Sole proprietorship

When starting up their own business and deciding which legal structure to adopt, many self-employed persons and managers face a choice: whether to opt for a sole proprietorship (as a natural person) or a company.

Advantages and disadvantages of sole proprietorship

A sole proprietorship (entreprise individuelle/eenmanszaak)is easy to set up, which makes it an appealing option for many.

However, a sole proprietorship also has some major drawbacks. Because it consists of a single individual (the founder), the company’s assets are not separate from those of its founder, who has unlimited liability for any debts.

Consequently, all of the founder’s property (both movable and immovable) is liable to be seized by creditors and even their spouse’s assets may be used to pay off debts.

Difference between a sole proprietorship and a company

Unlike a sole proprietorship, in the case of a company a distinction can be made between capital belonging to the business and that belonging to the businessperson. In other words, not all of the assets are at risk if the business fails. The company also has a separate legal personality and therefore has its own rights and obligations.

Limited or unlimited liability company

There is a further distinction between limited and unlimitedliability companies.

In the case of limited liability companies (SA/NV, SPRL/BVBA, SCRL/CVBA), the partners are liable for the company’s debts only to the amount that they have contributed or to the amount that they invested when the company was founded.

In the case of unlimited liability companies (SNC/VOF, SCS/GCV, SCRI/CVOA), partners make their personal assets liable for the company’s commitments.

Matrimonial property regime and sole proprietorship

When individuals register with the Crossroads Bank for Enterprises (Banque-Carrefour des Entreprises /Kruispuntbank van Ondernemingen), they must provide their spouse’s full details as well as the place and date of the marriage and the matrimonial property regime chosen. Where appropriate, the date of divorce must also be provided, as well as any ruling resulting in separation of the couple’s property.

The spouse may or may not be jointly and severally liable for the company’s debts, depending on the matrimonial property regime chosen.