Converting a sole proprietorship into a bv: three routes and timing
Written by Ilias Aarrass7 min read · Last reviewed on 
Written by Ilias Aarrass7 min read · Last reviewed on Many entrepreneurs start as a sole proprietorship, and that is usually right: low costs and generous deductions. But with structurally higher profit or growing liability risk, the bv can become more attractive. The trade-off itself is covered in sole proprietorship or bv; this article covers the next step: how to convert an existing sole proprietorship, the three routes, and why the calendar matters more than many entrepreneurs think.
When converting is worth considering
The tax tipping point sits roughly between 100,000 and 130,000 euros of profit, depending on how much you take out privately. Non-tax reasons also count: limiting private liability with large contracts or staff, retaining profit at the lower corporate tax rate, or building a structure a partner or buyer can later join. Well below the tipping point with limited risk, converting is rarely urgent.
What changes after the switch
Do not count only the rate difference, because more changes:
- You become a director-shareholder and must pay yourself a customary salary, in 2026 normed at € 58,000; see customary salary. That requires payroll records.
- The entrepreneur allowances lapse: no self-employed deduction and no SME profit exemption.
- The bv must draw up annual accounts each year and file them with the Chamber of Commerce.
- You face one-off costs: notary fees for incorporation, advice for the transfer, and somewhat higher ongoing administration costs.
The three routes compared
A sole proprietorship never becomes a bv automatically; you contribute the business or sell it to your own bv. That can be done three ways, each with its own tax treatment and deadlines.
| Asset transfer | Taxed contribution | Tax-free contribution | |
|---|---|---|---|
| Settle tax on hidden reserves and goodwill | Yes, immediately | Yes, as cessation profit with the € 3,630 deduction | No, book values carry over |
| Retroactive effect | None | Up to 3 months | Back to 1 January (9 months) |
| Register letter of intent before | Not required | 1 April | 1 October |
| Special conditions | Arm's-length transfer price | Few | Hold shares 3 years, standard conditions |
| Suits | Few hidden reserves and little goodwill | Limited hidden reserves, quick execution | Substantial hidden reserves or goodwill |
Route 1: asset transfer
You incorporate a bv and sell the assets and liabilities of your sole proprietorship to it separately, at arm's-length prices. You settle income tax immediately on the difference between sale price and book value, including any goodwill. Simple and fast, and fine when the business has few hidden reserves, for instance pure services with few assets.
Route 2: taxed contribution
You contribute the entire business to the bv and settle as if ceasing: hidden reserves and goodwill form cessation profit, reduced by the 3,630 euro cessation deduction. The tax burden can often be softened by converting the cessation profit into an annuity with your own bv. Register the letter of intent before 1 April and the bv may operate for your account retroactively from 1 January, three months back.
Route 3: tax-free contribution
The bv continues with the book values of your sole proprietorship and nothing is settled now; the tax claim shifts to the bv and your shares. Standard conditions apply in return, including holding the shares for three years. Register the letter of intent before 1 October and the contribution works back to 1 January of that year, placing the full year's profit in the bv. This route mainly suits substantial hidden reserves or goodwill, where settling immediately would hurt.
VAT, contracts and the practical wrap-up
No VAT is due on the transfer of an entire business; the bv steps into your place for VAT. The bv does receive its own VAT number and Chamber of Commerce number. You also move current affairs to the bv's name: client contracts, the business account, subscriptions and any permits. Do not forget invoices and quotations: they now name the bv as contractor. If you employ staff, employment contracts transfer by law, but inform your employees in writing. If you are considering a holding structure, read why and when a holding; adding a second bv at the start is cheaper than later.
Frequently asked questions
What does converting cost?
Expect notary fees of several hundred to over a thousand euros, plus advisory costs for the contribution. A tax-free contribution is more involved and thus more expensive than an asset transfer. Annual administration costs also rise due to payroll and the annual accounts.
Does my Chamber of Commerce number stay the same?
No. The bv is a new legal entity with its own registration and VAT numbers. You deregister the sole proprietorship after the transfer. Pass the new numbers to clients and update invoices, website and terms.
Can I later go back from bv to sole proprietorship?
A return facility exists, but it is complex and rarely favourable. Treat the conversion as a long-term choice and let the tipping point prove itself for a few years before switching.
Must I pay myself the full customary salary from day one?
The customary salary applies per calendar year, pro rata to the period the bv exists. With lower profit or a start-up phase you can agree a lower salary with the tax authority. Always record such an agreement in writing.
What happens to older losses from the sole proprietorship?
Unused box 1 losses stay with you personally and do not move into the bv. You can only offset them against future box 1 income, such as your salary. See also offsetting losses.
This article provides general information based on the rules known for 2026 and does not replace personal tax advice. For your specific situation, we're happy to take a look with you.
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Ilias
