A record number of entrepreneurs closed their doors in 2020

A recent report from the Central Bureau of Statistics (CBS) revealed a record number of businesses closed its doors for good in 2020, especially in the catering industry. The corona year registered 140,000 entrepreneurs giving up their business, a 20 percent rise compared to 2019. This is the highest increase since 2007, according to Het Parool newspaper.

AD Nieuws website reports that 470 restaurants closed their doors, about 10 percent more than a year earlier. Additionally, 450 cafeterias, lunchrooms, snack bars, catering businesses, ice cream parlors and other food outlets did the same. The rise took off especially in the third and fourth quarters of 2020. This may have to do with the partial lockdown that the government announced in mid-October.

Not only the catering industry suffered, but also advertising companies, communication agencies and web shops. According to figures from CSB, almost 89 percent of the businesses that ceased operations are one-man companies. About one out of ten companies that closed its doors had between two to ten employees on its payroll. Less than 1 percent had 10 to 250 people employed. “The decision to quit is easier for a business with sole proprietorship than for a company with 5000 employees,” says Marjolijn Jaarsma, a researcher at CBS, to AD Nieuws.

More business quitting than filing for bankruptcy
The decision to stop operations can help the business. By doing so, a small entrepreneur can prevent a more serious financial struggle. By closing on time, before debts hit, a bankruptcy can be prevented. To explain in more detail the difference between both types of business in the Netherlands: the Dutch government defines a sole proprietorship (eenmanszaak) as a structure without legal personality. As sole trader, the owner alone is responsible and liable for the company, its finances, and its debts. On the other hand, a private limited company is a business structure with legal personality. This means that the business is liable for any debts, rather than the owner as an individual.

By the end of last year, the number of business closures in Amsterdam appeared to have risen sharply, while the number of bankruptcies remains historically low, partly because of this scenario. CBS reported that 2,703 companies went bankrupt last year, 16 percent less than in 2019. “Of course, those 2,703 companies don’t include the 140,000 companies that stopped. The number 2,703 also doesn’t include sole proprietorships. If you include sole proprietorships, 3,178 have gone bankrupt. Still 16 percent less than in 2019,” says Jaarsma to Het Parool.

Despite the sharp increase in the number of business closures, CBS has a positive note. In 2020 approximately 280,000 companies started, compared to the 140,000 that stopped. “More companies started last year than stopped,” says Jaarsma to AD Nieuws. A good note in the hopes of better days.

Written by Raphael Perachi Vieira