Congratulations on your decision to enter the world of the free. To make your independent life a bit easier, we have compiled the essential topics that new independent consultants need to consider. Therefore, we first share the basics you need to get started. After that, we explain what you need for a sustainable long-term setup. Disclaimer: several of the tips we offer apply in a Dutch context.

STEP ONE: The basics to get started

Before you can start your first project as an independent consultant, you need three things. These are a legal entity, a bank account, and professional liability insurance.

Legal entity

To sign work contracts and send invoices, you need a legal entity with a KVK registration and a VAT number. The most accessible legal entity is a sole proprietorship. It costs €50 and can be set up through the KVK website.

After filling in the online form, you need to visit one of the KVK offices to confirm your identity.

Another option is to create a limited liability company, which has many advantages. However, incorporation takes more time and costs more money. Therefore, if you want to start your new project quickly, we recommend forming a sole proprietorship first. Later on, you can migrate to a limited liability company if you prefer. You can also transfer all your income for up to 15 months.

Bank account

The next step is to open a bank account. We recommend choosing a neo-bank, such as Bunq or Knab. That way, you can do this quickly, while traditional banks often take more time.

Basic insurance

Some clients may ask for professional liability insurance, also known as BAV. This insurance protects you against financial liability claims related to your professional work. For example, it covers cases of misguided advice or infringement of intellectual property rights.

Professional liability insurance costs approximately €30 per month. We recommend Zekur because of its ease, cost, and coverage.

STEP TWO: Laying the foundation for your career as a freelance consultant or entrepreneur.

If you plan to remain a freelancer for a longer period, such as six months or more, you should organize things more structurally. This also applies if you have entrepreneurial ambitions.

Legal entity

Should you keep a sole proprietorship or migrate to a limited liability company?

The correct answer depends on your situation. For example, if you expect to make more than €100,000 in profits, you should ideally opt for a limited liability company. There are two main reasons for this. First, the tax burden is lower. Second, it offers better protection against insolvency.

However, you should also consider other factors, such as additional administrative costs.

We recommend seeking advice from a professional certified accountant before making your decision. For setting up a limited liability company, Ligo is an excellent choice because of its ease of use and affordable price. For advice from professional accountants, see below.

Accounting: if you decide to do it yourself

In general, we recommend to outsource your finances to a bookkeeper or a certified accountant (see more on this below). You could consider DIY accounting if your legal entity is an SP. For an LLC, it gets complex quickly. It this requires solid technical expertise, and mistakes can be made quite fast and can be costly.

In case you want to DIY, we recommend the use of accounting software to facilitate your financial management. SaaS solutions can automate invoice generation, bookkeeping, expense management, and reporting. Most plans start at zero cost, but those that offer more features usually cost between €10 and €20 per month. The best options are Moneybird and Tellow for their functionalities (e.g. bank account integrations, automatic VAT reporting). Next to that, they have great user experience and are reasonably priced.

Accounting: if you decide to outsource

We are in favor of outsourcing your finances, for the following three main reasons:

• It requires a lot of time, focus and specific knowledge of the Dutch tax system.

• The expert accountant knows tax tricks that can considerably reduce your tax burden, up to a saving amount of more than the price he charges for his service.

• Banks generally favor financial statement signed by a professional accountant when applying for a mortgage.

The costs of outsourcing can vary depending on the complexity of your finances, and whether you choose a bookkeeper or a chartered accountant. On average, the annual price for a bookkeeper ranges from €700 to €1.300 for a sole proprietorship and €1.200 to €1.800 approximately for a LLC. For a chartered (certified) accountant, the price is about 50% higher. But with that higher price, also comes higher credibility.

Insurance

There are many types of insurance available for independent consultants (see a summary here). Whether or not to take out additional insurance is a personal decision: some people are more risk-loving or risk-averse than others.

However, we recommend taking out at least one additional insurance: disability insurance. Although the probability of becoming disabled is very low, the possibility of ending up on welfare for the rest of your life deserves hedging in our opinion.

Acquiring disability insurance is a lengthy process, requiring the help of a broker/intermediary and a review of medical records. It is also expensive; the price can vary between €125 and €400 per month. This amount depends on three factors:

• The level of income you want to insure: for example, €60.000 or €150.000

• Your age (the older you are, the more expensive it gets)

• The number of months you can go without income

We recommend ASR, which can be taken out through Harper Insurance.

Conclusion

Now you can take a deep breath. Do you think it’s a lot of work to arrange all of the above? Not really! But, it is undoubtedly essential to do so. So please make sure you follow the basic guidelines correctly.

Are you interested in learning more about the life of an independent consultant? Please fill out the form below and contact us to request information.