Choosing a legal form determines the legal framework for the company in the future, and there are numerous factors to consider. So, it's helpful to ask yourself a few questions in advance:
- Am I starting the company alone or with partners?
- Am I willing to risk my private assets?
- How much capital do I have to start the company?
- How much capital do I expect to need in the first few years of the business?
- How quickly do I want the company to grow?
The main legal forms in Switzerland
Partnerships
Corporations
Sole proprietorships
This legal form is suitable for small businesses with personal activities. The administrative work is minimal and formation documents are not required. A sole proprietorship comes into being when a natural person starts up independent business activities. If the annual turnover exceeds CHF 100,000, an entry in the commercial register is required.
With sole proprietorships, there is no minimum amount of capital that is required.
The owner has personal and unlimited liability with their private assets for any business debt.
In a sole proprietorship, only one person can be an owner.
- The proprietor is the sole owner
- There are no statutory capital requirements
- There is minimal administrative work
- No forms and procedures are required for start-up
- Unlimited, personal liability
- No unemployment insurance
- Lower creditworthiness
- Bankruptcy proceedings can be initiated after entry in the commercial register
Collective enterprise
A collective enterprise is a partnership that is created upon conclusion of a partnership agreement by at least two partners. It is suitable for smaller companies with a high level of personal involvement. A collective enterprise must be entered in the Commercial Register and does not have its own legal personality, but can act in its own name.
There is no minimum amount of capital that is required for a collective enterprise.
All partners have unlimited joint and several liability with their private assets.
At least two people are required for start-up.
- The partnership agreement governs the authority and responsibility
- There are no capital requirements
- The enterprise's capital has primary liability
- The partners' right to express an opinion reduces independence
- Secondary, unlimited, and joint and several liability with private assets
- Partners continue to be liable for five years after they leave the enterprise
- Partners are subject to bankruptcy proceedings
- Non-compete clause for partners unless all other partners agree otherwise
- Not suitable for start-ups
Joint-stock company (AG)
A joint-stock company is a company with its own legal personality. Its liability is limited to the business assets. The legal form is suitable for nearly all profit-oriented entities.
The minimum amount of capital required is CHF 100,000; CHF 50,000 of which must be deposited (paid in) at the time of formation.
Liability is limited to the company assets. The personal assets of the shareholders are not affected.
At least one shareholder and one member of the Board of Directors are required, although the same person can hold both positions.
- Separation of private and business assets, liability only in respect of equity capital
- Company shares are easy to trade; there are also options for contractual or legal restrictions
- High creditworthiness
- The ownership structure is not made public
- The minimum amount of capital required is CHF 100,000; at least CHF 50,000 of which is paid in upon formation
- There is a large number of formal requirements for startup
- Co-determination by shareholders and Board of Directors is possible
Limited liability company (GmbH)
A limited liability company is suitable for smaller companies centered around individuals. All of the members are entitled and required to manage the company jointly unless the articles of incorporation stipulate otherwise.
A minimum share capital of CHF 20,000 must be fully paid in at the time of formation.
Liability is limited to the company assets. The personal assets of the members are not affected.
At least one person.
- A low amount of share capital is required; liability is limited to this capital (must be fully paid up at time of formation)
- It has its own legal personality
- It can be converted into a joint-stock corporation without liquidation
- Only one person is required for startup
- Membership interest can only be transferred by written disposition. The articles of incorporation may intensify or waive statutory restrictions on the transfer
- There is a large number of formal requirements for startup
- The names of the members are entered in the Commercial Register
Limited partnership
The limited partnership consists of at least one natural person who is liable without limitation (general partner) and at least one natural person or legal entity with limited liability (limited partner). It is a company form that is used in special cases – for example, when involving external investors. They are liable only up to the amount of the contribution known as the "amount of liability."
The business shares and the method of sharing profits are regulated by the partnership agreement. The limited partnership is not a legal personality in its own right, but it may act in its own name, initiate debt collection proceedings, and may itself be subject to such proceedings.
There is no minimum amount of capital required.
General partners have joint and several unlimited liability with their private assets.
Limited partners have joint and several liability for the "amount of liability."
At least one natural person as general partner.
At least one natural person or legal entity as a limited partner.
- The company's assets have primary liability
- Limited partners have subsidiary joint and several liability, only up to the "amount of liability"
- There is a clear separation between operational management and financial investors
- General partners have subsidiary joint and several unlimited liability
- Limited partners and general partners are still liable for five years after they leave the partnership
- General partners are subject to bankruptcy proceedings
- It is not suitable for start-ups
Key contracts and agreements for partners and owners
The partnership agreement
This agreement governs the relationship among several partners. When starting a collective enterprise, a partnership agreement is advisable in order to minimize the risk of conflict. Important: This contract should govern such conditions as the exit of a partner and the calculation of the enterprise value or value of the equity shares.
The shareholders' agreement
The shareholders' agreement governs the relationship among multiple shareholders. It ensures clear rules among the shareholders. It is important to include provisions on the exit of a shareholder, among other things. At the time of the company formation, it should be decided who can acquire the shares, and for what price, when a shareholder exits. The shareholders' agreement should also define how the enterprise value is calculated and therefore how the share price is determined.