What is a sole proprietorship?
A sole proprietorship has a single owner. There is no legal separation between you and your business: business debts can affect your private assets. You can have multiple activities or trade names within a single sole proprietorship. KVK passes on your registration details to the Tax and Customs Administration. It assesses your position for VAT and income tax separately; registration alone does not entitle you to entrepreneurial deductions.
Difference between sole proprietorship and zzp
A sole proprietorship is an official legal form, similar to a bv or vof, for example. Zzp'er is not a legal form, but a term for working independently without staff. In practice, most self-employed people choose the sole proprietorship, because it is quick and cheap to arrange and fits well with small-scale entrepreneurship. Want to know exactly what the difference is between these terms? Then read our article on the difference between zzp, sole trader and freelance.
Can I hire staff?
Yes, you can. The name sole proprietorship only says that there is one owner. You can hire unlimited employees. Once you do, you become an employer and pay payroll taxes and contributions. The legal form does not change in the process: you remain the sole owner and fully responsible.
Setting up a sole proprietorship in five steps
Prepare the registration as follows:
- Preparing: Choose activities, company name, visiting address and start date. Check the name and any permits.
- Complete online: Fill in your details via the Chamber of Commerce. Gather a valid identity document and the address documents that the Chamber of Commerce asks for in your situation.
- Complete registration: follow the KvK instructions for the appointment and check.
- Retaining documents: keep your Chamber of Commerce details and letters from the Tax and Customs Administration regarding numbers and filing obligations.
- Starting administration: standardise how you record invoices, payments and business expenses.
Read the precise procedure at Registering with the KVK as a sole trader.
How much does it cost to start a sole trader business?
The Chamber of Commerce registration fee in 2026 is €85.15. That is not your entire starting budget. Also budget once-off for equipment, interior fitting and a website. Recurring costs can include a bank, software or accountant, insurance and a workplace.
Read what a bookkeeper cost and look the package from €70 per month excluding VAT and the conditions.
Benefits of setting up a sole proprietorship
You set up a sole proprietorship without a notary. You decide by yourself and do not have to file annual accounts with the Chamber of Commerce (KVK). However, you must keep records and generally draw up a balance sheet and profit and loss account for the calculation of fiscal profit. Tax benefits only apply if you meet the conditions of the relevant scheme.
Disadvantages of sole proprietorship
You are personally liable for business debts. Your entrepreneurship does not provide automatic employee protection. Research how you will cover loss of income and build up supplementary pension, and whether a mandatory scheme applies to your profession. Profits fall into Box 1; the amount you pay depends on your overall situation.
Liability and debts
If your company gets into debt or goes bankrupt, you are fully responsible. If you are married in community of property, your partner's assets can also be claimed. This risk makes the sole proprietorship less suitable if you make large investments or commitments. For more protection, entrepreneurs often later switch to a private limited company.
Tax matters
If you start a sole proprietorship, you will have to deal with tax. The two main types are the income tax and the sales tax (VAT). The tax authorities see your profit as personal income, on which you pay income tax. In addition, you usually have to charge VAT on your invoices and remit it neatly.
Income Tax
The taxable profit, with applicable corrections and deductions, forms part of box 1. The tax band rate applies to the income within that band, not automatically to your entire turnover. Other income, deductions and tax credits also play a part.
Tax benefits
For self-employed deduction and normal start-up deduction require, among other conditions, that you are an entrepreneur for income tax purposes and meet the hours criterion, alongside additional conditions. For the SME profit exemption the hours criterion does not apply. Check per scheme what applies to you.
VAT (sales tax)
Your VAT treatment depends on your activities and any exemptions or schemes. The Tax Authorities determine your return period. That is often a quarter; check the period and the deadline in your business portal. In the return, you process VAT due and the input tax that you may deduct.
Small business scheme
With a maximum turnover of €20,000 per calendar year and the other conditions, you can opt for the small entrepreneur scheme (KOR). It is about turnover, not about profit or what you have left over privately. You do not calculate VAT and do not deduct input tax. Sometimes you do have to file a return occasionally.
Do I need a bookkeeper?
An accountant is not compulsory, but it is wise. Deductions and VAT rules in particular can be complicated. An accountant will help you avoid mistakes, make the best use of tax benefits and save time. At Van Passe we take this completely out of your hands, so you can focus on your business.
Sole proprietorship or private limited company
The choice depends on risks, expected profit, desired income and additional costs:
| Section | Sole proprietorship | Private limited company (BV) |
|---|---|---|
| Liability | You are personally liable | Usually the legal entity; personal liability can arise, for example, in the event of wrongful management or by co-signing privately |
| Establishment | Chamber of Commerce, without a notary | Chamber of Commerce and notary; request a quote |
| Tax | Box 1, with conditional arrangements | Corporate income tax and potential payroll and box 2 levy |
| Administration | Administration and annual tax accounts | Additional obligations, including annual accounts and filing |
There is no general break-even point that applies to everyone. Also compare director-owner salary, dividend, profit retained in the bv and additional costs. Read the explanation of the private limited company (BV) at Ondernemersplein.
Frequently Asked Questions
What is the difference between self-employment and sole proprietorship?
A sole trader is a legal form, zzp'er is a term for working independently without staff.
Is a sole proprietorship a legal entity?
No, you yourself are legally liable for all obligations and debts.
How much tax do you pay as a sole trader?
That depends on your profit. It falls in Box 1 and is taxed at progressive rates.
When should you convert a sole proprietorship into a BV?
There is no general profit amount at which a private company (bv) is always more advantageous. Compare risks, director-and-major-shareholder salary, dividends, profit retained within the bv, and additional administrative and incorporation costs. A bv does not exclude personal liability in all cases.
