inbreng) — you transfer your sole proprietorship into the BV without immediately paying tax on the hidden reserves. You defer the tax settlement.

Asset-liability transaction (activa-passivatransactie) — also known as a ruisende inbreng. You sell the assets and liabilities of your sole proprietorship to the BV and settle immediately with the tax authority. This sounds less attractive but can be advantageous in some situations, for example if you have losses you want to offset.

Stop and start fresh — you close the sole proprietorship and start a new BV without transferring anything from the old business.

Which route suits you best depends on your situation. Read more in our article Silent contribution, asset-liability transaction or stopping: which fits you?

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Quick summary

A BV makes sense when your profit is high enough, you want to protect your personal assets, you want to keep money growing in the business or you plan to sell one day. If that is not yet the case, a sole proprietorship is perfectly fine and often simply cheaper.