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General partnership (GP)

Steve ten Bokum - belastingadviseur
A partnership firm (GP) is a partnership between partners. Read all about a GP in this blog.

A general partnership, abbreviated GP, is a common legal form in the Netherlands. It is a form of enterprise in which two or more persons start a company. In the Netherlands, the GP is legally regarded as a company in which all partners bear equal financial risk. This means that all participants are responsible for the debts and liabilities of the company. On the other hand, all profits are in principle shared equally among the partners. It is important to note that an IP has no legal personality; this means that the IP has no equity or identity of its own.

Advantages and disadvantages of a GP?

A General Partnership (GP) can be attractive for entrepreneurs who want to join forces. It is important to carefully weigh whether a GP suits your business plans and needs. That is why we have listed the pros and cons for you. 

Advantages of a General partnership

  • A general partnership is easy to set up.
  • No minimum capital is required.
  • You can benefit from the contribution of other partners.
  • You have the option of employing staff.
  • Je hebt recht op belastingaftrek door middel van zelfstandigenaftrek t.h.v. 5.030 euro in 2023 en 3.750 euro in 2024 (hiervoor gelden bepaalde voorwaarden).
  • You are entitled to tax deductions through start-up deductions amounting to €2,123 in 2023 (this is subject to certain conditions).
  • Je hebt recht op belastingaftrek door middel van mkb-vrijstelling: geen belasting betalen over 14% van jouw fiscale winst. Vanaf 2024 bedraagt deze vrijstelling 13,31%. 
  • You are entitled to tax deductions through small business scheme (this is subject to certain conditions).
  • You will get the social security contribution after the age of 65.

Disadvantages of a General partnership

  • All partners are jointly and severally liable with their personal assets for the debts of the company.
  • The bankruptcy of the general partnership basically entails the bankruptcy of the partners.
  • If the company becomes single-headed after its incorporation, it is dissolved by operation of law.
  • At least two 'shareholders' are needed.
  • The limited transferability of shares makes it more difficult to exit as a partner.

Private liability with a GP?

Unlike an LLC or a PLC, a GP is not a legal entity. This means that the partners are personally liable for the company's debts. First, creditors will use the company's assets to pay the debts. If this is not enough, they will hold the partners liable. They may then seize the private assets of you and your partner. So you may have to pay off the partnership debts incurred by another partner with your private assets. However, this does not apply to another partner's private debts. Marital agreements prevent your partner from also being liable for the debts of the general partnership. However, in a husband-wife firm, prenuptial agreements do not work because both persons are liable as partners.

Taxed GP

The entrepreneurs of a IP are each self-employed and therefore pay income tax on their own profits. In addition, the partners also pay VAT on the products or services they sell. This usually involves 21% VAT, but the VAT rate may also be 9% or 0%. If you hire staff, you will also have to pay payroll tax. As a GP entrepreneur, you therefore pay income tax, but in most cases you can also make use of certain deductions. You can contact us for more information.

Want to know more about a General partnership?

We can help you set up a GP. We will analyse the risks and ensure that the arrangements between the entrepreneurs/partners are set out in a GP contract. Contact us for more information or questions. 

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