A holding structure is an attractive option for many entrepreneurs looking to protect their assets and operate in a tax-efficient manner. However, setting up such a structure often raises questions: what exactly does it involve, and when is it advisable to take this step? In this blog, we explain what a holding structure entails, when it may be beneficial for you and which steps are required to implement it.
A holding structure consists of at least two private limited companies (Dutch: besloten vennootschappen, BVs). The top company — the holding company — holds all shares in the underlying operating company, where all operational activities take place. The holding company itself does not conduct operational activities, but acts as a manager of assets and shareholdings.
A holding structure becomes particularly attractive when one or more of the following situations apply.
Asset Protection and Risk Diversification
By placing operational activities in one or more operating companies, the assets held by the holding company remain protected in the event of bankruptcy of one of the operating companies. The holding company’s assets — such as accumulated profits or real estate — are not affected and cannot be used to satisfy the creditors of the operating company.
Tax Benefits on Profits
The Dutch participation exemption allows dividends from the operating company to be transferred to the holding company without being subject to corporate income tax. This can result in significant tax benefits, particularly when selling shares in an operating company. Once the operating company generates structurally more profit than you need privately, it can be beneficial to retain the surplus in the holding company. This allows assets to grow without immediate taxation. If you ultimately wish to receive the profits privately, income tax in Box 2 will be due at the time of distribution.
Flexibility
In addition to a single operating company, multiple BVs can be placed under the holding company, creating separate entities for different activities — such as consultancy, product development or real estate. Each operating company operates independently with its own profits, losses and risks, while the holding company remains the owner of all shares and manages the combined cash flows.
This structure makes it easier to sell, separate or restructure parts of the business, or to enter into collaborations for specific activities.
Business Succession
The structure of a business plays an important role in transferring ownership. Setting up a holding structure at an early stage can make the transfer of a business — including in the context of the Dutch Business Succession Scheme (Bedrijfsopvolgingsregeling, BOR) — considerably more tax-efficient.
Management of Assets
The holding company can manage and safeguard the company’s key assets — such as machinery or business premises — while the operating company or companies focus on day-to-day operations and entrepreneurial risks.
A holding structure is a smart way to organise your business for the future. It offers protection, flexibility and tax advantages — which is why an increasing number of entrepreneurs, from self-employed professionals to fast-growing companies, choose to place a holding company above their operating company or companies.
By securing profits within the holding company and limiting risks to the operating company, you create stability and room for growth. Entrepreneurs seeking professional growth or preparing their business for a sale, investors or expansion will often benefit from considering a holding structure.
To establish a holding structure, at least two BVs must be incorporated: the holding company and the operating company. Dutch law requires the incorporation of a BV to take place by notarial deed. The notary prepares the deed of incorporation for both BVs, including their articles of association. These documents set out, among other things, voting rights, profit allocation, decision-making procedures and any transfer restrictions.
Careful documentation is particularly important where multiple shareholders are involved. In such cases, it is often also advisable to prepare a shareholders’ agreement, in which the shareholders record their mutual arrangements that do not belong in the articles of association or that they prefer to keep outside the articles of association. We would of course be happy to advise you on this.
If you convert an existing BV into a holding structure, the notary will also handle the transfer of shares or the contribution of activities into the new structure.
Do you have questions about setting up a holding structure or would you like to know whether this structure is suitable for your situation? Please feel free to contact Sophie Oude Sanderink or Anneleen Brokking. We would be happy to think along with you.
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