A ‘vof’ starts with a good concept and even better agreements
You and your friends have this genius concept. Or you’re doing some commissions with someone and it’s starting to evolve in a steady collaboration. When these things get more serious, there’s a big chance you’ll found a partnership ‘vennootschap onder firma’(vof).
A vof is a legal status for a company when there are two or more owners at play. According to the law a vof is not a legal entity (so it is a legal status, but not a legal entity, check). This means owners can arrange their own agreements about their collaboration and in case of debt every owner is privately accountable regardless of who caused the debt. So it’s important for owners to take into account the following before they eagerly start doing business:
Document all agreements
To make a collaboration succeed, friendship and trust alone are not enough. Making well defined agreements and documenting them contractually will prevent most future misunderstandings. Agreements about for instance: the deposit of assets, tasks and activities, the powers and rewards of each owner, duration of the collaboration, rules for early withdraw, input of new business partners, illness, incapacity for work and insurances. There are a lot of matters on which you can disagree. Try to talk through all relevant scenarios with your co-owners and make clear agreements. You’re not obliged to put these in a contract, but it’s really recommended you do so.
Organise your money
In the vof there is no difference between private assets and company assets. In theory it doesn’t matter who pays what, at what time regarding the vof. The tax authorities determine the amount of taxes to be paid by the profit you make. It’s useful to open a business bank account for business transactions so every owner can keep track of the money. This way everyone has insight in the flow of funds and no one will be unpleasantly surprised financially.
Count your profit?
In a vof there are no salaries. You can extract monthly amounts to live from. This is called a private withdrawal. Because running a business is an uncertain way of making money, it’s usually not possible to withdrawal a steady figure after one month. So make an estimate of your profit to determine the amount you can withdrawal from your company each month.
About private liability
A big investment followed by a global pandemic can get your company in to trouble. A creditor will also not care about whose idea the investment was. He or she has the right to come knocking for money at each of the owners doors. So it’s recommended to not make larger investments than your bank balance will allow you to. Also make agreements on who’s authorized to do investments and how to handle business financially concerning creditors. Do take in to account that lawfully every owner is privately liable, regardless of the agreements you make.
Although it’s an odd chance, there is a possibility that someone wants to withdraw from the company early or one of the owners unexpectedly dies. In both cases the vof will be legally dissolved unless you’ve made agreements about that. Often times a vof can continue with a smaller group of associates. When there’s only one associate left it’s possible to continue the vof as a sole proprietorship. To conclude: A succssfull vof will stand or fall on the quality of it’s concept and the agreements made.”