You want to embark on a new project by setting up your own business. But what form should it take? An ASBL or a company?

The law of 15 April 2018 reforming company law broadened the general definition of a company (art. I.1, para. 1 of the Economic Law Code) so that ASBLs now fall under this category and can carry out commercial activities and make profits.

In addition, the rules governing companies and ASBLs have been largely harmonised. So how do you choose? Despite the simplifications introduced by the CSA, some differences remain.

Distribution of profits: ASBLs are still prohibited from distributing profits. Profits must be used entirely for disinterested purposes that are in line with the association’s projects. In other words, profit is permitted, but its distribution is not. In a company, on the other hand, part of the profit will be distributed to the shareholders, personal enrichment being an essential characteristic of the company.

Incorporation: The incorporation formalities (Art. 2:7 and 2:9 CSA) (drafting of articles of association/instrument of incorporation, filing with the registry of legal persons of the company court, registration with the BCE, publication in the annexes to the MB) are similar for ASBLs and companies, except for certain types of companies where the CSA imposes a minimum capital requirement.

Liability: In both cases, the liability of the partners/founders is limited to the amount of their contribution. Creditors cannot seize the entrepreneur’s personal assets. In the case of a company, however, they may be held liable in the event of bankruptcy within three (3) years of its formation.

Tax regime: ASBLs, which do not carry out profit-making commercial activities, are subject to the tax regime for legal entities, which applies to the following income: cadastral income, property income, certain capital gains, income from movable property and miscellaneous income; any sums or benefits granted. Companies are subject to corporation tax. It is taxed on its profits at a progressive rate.

VAT: In most cases, ASBLs are not subject to VAT if their transactions are non-commercial. Companies are essentially subject to VAT, subject to special arrangements for small businesses.

Funding: An ASBL is mainly funded by subsidies (from the authorities, donations, membership fees, sponsorship, bank loans). Investors are less common. A company, on the other hand, needs financial resources. It offers the possibility of attracting partners. These partners invest risk capital in the company, and then share in the company’s profits and losses.

For more information on this subject, please contact Melissa SAYEH.