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1.1.1. Main Forms of Doing Business

Incorporated Companies

A company can be incorporated in Switzerland in the form of a:

  • Stock Corporation
  • Partnership Limited by Shares
  • Limited Liability Company
  • Cooperative

Stock Corporation

The stock corporation is the most important and most common type of corporate structure in Switzerland

The stock corporation is a distinct legal entity with its own legal personality, and limited liability (limited to the company’s assets). The registered share capital is determined upon incorporation and subdivided into shares (bearer or registered shares).

A stock corporation can be incorporated by one or more individuals or legal entities, whereby at least one person has to be a shareholder. The minimum share capital is CHF 100’000. In order to incorporate a stock corporation 20% of the nominal share capital but at least CHF 50’000 must be paid in.

The stock corporation’s supreme body is the board of directors. It consists of one or more members, who are not required to be shareholders. There are no requirements regarding the nationality or legal residence of the directors. However, at least one member of the board of directors (or the executive board) authorized to represent the company must reside in Switzerland.

Stock corporations are required to have their financial audited. However, under certain conditions, the audit requirement can be limited (review) or fully waived.

Partnership Limited by Shares

A partnership limited by shares (or a corporation with limited partners) is a partnership divided into shares and in which one or more partners have unlimited joint and several liability to the creditors of the company, without limitation, and is similar to a partner in a general partnership. These partners are necessarily authorized to manage and represent the company. Due to tis complexity the partnership limited by shares is extremely rarely used as a company form.

Limited Liability Company

A Limited Liability Company is a separate business entity with its own legal personality. It can be incorporated by one or more individuals or legal entities. The minimum share capital is CHF 20’000 and must be fully paid in upon its incorporation. Each shareholder has an interest in the nominal capital in the form of one or more nominal shares having a nominal value of at least CHF 100. Shareholders are entered in the commercial register. All shareholders are entitled to join the management of the company, whereby at least one of them must have his or her place of residence in Switzerland. Depending on the size of the company there is only a limited audit requirement, which can be fully waived.

Cooperative

A cooperative is a separate business entity with its own legal personality. The cooperative is a group of persons or trading companies joined for promoting or securing certain economic interests by common self-help. This legal form is widespread, primarily in agriculture, but also among consumer associations, housing or building societies.

Audit Obligation

The audit obligation depends on the size and economic importance of the company. Regular audits apply to companies that are required to prepare consolidated financial statements and also to companies listed on the stock exchange, or if two of the three following thresholds are reached in two successive fiscal years:

  • Total assets of CHF 20 million
  • Annual sales of CHF 40 million
  • An average headcount over the year of 250 employees or more

If these conditions are not met, then the annual financial statements are only subject to a limited audit. The limited audit may be fully waived (opting-out) if the company has not more than an average of ten full-time employees over the year.

Partnerships

Simple Partnership

The simple partnership is a contractual relationship in which two or more individuals or legal entities agree to combine their efforts or resources in order to achieve a common goal. The simple partnership is created by an agreement (implicit agreement is sufficient). The simple partnership is not registered in the commercial register. It has no company name or domicile.

The simple partnership serves in particular as a subsidiary form in corporate law which applies whenever the prerequisites of another corporate form are not met.

The partners of a simple partnership are primarily and exclusively liable, not the company as such. The simple partnership is not subject to income taxation. The tax obligation is fulfilled by its partners.

General Partnership

The general partnership is a partnership in which to or more individuals (no legal entities allowed) join together without limiting their liability towards creditors of the partnership in order to operate a trading, manufacturing or other form of commercial business under one business name. The general partnership and its partners are registered in the commercial register.

The general partnership acts under its own name and has legal capacity to sue and be sued. Its assets are primarily liable for the partnership’s obligations. However, all partners have subsidiary unlimited liability for the debts of the partnership.

The general partnership is not subject to income taxation. The tax obligation is fulfilled by its partners.

Limited Partnership

A limited partnership is a partnership in which two or more persons join together in order to operate a trading, manufacturing or other form of commercial business under a single business name in such a manner that at least one person is a general partner with unlimited liability but one or more others are limited partners liable only up to the amount of their specific contributions. Partners with unlimited liability must be individuals, but limited partners may also be legal entities and commercial enterprises. The general partnership and its unlimited and limited partners are registered in the commercial register. The limited partnership acts under its own name and has legal capacity to sue and be sued.

The limited partnership is not subject to income taxation. The tax obligation is fulfilled by its partners.

Sole Trader

Sole traders are unincorporated businesses of individuals. There are no formal requirements to be fulfilled in order to run a business as a sole trader. Only, if the yearly gross proceeds amount to at least CHF 100’000, the sole trader is obliged to register him- or herself with the commercial register. The private assets of the sole trader are liable for all debts.

Other Legal Entities

Associations

Associations with political, religious, scientific, cultural, charitable, social or other non-commercial purposes acquire legal personality as soon as their intention to exist as corporate body is apparent from their articles of association. Commercial purposes are also allowed, provided that the association is registered with the commercial register.

Foundations

Foundations are characterized by assets dedicated to serve a specific purpose. The founder is generally free to determine the purpose of the foundation within the limits prescribed by law. A foundation may be fully tax exempt, provided that the following requirements are met: (a) the foundation must pursue a public interest; (b) the activity pursued must be exclusively dedicated to a public purpose or the benefit of third parties; (c) the funds available to the foundation are irrevocably committed to the tax exempt purpose; (d) the foundation must pursue the purposes set out in its by-laws and use its funds to achieve them; (e) the foundation must finally allocate its funds in an altruistic manner to achieve its purpose.

Foundations are supervised by a state authority. The supervisory authority ensures that the foundation’s assets are only used for their declared purpose.

Family foundations serve private purposes and are allowed within narrow limits. This type of foundation may only be established to defray the costs of upbringing, to endow or support family members or for similar purposes. The establishment of entailed family estates is prohibited.

Trusts

Switzerland has not incorporated the instrument of a trust into its legal system. However, the Hague Convention of the Law Applicable to Trusts and on their Recognition of 1 July 1985 became effective in Switzerland on 1 July 2007. As a consequence, trusts established in other jurisdictions are recognized in Switzerland.

Branch Office

Instead of incorporating a subsidiary, a foreign company may establish a branch office for doing business in Switzerland. A branch office has a certain organizational and financial independence from its principal office. It can enter into contracts and execute and settle transactions in its own name, and can sue and be sued at its place of business. Legally, however, the branch office is part of the foreign company (no separate legal entity).

The branch office needs to be registered with the commercial register at its place of domicile. An authorized representative domiciled in Switzerland has to be appointed.