Setting up a company - what steps should you take?
Starting out as an entrepreneur, should you do it with or without a company?
It is often one of the first choices an entrepreneur has to make. A lot of starting entrepreneurs opt to start their entrepreneurial adventure as a sole trader. This is often a logical choice: a sole proprietorship is relatively easy to set up and you limit the administrative obligations. However, many entrepreneurs choose to set up a company to separate private assets, limit personal liabilities as much as possible, etc.
So which company form should you choose?
Since the Companies and Associations Code came into force, there are five company forms in Belgium:
- BV: Limited Liability Company
- NV: Public Limited Company
- CV: Cooperative Company
- Maatschap: Contractual partnership
- Companies with unlimited liability: Vennootschap onder firma (VOF) en Commanditaire vennootschap (CommV)
Exactly which one you choose depends on your objectives and expectations. For the vast majority of entrepreneurs, the BV or Limited Liability Company are the legal entity of choice. The BV is characterized by a high degree of flexibility, the absence of a legally required minimum capital, etc.
Since the entry into force of the Companies and Associations Code on 1 May 2019, the BV is the standard company form in Belgium. Reason enough, therefore, to recall the different steps of setting up a Belgian BV.
What steps should I take to set up a BV?
Step 1 - Draw up a financial plan:
A financial plan outlines income and expenses for at least 24 months. The financial plan aims to assess whether the new company will have adequate (financial) resources to sustain operations under normal circumstances during the first 24 months after establishment. The financial plan must contain at least the following elements: a statement of all sources of funding, the opening balance sheet, the projected balance sheet at 12 and 24 months, the budgeted income and expenditure at two years and a description of the assumptions used in estimating turnover and profitability. The financial plan is used to determine the initial funding to be made available to the company. The initial funding can consist of own funds (founder's contribution), funds from third parties (loan capital) or contributions in kind.
The founder of the company must provide the financial plan to the notary. The latter will keep this plan in the incorporation file, it will not be made public. In case of bankruptcy within the first 3 years of incorporation, the court will assess this financial plan and check whether objectively there were sufficient financial resources. If not, the founders of the company could potentially be held liable.
Step 2 - Open a bank account:
Based on the financial plan, the initial funding required by the company is determined. In principle, at least part of the initial capital will consist of a contribution of funds. These funds must be deposited in a bank account of the company (in formation). This deposit must be made before the legal incorporation of the company. The bank must confirm to the notary who will execute the deed of incorporation, by means of a bank attestation, that the funds are available in a (blocked) account in the name of the company under formation.
Without the financial plan and the bank attestation, the incorporation of the company by the notary will not be possible.
Step 3 - Articles of association and memorandum of association:
In consultation with the founders, the notary will draft the articles of association of the new company. The articles of association are the provisions in the company's deed of incorporation that deal with:
- the identity of the founders,
- oname and purpose of the company,
- regulation of general meetings,
- other rules that will apply in the company.
Once the memorandum of association is final, the notary will authenticate the deed of incorporation. The BV (like the NV and CV) can only be incorporated by means of an authentic deed.
What are the following formalities?
Every company is also required to register in the Crossroads Bank for Enterprises (CBE) to obtain an enterprise number and to join a social insurance fund.
In most cases (depending on the specific activities), the enterprise number given to the company in the CBE will have to be activated as a VAT number. This is the same number as the enterprise number, preceded by the prefix 'BE'.
Since the introduction of the new Belgian anti-money laundering law at the end of October 2018, the company's beneficial owners must also be identified and registered in the appropriate register. The basic rule is that a natural person who (in)directly owns more than 25% of the company's shares (or voting rights) is a beneficiary of that company, exceptions may however apply.
Finally, companies wishing to employ staff in Belgium must register as an employer with the National Social Security Office (NSSO). The employer is then given an identification number: the NSSO number.
Finally, depending on the activity of the BV, other registration formalities may be required.
Once all the above is in place, you can get started with your entrepreneurial story!