Refactoring my business to start the next ten years
I’m refactoring my business to become the simplest thing that could possibly work for what I’ve been doing for the last couple of years. Developing valuable software and helping others do so.
I was at the chamber of commerce yesterday to change my Inc (Besloten.Vennootschap.) to a personal company (eenmanszaak). Writing down the details of the takeover my personal company does from the Inc, I noticed it was exactly ten years ago, on 27 December 2001 my business started.
Yves Hanoulle suggested I write a short post about it. So here it goes.
The reason I’m de-incorporating my company is that incorporation was doing more harm than good. I originally incorporated to participate in the founding of Seek You Too, since this year better known as Seecr. They are ten years today, because Eric (my then business partner) and I had to incorporate our personal holdings first. Why did we do this? Our then accountant advised us to do so. When we wound our collaboration down in 2004 it did provide somewhat useful as we at least got the basic rules of engagement down in a contract.
Before that we’d already changed accountant. Our new accountant frowned somewhat at the complexity and cost of three Inc’s for two people. But it’s a lot harder to get out of incorporation than it is to get into, probably because it is less common. Apparently when a business grows, it incorporates, and when it fails it is liquidated.
The state where a business is profitable, but the overhead of an Inc is too much is rarer, although the person who handled the registration of my new company at the chamber of commerce said he saw quite a lot of it lately. I scoured the internet for hints on how to unwind a BV, but nothing much turned up. If you’re interested I’ll do a dutch write-up after it’s completed.
If you’re making less than 150.000 Euros in profit after costs and your salary it’s not worth the trouble, unless you need it for other reasons. Paying yourself a minimum salary of about 34000 euros is obligatory here, because the tax man is afraid you’re not going to pay enough taxes otherwise. Pro tip: wind the incorporated company down when you’re still profitable, being incorporated while not making more than your salary + costs sucks. there were many months I had to figure out how to pay income tax while waiting for payments to come in. Luckily I had two very good years, so I could compensate for the losses I made the years before, and I’ll start the next year as simple as necessary. Same name – Living Software – new company.
As I wrote in about the name a couple of years ago, a company is still the best way for me to search for those moments and situations when I am most alive. I’m looking forward to the next ten years!
December 29th, 2011 at 11:19 am
Thank you for writing this down.
Will you explain what are the differences between the two situations? With differences I mean in paperwork, tax etc…
In Belgium the 33.000 euro salary is only needed when you have income. So when you don’t have any income, you don’t have to pay you salary. (The reason to pay the salary is to have a lower taxation, but without income, you don’t pay any tax anyhow.)
)
(Only found that out after a bad year
December 29th, 2011 at 3:18 pm
Yves,
Additional paperwork for a BV : annual report with accountants approval, monthly Salary statement with in ome tax (manual payment, an innovation from a few years ago to ease the administrative burden for companies, before I could do it at the end of the year).
Tax difference: individual company gets ‘independents deduction’ – first 7000 euros are not taxed. Also when you start you get a starters deduction on top of that for the first couple of years. VAT is quarterly as with the incorporated ( or monthly if you generate a lot of turnover per month). Only two kind of taxes, VAT and income instead of three (corporate. The tax sheet is so long I never went through the trouble to understand the entire thing). You can’t run a BV without an accountant, you can run a personal business without. I am going to keep the accountant though, easily gets paid from the items I would otherwise forget to deduct.
Missing features in one person company: run your own pension fund (you are required to go through the insurance mafia that skims the percentage you would otherwise pay in taxes), better liability protection (works only when you are careful).
Chamber of commerce registration also is a bit cheaper, but that is not significant.
December 29th, 2011 at 3:20 pm
Yves, I had to pay salary also in bad years. That meant I would pay the tax, pay some of the salary to me, and the rest was a debt from the company to me. Now the company is profitable it can pay off it’s debt.