Company Formation

As a specialized Relocation, Advisory and Concierge Firm, EPEK knows that Switzerland presents a massive opportunity to businesses and families alike. At EPEK, we work with our clients to reduce the risk and stress involved in moving to Switzerland. Built on our years of experience, this article highlights the procedures and nuances of company formation in Switzerland.

Prior to company formation, it is important to understand the business landscape in Switzerland, including the various legal forms of corporations that exist here – each presenting their own set of advantages and disadvantages.

The three most common types of Company include:

the “Aktiengesellschaft (AG)”

the “Gesellschaft mit beschränkter Haftung (GmbH)” and

a Sole Proprietorship.

Looking at each option individually, will allow you to understand the option best suited to your needs and business goals.

 

Aktiengesellschaft (AG) – Corporation (Ltd.)

The AG is a legal entity in its own right. To form an “AG”, the following requirements need to be met:

Requirements for an “AG”

• An “AG” can be set up by one or more private individuals or legal entities.
• Under Swiss corporate law, these individuals (or legal entities) can be Swiss or foreigner nationals
• Share capital must be at least CHF 100’000, whereby the total paid-up share capital must be at least CHF 50’000.
• “AG” must have a company name, which can be freely chosen. The name must clearly differ from any other registered company.
• Company’s domicile must be anywhere in Switzerland.
• An ordinary audit is required if the corporation exceeds two of the following variables within two consecutive fiscal years:
  • balance sheet total of 20 million Swiss francs
  • a turnover of 40 million
Swiss francs
  • a yearly average of 250 full time positions.
• In case the preconditions for an ordinary audit are not fulfilled, a limited audit is required. The limited audit is less extensive and considered as a review of the financial statements of the company.
• With the consent of all shareholders a company with less than ten full-time positions can abstain from an audit all together.

Governing Body of an “AG”

• The Shareholders are the supreme governing body and elect the Board of Directors and the auditors of the company.
• The Board of Directors is the management body of the “AG”. Law stipulates that the Board of Directors is responsible for the overall management of the company, which includes the following duties: appointment of employees entrusted with management functions (General Manager), preparation of the annual report, defining the organization etc.
• At least one individual in the Board must be residing in Switzerland.

Advantages of an “AG”

• Liability limited to the respective portion of the share capital of each individual shareholder.
• Shareholders names are not available to the public (no mentioning of the shareholders in the Swiss Commercial Register)
• Freely selectable name of the company, with the inclusion of “AG” at the end of the name.
• Founder(s) can have greater influence through the issuance of voting shares.

Disadvantages of an “AG”

• Relatively high minimum share capital requirement (CHF 100’000), of which at least CHF 50’000 must be paid up.
• Double taxation: an “AG’s” earnings and capital as well as shareholders’ income (dividend) and assets will be taxed twice by the fiscal authorities, on the private and corporate level.
• Stringent accounting regulations.
• Higher administrative expenses: board minutes/protocols, management reports, accounting, general meeting of shareholders, tax forms, auditing agency, etc.

 

Gesellschaft mit beschränkter Haftung (GmbH) – Limited Liability Company (LLC)

Similar to an AG, the GmbH is a legal entity in its own right. To form a “GmbH”, certain requirements need to be met:

Requirements for a “GmbH”

• A “GmbH” can be set up by one or more private individuals or legal entities.
• Under Swiss Corporate Law, these individuals (or legal entities) can be Swiss or foreign nationals.
• Paid-up share capital must be at least CHF 20’000.
• “GmbH” must have a company name, which can be freely chosen. The name must clearly differ from any other registered company name.
• Company’s domicile must be anywhere in Switzerland.
• An ordinary audit is required if the corporation exceeds two of the following variables within two consecutive fiscal years:
  • balance sheet total of 20 million Swiss francs
  • a turnover of 40 million
Swiss francs
  • a yearly average of 250 full time positions.
• In case the preconditions for an ordinary audit are not fulfilled, a limited audit is required. The limited audit is less extensive and considered as a review of the financial statements of the company.
• With the consent of all shareholders a company with less than ten full-time positions can abstain from an audit all together.

Governing body of a “GmbH”

• The Partners (Shareholders) are the supreme governing body and elect the Management and the auditors of the company.
• The Business Management of the “GmbH” acts in a similar role as the Board of Directors in an “AG”. A Partner has the right to be a General Manager of the “GmbH”
• At least one individual in Business Management must be residing in Switzerland.

Advantages of a “GmbH”

• Share capital relatively small (minimum CHF 20’000)
• Liability limited to the paid up share capital (minimum CHF 20’000)
• Freely selectable name of the company, with the inclusion of “GmbH” at the end of the name.
• Only 1 private individual or legal entity necessary.
• Sale of original paid up capital is are of capital gain tax.

Disadvantages of a “GmbH”

• Double taxation: GmbH’s earnings and capital as well as shareholders’ income and assets will be taxed twice through the fiscal authorities, on the private and corporate level.
• Partners (Shareholders) will have their names made public in the Swiss Commercial Register (Handelsregister).

 

Sole proprietorship

The third type, called a Sole proprietorship can also be established in Switzerland, however this form of entity is uncommon and requires the founder’s to be part of the company name (art. 944 et seq. CO). The owner has unlimited liability, including his private assets. Entry in the Commercial Register is compulsory if the turnover exceeds the amount of CHF 100’000 per year.

Advantages of a Sole proprietorship

• Freedom of the founder in terms of decision making.
• Can be stabbed without any capital.
• No double taxation: no fiscal double-burden on business and entrepreneur income or respective business assets.
  Therefore individual entrepreneurs tend to be seen at a fiscal advantage.
• Less expensive to set up with little formalities.

Disadvantages of a Sole proprietorship

• The founder (proprietor) is liable with his/her entire personal and business assets.
• The founder’s name absolutely must be included in the business name.
• Founder will have his/her name made public in the Swiss Commercial Register (Handelsregister).
• No additional partners can be added to the business.
• Can be problematic with customers and clients.

 

In conclusion, the options for company formation in Switzerland are clearly defined, with their given characteristics and structures. Even if a simple process, EPEK works tirelessly with its clients to manage the founding and management of their companies and entities when moving to Switzerland.

We support from EPEK, interactions with local authorities, completion of paperwork and administrative tasks become a seamless milestone on your journey to moving to Switzerland. Together with EPEK, you can focus on running your company and finding new clients and partners, leaving us to manage the background tasks and formalities.

Out of sight and out of mind – founding your company and working with EPEK will give you the confidence you deserve when moving to Switzerland.

Hopefully, our useful company formation overview has provided you with a little more clarity. If you have any further questions, please don’t hesitate to contact our team.