Things you need to consider on legal matters on building a business

Starting a Business in Belgium: A Guide to Legal Structures and Key Considerations

Belgium has long been recognized as a prime location for entrepreneurs, offering a highly developed infrastructure, access to European markets, and a business-friendly environment. If you’re considering starting or expanding a business in Belgium, understanding the legal framework that governs company formation and operation is essential. In this article, we’ll guide you through the key legal aspects that will help you navigate the process and ensure your business is compliant, flexible, and well-positioned for growth.

1. Choosing the Right Legal Structure for Your Business

One of the first steps in setting up a business in Belgium is selecting the appropriate legal form for your company. Belgium offers a range of structures, each tailored to different types of businesses. The most popular options include:

• Private Limited Liability Company (SRL/BV): Ideal for small and medium-sized businesses, the SRL (now commonly referred to as BV) provides limited liability for its shareholders, meaning their personal assets are protected. The best part? There’s no minimum capital requirement, making it more accessible for entrepreneurs starting out.
• Public Limited Company (SA): This structure is typically used for larger businesses, particularly those with plans to go public or raise significant capital. It requires more formal governance structures but allows for greater flexibility in terms of capital.
• Cooperative (SC): If your business is centered around mutual benefits, a cooperative could be a good fit. This structure works well for groups or associations focused on shared interests, such as environmental or social goals.
• Sole Proprietorship: For solo entrepreneurs, this option offers simplicity. However, it comes with the downside of unlimited liability, meaning your personal assets are at risk if the business faces financial challenges.

2. Corporate Governance Made Simpler

Belgium’s legal framework provides greater flexibility in corporate governance. Previously, Belgian companies had to adhere to rigid structures, but now, businesses have more freedom to design their governance model to suit the needs of the company.

• Flexible Decision-Making: Businesses can now adopt more flexible decision-making processes. For example, you can hold virtual meetings or make decisions electronically, which is particularly useful for modern businesses that operate in the digital age.
• Shareholder Rights: Shareholders now have the ability to exercise their rights more easily. The process for making important corporate decisions has been simplified, with options for electronic voting.
• Board Responsibilities: While larger companies (like the SA) still require a board of directors, smaller companies (like the SRL/BV) can operate with a single director, streamlining management and decision-making.

3. Capital Flexibility and Financing Options

The legal framework offers businesses more capital flexibility, allowing them to choose how they want to structure their funding and growth. For example:

• SRL/BV: The requirement for a minimum capital investment has been removed for the SRL/BV, lowering the barrier for entry. The only stipulation is that the business must be properly financed to function effectively.
• Shareholder Contributions: Whether you need capital for expansion or for day-to-day operations, the legal structure allows for more creative ways to fund your company. Shareholders can contribute capital, assets, or even services in kind.
• Public Funding Options: Larger businesses, such as those operating under the SA structure, can issue corporate bonds or new shares to raise capital. This is a powerful tool for financing growth or expansion plans.

4. Transparency and Reporting Requirements

Transparency is crucial for building trust and credibility, and Belgium’s business laws enforce strict rules regarding financial reporting.

• Annual Financial Statements: Every company in Belgium is required to prepare annual financial statements, which include a balance sheet, income statement, and cash flow statement. These documents must be filed with the National Bank of Belgium for transparency and accountability.
• Auditor Requirements: If your business meets certain thresholds (e.g., size, public interest), an external audit of your financial statements may be required. This ensures the accuracy and reliability of your financial information.
• Beneficial Ownership Register: Businesses must register their beneficial owners in the Central Beneficial Ownership Register (CBE). This enhances transparency and helps prevent financial crimes such as money laundering.

5. Taxation and Fiscal Responsibilities

While the legal framework doesn’t directly regulate taxation, the tax status of your business depends on its legal form. Belgium offers a relatively high corporate tax rate (25%), but SMEs can benefit from preferential rates and tax breaks. Additionally, VAT (value-added tax) is levied on most business activities, and companies must ensure they comply with tax filing requirements.

• Dividends and Distributions: Depending on your company’s structure, there may be different rules regarding the taxation of dividends and capital gains, which can impact shareholders and investors.

6. Mergers, Acquisitions, and Restructuring

For businesses looking to expand through mergers or acquisitions, the legal framework provides a clear and efficient process for handling these transactions. Whether you’re merging with another company, acquiring a competitor, or restructuring your business, the legal system ensures these changes are handled smoothly.

• Cross-Border Transactions: Belgium’s business laws also support cross-border mergers and acquisitions within the EU, aligning with broader European corporate law, which simplifies operations for businesses involved in international expansion.

7. Dissolution and Exit Strategy

If you decide to close your business, there are clear guidelines for liquidation and dissolution. Whether it’s a voluntary closure or due to financial difficulties, the legal framework ensures that the process is handled in an orderly and legally compliant manner.

8. Digitalization and Modernization of Corporate Law

The legal framework has embraced digitalization, allowing businesses to conduct operations online, file documents digitally, and even hold virtual shareholder meetings. This modernized approach makes it easier for businesses to adapt to an increasingly digital world.