It is no secret that Switzerland rates highly as a place for doing business. With a high standard of living, business-friendly policies, and a highly skilled workforce, the Swiss are a world leader in financial services, pharmaceuticals, and of course, watches. Likewise, the tax laws are favorable, and startup capital requirements are relatively low by European standards. With that said, below are some of the most common business structures in Switzerland.

Sole Proprietorship

This is the most popular business entity and operates in a similar manner to most countries. As the name implies, it is owned by an individual and is commonly used for small or family-owned businesses. Some examples would be a doctor or a consulting service that is operated from an individual’s home. While the startup costs are very low and there are no minimum capital requirements, the main disadvantage has to do with unlimited liability. As in, debts incurred by the business can extend to the proprietor’s personal assets. 

Additional requirements, information, and costs

-No registration for VAT if sales are under CHF 100,000 a year. 

-Simplified accounting rules if turnover is less than CHF 500,000 a year.

-Owner’s name must be part of the company name.

-No minimum capital requirement.

-Proprietor’s business and personal income are taxed together.

-The owner does not have to reside in Switzerland but must have a residence and work permit.

-Startup Costs: 120 CHF for registration in the trade register.

General Partnership

A general partnership is similar to a sole proprietorship with the exception there are two or more owners. Some common examples of partnership would be a restaurant or a law firm. Like a proprietorship, there is unlimited liability for all general partners meaning business expenses can extend to their personal assets. Aside from that, a general partnership has low startup costs and is exempt from the corporate income tax.

Additional requirements, information, and costs

-Must keep simplified accounts for sales of less than 500,000 CHF a year. For sales greater than 500,000 CHF, accounts must be kept and submitted in accordance with the Code of Obligations.

-The name of the partnership is public record.

-No minimum capital requirements.

-The owners do not have to reside in Switzerland, but they must have a work and residence permit.

-Startup Costs: CHF 2,000-40,000 in attorney fees for the company contract and a CHF 240 registration fee.

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Limited Partnership

This is not a common business structure in Switzerland, although it operates in a similar manner to a general partnership. The main difference has to do with liabilities as a general partner(s) has unlimited liability while limited partners are liable up to the amount they have invested in the company. 

Additional requirements, information, and costs

-Accounting obligations are the same as a general partnership.

-No minimum capital requirements.

-Like a sole general proprietorship, the owner does not have to physically reside in the country, although they must have a residence and work permit.

-Startup Costs: CHF 2,000-40,000 in notary fees for the partnership agreement and a CHF 600 registration fee.

Limited Liability Company (Sàrl)

A limited liability company is popular with SMEs and family businesses. It offers a few advantages for investors, namely limited liability for investors and some tax benefits. In addition, the startup capital requirements are fairly low when compared to other countries, and profits from the sale of company shares are not taxable.

Additional requirements, information, and costs

-Must maintain and submit accounts as required by the Code of Obligations Act. In addition, the LLC is subject to an ordinary audit if two of the following three conditions apply.

-Balance sheet of CHF 20 million or greater.

-Turnover of CHF 40 million or greater.

-Has 250 or more employees.

-The name may be freely chosen, although it must include the abbreviation “Sàrl”.

-Requires a minimum startup capital of CHF 20,000.

-The makeup of the corporation, capital, and shares are public information.

-At least one of the managing directors must be a Swiss resident.

-Startup Costs: Minimum of CHF 20,000 in capital, CHF 700-2,000 in notary fees for the LLC startup documents, and a CHF 600 registration fee. In addition, a 1% stamp fee if the share capital is greater than CHF 1,000,000.

Limited Company (AG)

This is the second most popular legal entity in Switzerland, and it is ideal for businesses that are focused on making a profit. While it requires more startup capital than an LLC, it offers some advantages in terms of liability and the issuance of shares.

Additional requirements, information, and costs

-Accounting standards are the same as a Sàrl.

-The name may be chosen freely provided it is not in use by another company. 

-Requires a minimum investment of CHF 100,000 in shares. At least CHF 50,000 or 20% of the share must be paid upon formation of the company.

-The owner’s legal status can be kept private. 

-At least one of the managing directors must reside in Switzerland.

-Startup Costs: Minimum of CHF 100,000 in capital, CHF 800-2,500 in notary costs for the founding documents and share certificates, and a CHF 600 registration fee. A 1% stamp fee applies if the share capital is greater than CHF 1,000,000.

Advantages and Disadvantages of Operating a Company in Switzerland

Advantages

-Switzerland is strategically located in the center of Europe with easy access to some of the largest markets, such as France and Germany. 

-Switzerland has a history of economic stability and neutrality. Likewise, government policies have traditionally been pro-business.

-Entrepreneurship: It is one of the easiest countries for starting a business. In addition, the Swiss have a culture of entrepreneurship. 

-Low taxes: While the rates vary by canton, the overall tax rates in Switzerland are considerably lower than in many European countries. 

Disadvantages

-While Switzerland has a skilled workforce and the fees for starting a business are low, the cost of living and wages are high. In fact, it is one of the most expensive countries in Europe. 

-Regulation and Compliance: Certain industries like agriculture are highly regulated and difficult to enter. In addition, the laws and regulations can vary by canton. Lastly, Switzerland is not part of the EU, so doing business outside of the country can be difficult. 

-Multiple languages: While this can be an advantage, Switzerland has four official languages: French, German, Italian, and Romansh. Even though English is commonly spoken for business, being bilingual goes a long way.

-Many forms of business ownership require a residency and work permit. Larger companies must have at least one manager or director that is a Swiss resident.

Conclusion

When it comes to business formation, Switzerland offers a lot of advantages. Most notably, the minimum capital requirements and startup fees are low when compared to many developed countries. It is strategically located with access to some of the world’s largest markets. In addition, the tax rates are below the average for Europe and Switzerland has double taxation treaties with many countries. 

Likewise, the Swiss have a culture that fosters entrepreneurship. Aside from that, the main downsides are the high cost of living and the fact owning/managing a business requires a residence and work permit. With that said, we can say the advantages definitely outweigh the disadvantages.

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