Creatives with their own company often have a sole proprietorship, the simplest legal form. When should you opt for this form and how does that actually work in terms of liability?
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Who are involved?
If you form a sole proprietorship, you are the owner/boss of the company. You are often referred to as a self-employed person or freelancer in that case. You can also speak of a self-employed worker without employees (zelfstandige zonder personeel, zzp’er) if you work on your own as an entrepreneur. With a sole proprietorship, you can also employ staff.
Who has the capital at his/her disposal and is liable?
The sole proprietorship is not a legal entity. This means that you, as owner, are responsible for the debts of the company with your private assets. If the company goes into liquidation, you are also bankrupt as owner. You are therefore personally liable and there is no distinction between private and business assets. Both the profit and the debts are yours as owner of the sole proprietorship. Debts can mount up and in the worst case you could, for example, lose an owner-occupied home. Fortunately, you can insure yourself, in part, against liability. Another option is to convert your sole proprietorship into a private limited company, as a result of which you will no longer be personally liable.
Switching to a private limited company
The sole proprietorship is a great type of enterprise with which to begin. There will come a time when it is advisable to investigate whether you want to convert your company into a private limited company. If you have a private limited company, you are no longer personally liable. In addition, you will pay tax in a different way, which may be cheaper for you. In most cases, this turning point is if you make around € 100,000 or € 150,000 profit.
Examples of the sole proprietorship
In the arts and cultural sector, a lot of work is project-based and that requires flexible employees. That is why a lot of people work as self-employed persons in this sector, as in that case you can easily accept assignments and work for different clients. Clients may be private customers or other organisations. Your own foundation can also be your client. Many musicians, actors, composers, dancers, directors, technicians, production managers and designers work as self-employed persons in the worlds of film and the performing arts. Visual artists, architects and arts teachers also often opt for a sole proprietorship. In the heritage sector, project managers and heritage specialists, for example, are active as self-employed persons.