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Having employees to participate in your company

To grow your business, you need good staff. But high salaries and/or bonuses are not always immediately possible. A solution may be to allow employees to participate in your company. That way you can keep them committed to you without sacrificing your cash flow.

The three most common forms at a private limited company are: providing stock options, shares or a bonus linked to the value of shares.

1. Stock options

A stock option gives an employee the right to buy shares in the employer's company at a predetermined price (the strike price). If the shares increase in value, the employee benefits because the value of his stock option increases.

The option benefit (difference between the value of the shares and the option strike price) is taxed to the employee as wages at the time the options are exercised or disposed of.


A second way to allow employees to benefit from the growth of the company is to issue shares. An employee is entitled to 'free' shares in the employer's company after certain (performance) conditions have been met.

For the employee, the value of the right is taxed as wages at the time it is unconditionally acquired. Optionally, you could consider placing the voting right with a foundation - of which you form the board.

3. Bonus linked to the stock value

A Share Appreciation Rights (SAR) agreement entitles an employee to a bonus, the amount of which depends on the increase in the value of the company's shares. Basically, a kind of "virtual share”. There is neither direct nor indirect actual participation in the company.

For the employer, the major advantage is that the costs involved in the settlement of the SAR are in principle deductible from corporate income tax for the employer. For the employee, the benefits from a SAR are taxed as wages at the time they are paid out.


For all of the above options, the conditions must be carefully formulated to avoid adverse tax consequences. CourtLane is happy to assist you with that.

Would you like employees to participate in your company?

Structuring your business in a company or in sole proprietorship/general partnership?

Most companies start as sole proprietorship or general partnership because of start-up advantages and cost efficiency. As cash flows increase, a private limited company may be chosen for commercial and tax reasons. If starting up your business with a private limited company is interesting for you depends on the investment value, the business risk and the future outlook.


The biggest difference between the sole proprietorship or general partnership and a private limited company is in its liability. A private limited company is a legal entity, an independent legal body. Liability remains limited to the assets of the private limited company. The liability of the shareholders is limited to the value of the shares. They cannot be held accountable by creditors.

Unlike the private limited company, the sole proprietorship or general partnership are not legal entities. The partners are personally and/or jointly and severally liable for debts of the company.


The private limited company is liable to pay corporate income tax on its profits (2022: 15% on the first € 395,000, 25.8% on top of that). If this profit is distributed to the shareholder, the shareholder as a natural person is liable to pay 26.9% tax.

A director is employed by his B.V. and is required by law to pay a minimum income to itself (2022: € 48,000 per year). Wage tax is withheld from the income (salary) (2022: maximum 49.5%).

In the first few years of the start-up company, the director-major shareholder (DGA in Dutch) can request the tax authorities to moderate this mandatory salary payment. This may be wise if substantial investments need to be made in the first few years, the director-major shareholder works part-time, or because the business does not yet generate much turnover. (turnover or revenue)

The income generated from a general partnership or sole proprietorship will be taxed on the partner (2022: maximum 49.5%). On the other hand, the general partnership or sole proprietorship can take advantage of a number of tax benefits, such as the self-employment and start-up deductions and the 14% SME exemption, reducing the effective tax rate.

The turning point, when it is fiscally interesting for a private limited company choice depends on a number of circumstances. Such as your net income needs, the profit capacity of the company, the presence of a business car and the need for private financing.

Looking for advice on what is best for your company? Contact us.

Structuring your business as a Partnership or a Sole proprietorship

Company car or a private car?

Many entrepreneurs wonder: Is it cheaper to keep the car at the company or is it better to drive it privately? The answer to this question is not so easy, because it depends on a number of factors:


  • Depreciation and financing costs

  • Maintenance and insurance costs

  • Motor vehicle tax

  • CO2 emissions from the car

  • Age of the car

  • List price and purchase price

Do you have a sole proprietorship or general partnership? Then you can usually choose whether you include the car as part of your business assets or as part of your private assets. If you drive up to 500 kilometers per year privately, then you must include the car as part of your company assets. Do you drive less than 10% of the kilometers for business purposes? Then you must include the car as part of your private assets. A car registered in the name of the private limited company is in principle always business assets.

The advantage of a company car is that the VAT can be settled and the cost ex VAT are deductible. Investment and environmental investment deductions can also be claimed for certain cars.


The disadvantage of the company car is that any sales profit is taxed and an addition must be made for the private use of the car.


What is most favorable(beneficial) for your situation? Contact us

Company car or private vehicle?

Want to build up your pension favorably?

As an entrepreneur, you are in principle not included in the mandatory pension schemes except for the general old-age insurance (AOW in Dutch). There are various ways to build up a pension to supplement the AOW. Some are:

1. Build up an annuity through a bank, insurer or investment institution. The premium you pay for       an annuity is tax deductible to a certain extent.


2. Within your company (sole proprietorship or general partnership) you can reserve an amount to     purchase an annuity insurance policy. The accrual is tax deductible, the benefit is taxable.

3. If you decide to stop your business, it is possible to convert the discontinuation profit into an annuity. This prevents you from having to settle directly with the tax authorities. And you can use the annuity capital later for your pension. However, there are number of conditions attached to this.


4.Build your own wealth by saving or investing money. The advantage is that you can get your money at any time. This is less attractive from a tax perspective; in principle, you pay capital gains tax every year. In addition, this capital is not safe from the social assistance test, should you ever have to rely on it.

5. Pay off mortgage loan. The advantage is that this way you have lower housing costs at the time of your retirement. And having your own house that has been (partly) paid off gives you a feeling of freedom. Also realize that the equity in your home is not safe for the social assistance test. And finally, realize that if paying off your house is the only thing you do for retirement, your entire retirement investment is in one piece of real estate. And that is risky.


Which way suits you best? Together we will look at your situation, both business and private. We make a financial plan for the required amount and how you can build it up in installments.

How to build up your pension favorably?

Transfer of assets to your children?

You can already save inheritance tax by jointly thinking about a donation plan. It is good to know that the gift tax rate is at first glance the same as that of the inheritance tax. Nevertheless, donations can be more tax-efficient than inheritance.


The purpose of a donation plan is to gradually transfer (part of) the assets of the parents to the future heirs during their lifetime. This caps the rate and makes it possible to take advantage of the gift tax exemptions.


You prefer to give with a warm hand rather than a cold one! From an emotional point of view, it is wonderful to be able to let your children enjoy gifts, and to actually experience this yourself.


Family fund

Many parents want to transfer their assets to the next generation, but still retain control. One of the options is a family fund. Here are three advantages of a family fund:

1. Control over assets is retained over donated assets.

If you are the director of the foundation yourself, you have control over the assets in the family fund. You then donate the participations in the fund to the (grand)children, who then gain economic ownership of the assets. They must pay gift tax on the donation. Although the children are economic owners of part of the assets, they only receive annual payments and the principal amount remains largely intact.


2. Teaching children how to handle assets.

The children are thus introduced to "the world of investing" under your guidance. In addition, they learn that although they are economic owners of part of the assets, they only receive annual payments and the principal amount is largely maintained. In fact, because the family fund is fiscally transparent, each adult child must declare the value of the units in Box 3. For minor participation holders, the parents indicate the value of the participations to their own Box 3 assets.

3. The assets remain together even after the donation of the participations.

As a result, the size is larger than with a split-up and more investment options available.. Asset management costs can also be lower than when working with several smaller deposits.


Paper donation
The advantage is that the property remains available for subsistence purposes. However, interest will have to be paid annually to the children on the gifted claim.


Asset transfer linked to a business transfer
s the wealth transfer linked to a business transfer? Then the matter is a bit more complex. Ensuring the continuation of the business is the first priority in the advice from CourtLane.

The key question? What assets must be left behind to live on and how is this shaped? CourtLane is happy to be your personal advisor in this. Contact us.

Transferring assets to your children?
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