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What legal form should you choose for your business?

Would you like to set up as a self-employed worker or start your own company?

Before setting up your business, you should ask yourself a number of questions in order to refine your project. Below is a not exhaustive list:

  • What activities will you offer?
  • Analyse your market position
  • Market your idea
  • Organize your company
  • Finance your project
  • .

Definition of a self-employed worker

First of all, what is the definition of a self-employed worker?

Self-employed workers are those who engage in professional activity in Belgium for which they have no employment status or have not signed an employment contract. There is no subordinate relationship. The person is not an employed worker or government employee.

There are two options if you want to work as a self-employed worker:

  • the individual company (self-employed as a natural person);
  • the company (legal person).

 

If you decide to work using the legal form of a company, you have to make sure to choose the most appropriate type of company. You can contact experts like a notary public, lawyers, accountants,. and ask their advice.

A company is formed by a contract on the basis of which two or more people agree to put something in common ownership with the aim of carrying on one or more well-defined activities and with a view to obtaining a capital advantage for the partners, whether directly of indirectly.

Types of companies

There are different types of companies, the most common types are the Private Limited Liabilty Company (PLLC) and the Public Limited Company (LLC). For more detailed information, please see the Belgian Companies Code.

1)      Private limited liability companies are generally considered the best legal form for small or medium-sized businesses:

  • Only two persons are required to create it, except in the particular case of one-person private limited companies which may be created by a single associate;
  • A PLLC must be established by a notarised deed (deed of sale)
  • A PLLC is a separate legal person which is distinct from the associates. It also has its own assets;
  • It is a private company: associates may not freely sell their shares to third parties (except where allowed by law);
  • It is a limited liability company: associates are only responsible for the amount of their contribution. In case of bankruptcy, creditors have no claim to associates' own assets. However, there are exceptions to this rule for company founders;
  • The minimum capital required is EUR 18,550

2)      The starter private limited liability company has all the characteristics of the classic PLLC, except that there is no minimum capital requirements: you can set up a Starters-PLLC with capital of just 1 euro. However, there are a few conditions. A Starters-PLLC cannot exist for more than 5 years. Five or more employees may never be employed full-time. 25% of the profit must be transferred to a reserve every year.

 

3)      A public limited company is a company in which at least two shareholders are prepared to invest capital.

This type of company is preferable if large amounts of capital are required, as the company may call upon new sources of external capital or launch an initial public offering.  This allows for fast business growth.

Characteristics

Unlike partnerships (SPRL, SNC, etc.), the shareholder does not, in principle, play a significant role in a limited liability company. An LLC is commonly called a "capital company" because it is founded using start-up capital.

The company is created for an unlimited period of time (unless otherwise agreed).

     Advantages

  • The responsibilities of associates/shareholders are limited to their start-up contribution.
  • Bearer shares are transferable.
  • All shares are in registered form until they have been fully paid up.

    Disadvantages

  • A limited liability company must be established by a notarised deed (deed of sale).
  • The "family-owned" character of the company is lost (shareholder anonymity and freely transferable shares).
  • The decision-making process is complex (board of directors).
  • An LLC is required to meet all accounting and administrative requirements.
  • The amount of required start-up capital is high: minimum of EUR  61,500.

 

4)      Cooperative company with limited or unlimited liability

This is a flexible legal structure which does not require notarised deeds or minimum capital. Associates of these types of companies are jointly responsible for the commitments made by their company.

 

5)      General partnership

A general partnership is a company of persons whose object is to engage in a civil of commercial activity under a common name. There is no legal minimum capital. Its existence is linked to its associates. This type of company requires few administrative formalities, but it remains less commonly used because the associates have joint unlimited responsibility for the company's commitments.

 

6)      Simple limited partnership

There are "active" partners and "limited" partners or providers of capital. Unlike the active partners, who are liable without limit, the limited partners have limited liability.

 

7)      Partnership limited by shares

A partnership limited by shares is a type of limited partnership. It involves two types of associates: limited partners, who provide capital and shareholders.

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