Overview of Swiss legal forms — How to find the ideal legal form for your company
In the dynamic economic landscape of Swiss legal forms, choosing the right legal form for your company is crucial. This decision not only influences the tax burden and liability, but also the credibility and growth potential of your company.
Overview of Swiss legal forms
It is important to get an overview of Switzerland's various legal forms. Each legal form has its specific advantages and disadvantages, which may be relevant depending on the business activity, size and goals of your company.
The four main types of companies
Four main types of companies can be identified among Switzerland's legal forms:
- sole proprietorships,
- partnerships (such as the collective and limited partnership),
- corporations (such as AG and GmbH)
- cooperatives.
Each of these legal forms of companies has specific characteristics in terms of liability, capital requirements and corporate governance.
Different legal forms of companies
Swiss law covers eight different types of companies: the sole proprietorship, the collective partnership, the limited partnership, the joint stock company (AG), the limited liability company (GmbH), the cooperative and the association.
These legal forms of companies in Switzerland differ in terms of liability, capital requirements and tax treatment.
- Sole Proprietorship | Sole Proprietorship
This form is especially popular among individual entrepreneurs and small businesses. An overview guide to setting up a sole proprietorship can be found here. - GmbH (limited liability company)/Ltd. Liability Company
The GmbH is a very popular choice for medium-sized companies as it offers limitation of liability and is less strict in terms of disclosure requirements than an AG. An overview guide to setting up a GmbH in Switzerland can be found here. - AG (joint stock company)/Public Ltd. Company
AG's are widespread in Switzerland, particularly among larger companies and those that are listed on the stock exchange or are planning to do so in the future. While around every fifth legal entity in Switzerland has the legal form of an AG, the overall economic share of this legal form is much larger here, particularly with regard to capital and the number of persons employed. An overview guide to setting up an AG in Switzerland can be found here. - Collective and limited partnerships/General and limited partnerships
These can often be found in smaller and family-run businesses and make up a smaller percentage of the total number of companies in Switzerland. - Cooperatives and associations/Cooperatives and associations
These are represented in specific areas such as the housing industry, agriculture or as non-profit organizations, but make up a smaller share compared to other types of companies in Switzerland. - Limited partnerships and simple companies/Limited partnerships and simple partnerships
These types of companies are less common in Switzerland and represent a significantly smaller proportion of total companies.
The most popular legal form in Switzerland
The most common include the sole proprietorship, the limited liability company (GmbH), the stock corporation (AG), the limited partnership and the cooperative. The table below shows the number of companies by legal form in percent from 2020 [Source: Statista].
Switzerland's three common legal forms
The three most common types of companies in Switzerland are the sole proprietorship, the GmbH and the AG. While sole proprietorships are suitable for small entrepreneurs, GmbH and AG offer advantages for larger companies, in particular with regard to liability and raising capital.
Choosing the appropriate legal form in Switzerland
Company founders in Switzerland have the option to choose between different legal forms, each with its own special features in terms of liability, capital requirements, tax issues and the complexity of setting up a company. There are significant differences between GmbH, sole proprietorship and AG in particular.
The choice of the appropriate type of company depends on various factors, such as the size of the company, the number of shareholders involved, the type of business model, the risk appetite of the owners and the long-term goals of the company.
Advantages and disadvantages of various legal forms of Swiss companies
The choice of legal form should not only be based on simplicity. For example, the simplest legal form is a sole proprietorship, but it does not offer the limited liability protection that a GmbH or AG offers. Here is a brief overview of legal forms in terms of liability, start-up costs, required start-up capital and accounting requirements.
GmbH (limited liability company)
Liability: In the case of a GmbH, the shareholders are not personally liable with their private assets, but only in the amount of their contributions. This provides significant protection against financial risks.
Start-up expenses: Establishing a limited liability company is more formal and complex than setting up a sole proprietorship. It requires a notarized articles of association and entry in the commercial register.
Capital requirement: To establish a GmbH, a minimum share capital of 20,000 CHF is required, which must be paid in full.
Accounting obligation: Limited liability companies are required to maintain proper bookkeeping and accounting, which means additional administrative work.
Sole proprietorship:
Liability: The owner of a sole proprietorship is fully liable with all his private and business assets. This may result in higher financial risk.
Start-up expenses: Setting up is relatively easy and quick. It requires no formal incorporation documents or a minimum capital. Registration in the commercial register is only mandatory after a certain turnover has been reached.
Capital requirement: There is no mandatory minimum capital, which makes it easier to set up and particularly attractive for small or start-up businesses.
Accounting obligation: Smaller sole proprietorships that are not registered in the commercial register often have simplified accounting requirements.
AG (stock company):
Liability: As with a GmbH, the shareholders of an AG are only liable up to the amount of their capital contributions and not with their private assets. This offers a clear advantage for shareholders, particularly in high-risk business areas.
Start-up expenses: The establishment of an AG is formal, similar to a GmbH, and requires a notarized act of incorporation and registration in the commercial register. Setting up can be more complex as it imposes stricter organizational structure requirements, such as setting up a board of directors.
Capital requirement: An AG must have a minimum capital of 100,000 CHF, of which at least 50,000 CHF must be paid up upon incorporation. This represents a higher financial barrier to founding a company than with a GmbH.
Accounting obligation: AGs are subject to strict accounting and auditing requirements. They must submit an annual report and financial statements and have them audited by independent auditors.
Comparison between GmbH and AG
The choice between a GmbH and an AG often depends on the size of the company and the plans for the public offering. An AG tends to be suitable for larger companies or those that want to keep the option open to raise capital by issuing shares. It is the preferred choice for companies that are planning to go public or that want to benefit from a wider ownership structure.
However, the stricter disclosure and accounting requirements can be a burden for smaller companies. A GmbH, on the other hand, offers more privacy and offers less strict disclosure requirements.
The GmbH is a good middle way option for many small to medium-sized companies that want limited liability without having to raise the higher requirements and larger start-up capital of an AG. It also offers greater flexibility in corporate management compared to the AG.
Comparison between GmbH/AG and sole proprietorship
For smaller companies or sole traders, the choice between a GmbH and a sole proprietorship can be difficult. While a GmbH and an AG offer limited liability, a sole proprietorship is often easier to manage and has less strict reporting requirements.
Compared to GmbH and AG, the sole proprietorship offers the advantage of simplicity and flexibility, which is particularly attractive for sole traders who want to start a business quickly and with low capital expenditure. However, the main disadvantage is unlimited liability, which, in the event of business debts, can also affect the entrepreneur's private assets.
Conclusion
Choosing the right legal form for your company in Switzerland is decisive for the success of the company. The decision for one of these legal forms should therefore always be made taking into account individual business goals, the market and risk appetite. Advice from a lawyer or auditor can often provide valuable insights that lead to the choice of the optimal legal form for your own company.
Note: This article provides a general overview of the legal forms of companies and should not be regarded as specific legal advice. It is recommended to contact a specialist lawyer or a management consultant for detailed advice. Once you have identified the right legal form for your new company in Switzerland, the Office Group Zug team will be happy to help you set it up. Contact us without obligation.