Common Mistakes to Avoid When Forming a Company in Switzerland
Switzerland is always among the most appealing countries in the world to conduct business. The "Swiss Made" tag carries immediate world acclaim, the currency is robust, and the economic stability is legendary. Setting up a head office or a holding company here seems like a tactical coup for international business owners.
But the procedure is not a simple walk around. Swiss administration is exact. Swiss bureaucracy is precise. It is unforgiving of errors. If you miss a step or file a document incorrectly, you don't just get a warning. You get delays, fines, and sometimes a complete rejection that forces you to start over.
We see many entrepreneurs rush into the process with great enthusiasm only to hit a wall because they treated Swiss incorporation like setting up an LLC in Delaware or a Ltd in the UK. It works differently here.
To help you navigate this, we have identified the most frequent stumbling blocks foreign investors encounter. Avoiding these errors will save you significant capital and weeks of frustration.
1. Choosing the Wrong Legal Structure
The first decision you make is often where the first mistake happens. Investors often default to what they know from their home country, but Swiss legal forms have specific nuances.
The two main players are the GmbH (Gesellschaft mit beschränkter Haftung) and the AG (Aktiengesellschaft).
Many entrepreneurs instinctively go for the AG because it sounds more prestigious. It is the standard corporate structure. However, it requires a minimum capital of CHF 100,000, with at least CHF 50,000 fully paid up. It also comes with higher administrative costs and stricter audit requirements.
On the other hand, the GmbH is often underestimated. It requires only CHF 20,000 in capital. It is perfect for small to medium enterprises and offers the same liability protection as an AG.
The mistake happens when a founder chooses an AG for a small startup simply for "image," burning through cash that could have been used for growth. Conversely, we see companies choosing a GmbH when they plan to list publicly or bring in many anonymous investors later, which forces a costly conversion to an AG down the road.
Take the time to assess your actual capital availability and your 5-year plan. If you don't need investor anonymity right now, the GmbH is usually the smarter, leaner choice.
2. Underestimating the "Swiss Director" Requirement
This is the single most common dealbreaker for foreign entrepreneurs.
Swiss law (Article 718 of the Code of Obligations) mandates that at least one person authorized to represent the company must be domiciled in Switzerland. This person must have signature authority.
You cannot run a Swiss company entirely from a laptop in London, New York, or Dubai without a local representative. Many foreign founders file their paperwork thinking they can appoint themselves as the sole director while living abroad. The commercial registry will reject this application immediately.
If you do not plan to move to Switzerland, you have two options:
- Hire a local employee and give them director status.
- Use a nominee director service.
Ignoring this requirement stops the incorporation process dead in its tracks. You need to secure this representation before you even visit the notary.
3. The Capital Account Trap
You cannot simply transfer your share capital to the commercial registry. You must open a specialized capital contribution account (Kapitaleinzahlungskonto) with a Swiss bank.
Here is the catch: opening a bank account for a company that does not exist yet is difficult. Opening one as a foreign national with a complex corporate structure is even harder. Swiss compliance rules are incredibly strict.
Entrepreneurs often leave this until the last minute. They schedule the notary appointment, fly to Zurich or Geneva, and then realize the bank hasn't released the capital certificate yet because compliance is still checking the source of funds. Without that certificate, the notary cannot incorporate the company.
Start the banking conversation weeks in advance. Be prepared to provide extensive documentation on where your money comes from. If traditional banks are moving too slowly, look into modern fintech solutions or corporate service providers who have pre-vetted banking relationships to speed this up.
4. Focusing Only on Tax Rates When Choosing a Canton
Switzerland is a confederation of 26 cantons. Each has its own tax rate.
It is tempting to look at a tax map, see that Zug or Schwyz has low corporate tax rates, and decide to incorporate there. While tax optimization is smart, it is a mistake to make it the only factor.
Low-tax can be costly in other aspects as well. Zug has office rents far more than those in Thurgau or St. Gallen. Low-tax centers have really competitive talent, which is raising salary expectations.
Moreover, if you register a "mailbox" in Zug only for taxes but your company operations really occur in Zurich, the tax authorities might explore this setup. If they determine your effective place of management is Zurich, they will tax you in Zurich anyway.
Choose a location that makes sense operationally, not just fiscally.
5. Overlooking Mandatory Social Security and Insurance
In some jurisdictions, a company owner can pay themselves via dividends and skip the payroll hassle. In Switzerland, if you are working for your company, you are considered an employee.
This means you must register for the Swiss social security system (AHV/IV/EO). You cannot opt out. If you are the owner and the director, you are still an employee in the eyes of the social security office.
Failing to register for social security, accident insurance (UVG), and pension funds (BVG) can lead to massive back-payments and fines later. The authorities will eventually audit you, and they will calculate what you should have paid.
Additionally, don't forget VAT (MWST). You generally become liable for VAT once your turnover hits CHF 100,000. However, you can voluntarily register earlier. If you are exporting services or goods, registering early allows you to reclaim the input VAT you pay on your startup costs. Failing to register early in this scenario is essentially throwing money away.
6. Trying to DIY the Translation & Notarization
The official languages of the Swiss commercial registers are German, French, or Italian, depending on the canton. English is widely spoken, but it is not an official language for legal incorporation documents.
Your Articles of Association and the Public Deed of Incorporation must be in the official language of the canton where you are incorporating.
We have seen founders try to use Google Translate or standard templates found online to draft their statutes. The notary will refuse to sign these. Though a notary accepts a bilingual document (English/German), the German version is the one legally binding.
You are blindly signing a binding contract if you lack understanding of the neighborhood language. Employing a professional service guarantees that your own records include a precise English translation of the documents written correctly in the local language.
7. Ignoring Post-Incorporation Maintenance
Incorporation is just the starting line. The mistake many businesses make is thinking the job is done once the company appears in the Commercial Register (Zefix).
Swiss companies require ongoing maintenance. You must file tax returns. You must hold an annual general meeting (AGM). You must keep your bookkeeping in order according to the Swiss Code of Obligations.
If you move your office, you must update the registry. If a director resigns, you must update the registry.
We frequently see "zombie companies" where the owners moved on, stopped paying the Swiss director, and ignored letters from the registry. This leads to an ex officio liquidation, which damages the reputation of the directors involved. If you want to pause operations, do it properly. If you want to switch providers because your current fees are too high, do it proactively. Don't just go silent.
8. Falling for Hidden Fees
The market for Swiss company formation is crowded. You will see ads for "Incorporation for CHF 500." This is rarely the final price.
These low-cost offers often exclude the notary fees, the commercial registry fees (which can be CHF 600+ alone), the cost of the capital contribution account, and the translation fees. By the time you are done, that CHF 500 offer has ballooned to CHF 3,000.
Worse, some providers lock you into expensive recurring contracts for domicile or directorship with difficult exit clauses.
Always ask for the "all-in" price. A transparent provider will tell you exactly what goes to the state, what goes to the notary, and what goes to them.
Summary
For your business reputation and asset protection, starting a company in Switzerland is a wise step. Provided you abide by the regulations, the environment here is meant to foster corporate success.
Preparation is essential. Choose the correct framework, early secure your Swiss director, straighten your banking before you book your flight (or do it remotely), and don't let tax rates blind you to operational realities.
Avoiding these typical mistakes guarantees that your Swiss trip begins on a firm base so you can concentrate on what you do best: growing your company.
Partner with Swiss Incorporated AG
Navigating Swiss corporate law from abroad can be difficult; hence, we at Swiss Incorporated AG know this. Our services were created especially for foreign business owners needing a smooth, remote-friendly experience.
