Setting up a company

Setting up a company allows the creation of a legal structure that has its own legal identity and its own funds, that are separated from the partners’ identity and funds.

Many aspects must be examined when setting up a company:

•    Choice of legal structure? Choice of name for the company? What are the liabilities?
•    Manager, director, ...
•    Mandatory legal notices, compliance with agreements...
•    Organisation of an annual general meeting, keeping a register, filing of the annual accounts...

Choice of company format, choice of name, liabilities ...?

Why set up a company?

Some of the reasons to decide to set up a company can be:

  • Limitation of your liability;
  • Simplification of the transfer of your activity;
  • You want to go into business with one or several partners;
  • You want to involve your child(ren) in your activity ;
  • Succession planning ;
  • Etc.

Changing into company also brings changes in matters of income taxes. The change into a company makes the situation more complex but offers more diversity and perhaps possibilities.

 

Can one give any name to his company?

The founders must take care that the name they want to give to their company has not already been used for another company, which might cause mix-ups and unfair competition.

 

Choice of company structure

The most common company forms in Belgium are the limited liability company, the public limited company, the cooperative company with limited liability and the partnership.

The common characteristics of these legal forms are:

  • The obligation of drafting an authentic deed before a civil law notary,
  • The obligation of drafting a financial plan,
  • The partners’ liability is limited to the extent of their personal capital contribution.

Other characteristics and conditions depend on the company format, such as:

  • shareholdership,
  • minimum capital,
  • voting rights,
  • liability.

 

Financial plan and founders’ liability

When starting up a company, there is an obligation of drafting a financial plan that shall be kept in custody by a notary. If it appears that the financing of the company was clearly insufficient to support the company’s activity during at least 2 years, de founders’ liability can be put at stake if the judge thinks that the financial plan was unreasonable.

The manager’s statute...

What role does the management body play?

Depending on the choice of company form, the management body will include either one or more managers (in a limited liability company) or a board of directors with minimum two directors (in a public limited company).

This management body represents the company in its relations with third parties and commits the company in its everyday activities. The managers can commit the company’s liability individually while directors can do this only jointly.

If it is not possible to bring the members of the board of directors together for every decision the company makes, it is possible to confer power to have the company represented by only a part of the directors, who shall act jointly, or by a managing director.

What tax regime applies to the manager’s income?

In terms of income tax, companies’ managers are considered as independent people with regards to the income they earn for their mandate(s). They thus pay compulsory social contributions.

Legal notices

After the set up of the company, there is a mandatory indication of certain information on all the company’s commercial documents.

The company’s letterhead shall mention:

•    The company’s trade name,
•    The company’s legal form,
•    The address of the headquarters,
•    The company number and/or VAT-number.

Holding the annual general meeting, filing the annual accounts and other related obligations...

Is there an obligation to hold annual general meetings?

The management body is required to hold partners’/shareholders’ meetings at least once a year, within the 6 months after the closure of the financial year.

For each financial year, the management body shall:

  • Make an inventory, draft the annual accounts and file these with the National Bank of Belgium, and if necessary, draft an annual report;
  • Submit these documents for validation to the partners/shareholders. Each time an ordinary or extraordinary general meeting takes place, minutes shall be drafted and corporate records shall be maintained.

Is there an obligation of filing annual accounts?

Yes, the obligation of filing annual accounts exists for the majority of Belgian companies whose partners’/shareholders’ liability is limited and also for some other companies, big and very big associations and for international legal persons.

The format of the filing will depend on the size of the company, based on the turnover, the balance sheet total and the number of full time equivalent employees.

 

Is there an obligation of drafting an annual report?

Only the big companies have an obligation of drafting an annual report. This reports must be filed with the National Bank of Belgium, together with the annexes of the annual accounts.

Small companies do not need to draft an annual report.

As a conclusion...

The change into company is not only a tax decision. After setting up the company there are many legal, accounting, tax and administrative obligations that arise from the set up and that shall be complied with. If you neglect these formalities and obligations, the founders/shareholders/partners take the risk to be held personally responsible and may lose the return of their contribution. We can help streamline the procedures.