Almost every guide to setting up in Sint Maarten compares the NV with the BV, and almost none of them deal with the option that most new businesses here actually take, which is to trade as a sole proprietorship. That gap matters, because the choice between trading personally and trading through a company is the more consequential decision, and it is the one made first.
This guide covers what a sole proprietorship gives you, what it costs you, and where the crossover point sits in practice.
The Two Positions
A sole proprietorship, the eenmanszaak, is not a separate legal person. It is you, trading under a registered business name. The business does not own anything, because you do. The business does not owe anything, because you do. Registration establishes the trading name and brings the business into the register, but it does not put a wall between the enterprise and the person running it.
An NV or BV is a separate legal person. It owns its own assets, owes its own debts, contracts in its own name, and continues to exist independently of whoever happens to own the shares. That separation is the entire point, and everything else follows from it. Our guide to NV, BV and Foundation covers the choice between the corporate forms once you have decided you want one.
Where the Difference Actually Bites
Liability
This is the difference that matters most and the one that gets least attention at the point of setup, because a new business is thinking about revenue rather than about claims.
As a sole proprietor, a claim against the business is a claim against you. A dispute with a client, an accident on a job, a supplier debt when a season goes badly, all of it reaches your personal assets, including your home. There is no separation to argue about because none was created.
Whether that matters depends entirely on what you do. A freelance designer working from a laptop carries a genuinely small risk. A contractor working on other people's property, a business handling client money, an operation with vehicles or equipment or premises open to the public, all carry risk that can exceed the value of the business several times over. Insurance covers part of it. It does not cover all of it, and it does not respond to every kind of claim.
How the profit is taxed
A sole proprietorship's profit is your income. It goes into your personal income tax return and is taxed at the personal rates, and it is taxed whether or not you took the money out of the business, because there is no separate business to leave it in.
A company's profit is the company's, taxed at the profit tax rate of 34.5%. Getting it into your hands is a second step, either as salary, which is deductible for the company and taxed as your employment income, or as a dividend, which now carries a withholding on top of the profit tax. Our guide to dividend withholding tax works through the combined arithmetic.
The consequence is that at lower profit levels the sole proprietorship is frequently the cheaper answer, because the personal rates on a modest profit are lower than the company rate plus the cost of extraction. As profit rises, and particularly where a substantial part of it is being retained in the business rather than drawn, the company becomes more attractive. There is a crossover, it depends on your numbers rather than on a rule of thumb, and it is worth calculating rather than assuming.
What stays the same
Several obligations do not care which form you chose, and people setting up as sole proprietors are regularly surprised by all three:
- Turnover tax. The 5% applies to business turnover regardless of legal form, with the same monthly filing cycle. A freelancer is not outside it. See turnover tax in Sint Maarten.
- Licensing. A business licence, and where applicable a director's licence, is driven by the activity and the people behind it rather than by the legal wrapper. See business and director's licences.
- Employer obligations. Taking on staff brings wage tax and SZV duties whether you are a sole proprietor or a company. See registering as an employer.
Running Cost and Administration
The sole proprietorship is cheaper and simpler, and honestly so. No notarial incorporation, no share capital, no separate corporate return, no statutory accounts, no board formalities, and bookkeeping that can be proportionate to a small operation.
A company carries incorporation costs before a notary, an annual profit tax return, proper books, and the ongoing administration of an entity that exists separately from you. None of it is onerous at the scale most island businesses operate at, but it is a recurring cost against which the benefits have to be weighed.
One practical point that applies to both and is ignored by most sole proprietors: keep a separate business bank account. Legally you and the business are the same person, so nothing forces it. Practically, mixing business and personal money through one account makes every filing harder, every review longer, and any eventual sale or financing of the business considerably more difficult to evidence.
Freelancers here regularly register a sole proprietorship and invoice a single client for years. Registration does not make that relationship independent. If the substance is employment, in that the client can direct how, when and where the work is done, the arrangement can be reclassified whatever the paperwork says, and the exposure falls on the client. See contractor or employee in Sint Maarten, which matters to you as much as to whoever pays your invoices.
When Incorporating Starts to Make Sense
The honest triggers, in rough order of how often they decide it:
- The liability profile changes. You start working on client property, handling client money, employing people, or operating equipment or premises. This alone justifies the move irrespective of the tax position.
- Profit rises and is being retained. Once meaningful profit stays in the business to fund growth, being taxed personally on money you have not taken becomes expensive.
- Someone else comes in. A partner, an investor, a co-founder. Shares divide ownership cleanly. A sole proprietorship has no mechanism for it at all.
- Counterparties require it. Larger clients, landlords, lenders and insurers frequently prefer or insist on contracting with an entity.
- You want the business to be saleable. A company can be sold as a company. A sole proprietorship can only sell its assets and goodwill, which is a harder and usually less valuable transaction. See closing, selling or liquidating a company.
Converting later is possible and routine. It is not free, because assets have to be transferred into the new entity and some transfers carry their own cost, contracts have to be novated, and licences and registrations have to be reissued in the company's name. Cheaper than doing it wrong, more expensive than starting in the right place.
The Short Version
Start as a sole proprietor if the work is low risk, the profit is modest and mostly drawn, and you are the only person involved. Incorporate when the risk profile changes, when profit is being retained, when someone else joins, or when you want the business to be a thing that can be sold.
The decision that ages badly is staying a sole proprietor out of inertia after the business has outgrown it, because the liability that structure exposes you to is the one nobody thinks about until the claim arrives.
If you are setting up in Sint Maarten and want the two routes modelled on your actual numbers, talk to us. Confirm current registration requirements, licence conditions and rates with the Chamber of Commerce and the Belastingdienst before acting.