Choosing the Right Legal Form as a Founder

Why Does This Decision Matter So Much?

It all starts at the notary's office. Before signing the deed, you must settle on a legal form for your future company. That decision fixes how much you contribute, how you take decisions and how shareholders can leave. It also shapes how your bank and your investors see the project.

In 2019, Belgium's Code of Companies and Associations (CCA, or "CSA" in French) simplified the landscape. For a commercial business, the legal form choice comes down to two options. The first is the private limited company (SRL, or BV in Dutch). The second is the public limited company (SA, or NV in Dutch). The cooperative company (SC) stays reserved for genuinely cooperative projects. As a result, most founders hesitate between an SRL and an SA.

The SRL: Flexible and With No Minimum Capital

The SRL is the legal form most start-ups choose. It requires no minimum capital. However, founders must provide sufficient starting equity for the planned activity. They justify it in a mandatory financial plan covering at least two years.

This is no mere formality. If the company goes bankrupt within three years, founders may face personal liability when the starting equity was manifestly insufficient. Therefore, zero capital does not mean zero risk.

For many entrepreneurs, it is the legal form that balances cost and protection best. It also leaves wide freedom in the articles of association. A single founder is enough. The articles organise voting rights, contributions and share transfers. By default, a transfer to a third party needs approval from the shareholders, but the articles can relax this rule. Finally, every profit distribution must pass a double test: net assets and liquidity.

The SA: For Projects With Large Capital Needs

As a legal form, the SA requires minimum capital of €61,500. That amount reassures creditors, but you need to plan for it from incorporation. As with the SRL, a notarial deed sets up the company. A single shareholder is enough, and a financial plan also remains mandatory.

On governance, the CCA offers three options. The SA may have a sole director, a board of directors or a dual structure with a supervisory board and a management board. A board is therefore no longer compulsory. Shares transfer freely in principle, unless the articles include approval or pre-emption clauses. This makes it easier for investors to come in and for shareholders to sell.

In practice, many small businesses find the SA heavier to run, especially with a full board. Still, this legal form makes sense when large amounts arrive from day one. In both cases, keep director liability in mind for management errors.

Six Criteria for Picking the Right Legal Form

Ask yourself these questions before settling on a legal form.

Pick your legal form based on figures, not prestige. Besides, your legal form does not settle the tax question. SRLs and SAs pay corporate income tax at the same rates. The standard rate is 25%. SMEs can pay 20% on the first €100,000 under certain conditions. One condition is, in principle, a director's pay of at least €45,000.

Two Practical Examples

Here is how the legal form follows from your figures.

Example 1. Julie sets up a consultancy on her own. She needs a laptop, a website and three months of cash. Her financial plan shows needs of around €15,000. The SRL is the obvious legal form here: no minimum capital, simple management and limited liability.

Example 2. Three partners are building an app and want to raise money from investors. The project needs €150,000 straight away. Here, the SA holds up well: the required capital poses no problem and investors find a familiar setting. Still, with carefully drafted articles, the SRL would remain a workable legal form.

These amounts are illustrations, not statutory thresholds.

Common Mistakes

These traps come up often.

• Underestimating an SRL's starting equity to reduce the initial contribution.
• Picking a legal form for prestige alone.
• Copying template articles without settling how a shareholder can exit.
• Skipping a shareholders' agreement when several founders team up.
• Setting up an SC without a genuine cooperative purpose.
• Believing that the legal form changes the tax rate.

Each mistake costs a lot to fix after incorporation. For example, a shareholder who wants to leave without a suitable clause can block the company for months.

Can You Switch to Another Legal Form Later?

Yes, nothing stays fixed forever. A growing SRL can become an SA, and the reverse also works. A company conversion keeps the same entity, with the same enterprise number and contracts. To become an SA, however, net assets must reach at least €61,500. A registered auditor checks the figures. So the legal form you pick today can evolve, without aiming too big from the start.

In Summary

For most founders, the SRL offers the best balance between flexibility, cost and protection. The SA still makes sense for projects that bring in large capital or investors from day one. In both cases, the right legal form flows from a solid financial plan. The FPS Economy explains the formalities for incorporation and registration with the Crossroads Bank for Enterprises (CBE).