Profit sharing is the solution for entrepreneurs who want to grow their business. Instead of issuing new shares, you distribute profit shares to your fellow entrepreneurs, employees, suppliers, or investors. Here’s how it works:
Profit sharing in short:
- You first determine the value of your company and divide that over a number of profit shares with which you start. If there are already more shareholders or owners, each receives a portion of those profit shares.
- From that moment on, you give new profit shares to everyone who invests money in your company or who contributes time or facilities without further compensation. The more you contribute, the more profit shares you get. This can also be spread over a longer period.
- As soon as you decide to pay out profit to yourself, you pay out the same amount per profit share to everyone else. And also, if you sell or dissolve the company, everyone receives the same amount per profit share.
- This is possible for all legal forms, so a sole proprietorship, partnership, professional partnership, private limited company (BV), or cooperative. You don’t have to change your legal form, and you don’t have to go to a notary.
- You keep track of the issuance of profit shares yourself and periodically inform everyone about the issuance of new profit shares. This can be done through our dashboard, but there are also various other solutions for this.
For whom is profit sharing meant?
- For your fellow entrepreneurs: for example, if you have already set up a sole proprietorship or BV (private limited company) or as an addition to your current agreements. Profit sharing fully aligns with the ‘Slicing pie’ model.
- For employees: as an addition to their salary or to ensure that you keep your fixed costs low.
- For investors who want a return but don’t need control.
- For suppliers, customers, or other parties you want to involve in your business.
What is the difference with normal shares?
- Shares are only available in a BV (private limited company), while profit shares can also be used in a sole proprietorship, partnership, professional partnership, or cooperative.
- The issuance and change of ownership of shares go through a notary, but with profit shares, you maintain the register yourself, which can optionally be done through our dashboard.
- Profit shares are not tradable and are generally not taken back by the company.
- Shares provide control, while profit shares only grant rights to profits or sales proceeds.
How does it work in terms of accounting?
- Participants receive an agreement with the company, regardless of its legal form.
- In this agreement, the company promises that participants will receive as much profit per profit share as the shareholders/owners.
- The shareholders/owners guarantee this, which is important when selling the company.
- How the contribution is recorded varies by type: money is recorded as a subordinated loan, for employees it is considered deferred wages, and for fellow entrepreneurs and suppliers, it’s a profit-dependent reward.
- For each of these situations, there are clear calculation examples and this is fiscally substantiated.
How quickly can you start with profit sharing?
- With the principles of profit sharing, you can get started right away.
- If you only have a few ‘profit sharers’, we can set up the structure within two weeks.
- Do you want to offer profit shares to a larger group of employees or investors? Then allow for four to six weeks.
- We have a clear approach with fixed rates for most matters. For an initial consultation of max 2 hours you pay € 495 excl. VAT. If you want to continue with the implementation of profit sharing you pay € 1500 excl. VAT for the complete package with contracts and further advice. Please note that at this moment all documentation and our dashboard is still in Dutch, so additional translation costs may apply.
For any questions, contact me through +31 6 24776865.