Switzerland is renowned for its stable economy, transparent legal system, and investor-friendly environment, making it a prime destination for entrepreneurs and international businesses. A crucial early decision when launching a business here involves choosing the most suitable legal structure. This choice directly affects your liability, tax obligations, administrative workload, and access to funding.
What is the legal form of a company in Switzerland?
This article outlines the main legal forms of business in Switzerland, offering clear guidance for local entrepreneurs and foreign investors alike. The Swiss legal system offers a range of business structures tailored to different operational scales and goals. Making the right choice requires evaluating your business model, long-term objectives, and appetite for administrative complexity.
Sole Proprietorship (Einzelunternehmen)
The sole proprietorship is the simplest and most cost-effective business structure in Switzerland, ideal for individuals or freelancers. No minimum capital is required, and registration in the Swiss commercial register is only mandatory for businesses with annual revenues exceeding CHF 100,000.
As the sole owner, you enjoy complete control and direct management of your business. However, this autonomy comes at a cost—namely, unlimited personal liability. This means your personal assets are at risk if the business incurs debt or fails.
Tax-wise, the profits are considered personal income, avoiding double taxation. Businesses with annual turnover below CHF 500,000 may use simplified accounting methods. Due to its ease of setup, the sole proprietorship is an excellent starting point for small ventures, though many owners later transition to more protective structures as they grow.
Partnerships
Partnerships are suitable for ventures involving two or more people working toward a shared business goal. Switzerland recognizes two primary forms: general partnerships and limited partnerships.
General Partnership (Kollektivgesellschaft)
A general partnership involves two or more individuals, with no minimum capital requirement. Registration in the commercial register is mandatory. All partners share management duties and assume unlimited joint and several liability. This means creditors can target the personal assets of any partner.
While this structure offers flexibility and resource pooling, it also requires trust and a solid partnership agreement. General partnerships are common among family-run and small professional businesses.
Limited Partnership (Kommanditgesellschaft)
This structure introduces two types of partners: general (with unlimited liability) and limited (liable only up to their capital contribution). Limited partners generally don’t participate in management. This form is often used for ventures needing passive investors, such as real estate projects or investment funds.
Although less common in Switzerland, limited partnerships offer a compromise between raising funds and maintaining control. Like general partnerships, they must register in the commercial register.
Limited Liability Company (GmbH / Sàrl)
The GmbH / Sàrl is a popular choice for SMEs in Switzerland. It combines limited liability protection with moderate capital and management requirements. The minimum capital required is CHF 20,000, which must be fully paid in upon formation. Registration in the commercial register is mandatory.
At least one managing director must be a Swiss resident. One key feature of the GmbH is the public disclosure of shareholder information. While this adds transparency, it may deter those who prefer confidentiality.
GmbHs allow for flexible profit distribution and are easier to manage than joint stock companies. They are suitable for growing businesses that want liability protection without the complexity of a full corporation.
Joint Stock Company (AG / SA)
The AG is the preferred structure for larger firms, particularly those seeking outside investors or planning to go public. It requires a minimum share capital of CHF 100,000, with at least CHF 50,000 paid in at incorporation.
The AG offers strong liability protection and anonymity for shareholders, as their identities are not made public in the commercial register. It also features a board of directors and a general meeting of shareholders, with at least one board member residing in Switzerland.
While AGs are more complex and costly to set up and run, they are ideal for high-growth companies needing flexibility in ownership transfer and access to capital markets.
Other Legal Forms
Cooperative (Genossenschaft)
Cooperatives promote the economic interests of their members through joint operations and shared ownership. They require at least seven members and generally do not have a capital requirement. Governance is democratic, with each member having one vote, regardless of their contribution.
Well-known Swiss cooperatives include Migros and Coop. This structure suits organizations with social, economic, or cultural objectives.
Association (Verein)
Associations are designed for non-commercial purposes, such as sports clubs or charitable organizations. Only two founders are needed, and there is no minimum capital requirement. Registration is only mandatory if the association conducts commercial activities.
Associations are easy to form and manage, making them ideal for nonprofits or local initiatives.
Branch Office
A branch office is an extension of a foreign parent company and is not a separate legal entity. It must be registered in the commercial register, and at least one Swiss-resident agent must be appointed. There’s no minimum capital requirement, but the parent company remains liable for branch obligations.
Branch offices are useful for foreign firms wanting a Swiss presence without forming a full subsidiary.
Choosing the Right Structure
When deciding on a legal form, consider the following:
- Liability: Structures like sole proprietorships and general partnerships offer no liability protection, while GmbH and AG limit personal risk.
- Capital: AGs require the most capital but support easier fundraising. Sole proprietorships need none but offer limited growth potential.
- Administrative Requirements: AGs involve the most complex setup, followed by GmbHs. Sole proprietorships are the simplest.
- Taxation: Corporations face potential double taxation, while profits from sole proprietorships and partnerships are taxed as personal income.
- Future Plans: If you plan to scale, raise capital, or go public, an AG is likely best. For modest, owner-managed operations, a GmbH or sole proprietorship may suffice.
Summary Table: Legal Forms in Switzerland
| Feature | Sole Proprietorship | General Partnership | Limited Partnership | GmbH / Sàrl | AG / SA | Cooperative | Association |
|---|---|---|---|---|---|---|---|
| Liability | Unlimited | Unlimited | General: Unlimited; Limited: Limited to contribution | Limited | Limited | Generally Limited | Generally Limited |
| Minimum Capital | None | None | None | CHF 20,000 | CHF 100,000 | None | None |
| Registration | Mandatory if > CHF 100k | Mandatory | Mandatory | Mandatory | Mandatory | Mandatory | Mandatory if commercial |
| Management | Owner | All partners | General partners | Director(s) | Board of Directors | General Assembly, Board (min 3) | General Assembly, Board (min 2) |
| Shareholder Info | Private | Private | Private | Public | Private | Private | Private |
| Ease of Setup | Very Easy | Easy | Moderate | Moderate | Complex | Moderate | Easy |
| Taxation | Personal Income | Partners' Personal Income | Partners' Personal Income | Corporate & Personal | Corporate & Personal | Corporate & Personal | Generally Exempt |
| Capital Raising | Difficult | Difficult | Moderate | Moderate | Easy | Moderate | Difficult |
The Role of the Swiss Commercial Register
Most businesses must register with the Swiss commercial register (Handelsregister), which ensures legal recognition and public access to key business data. This step is essential for protecting your business name and establishing legal credibility, especially for GmbHs and AGs.
The commercial register is managed at the cantonal level and accessible through the federal Zefix portal. Registration is typically required unless you operate as a small sole proprietorship or general partnership under the turnover threshold.
Conclusion
Choosing the right legal structure is one of the most impactful decisions you’ll make when starting a business in Switzerland. Each form offers specific advantages and limitations concerning liability, taxes, and administrative effort.
By carefully aligning your choice with your risk tolerance, financial needs, and long-term strategy, you can lay a solid foundation for your business’s success. Given the legal nuances involved, consulting with a Swiss legal or financial expert is highly recommended to ensure compliance and optimize your structure for future growth.
