Business Registration

In principle, one is free to use a form of one’s choice in which a business can be conducted. The available alternatives generally are:

  1. the sole proprietorship;
  2. the partnership with all its different variations;
  3. the limited liability company (NV);

1. The Sole Proprietorship

The sole proprietorship is a form of business in which one individual person operates entirely at his own risk and expense. The business assets form a legally inseparable part of the individual’s total assets. The sole proprietor is solely liable for all the debts of the business. Income generated from the sole proprietorship is subject to personal income tax, which is a type of taxation levied on private individuals. Because of the personal liability and the progressive income tax rate, the sole proprietorship is generally used for small and medium-sized businesses.

2. The Partnership with all its different variations

Partnerships are based on an agreement of cooperation between two of more private individuals or legal entities. The law distinguishes between three types of partnership:

  1. the private-law partnership,
  2. the general partnership,
  3. and the limited partnership.

Unlike limited liability companies, partnerships do not have a legal personality. The cooperating individuals or entities act directly, and liability for actions of the partnership remains fully or partly with the partners themselves.

Partnerships are frequently used because of the flexibility of partnership: contrary to the detailed statutory regime applicable to the limited liability companies, the statutory regime for partnerships is very rudimentary and allows the parties a great deal of leeway in drafting their agreement. In terms of taxation, partnerships are transparent, which means that tax is levied at the level of the partners rather than that of the partnership. This makes partnerships suitable for cooperating parties who have different tax needs and offers the individual partners the opportunity to offset any losses directly against other sources of income.

3. The Limited Liability Company (NV)

The most common business form for both small and large businesses is a limited liability company – the “Naamloze Vennootschap” or “N.V.” – which is a legal entity whose capital is separate from that of the owners. The NV’s popularity is founded largely on the shareholders’ limited liability for the company’s debts. Limited liability companies are subject to profits tax, a type of tax levied on the income generated by legal entities and similar structure.

To register a business in Aruba please contact us