Incorporating a company in Switzerland (SA, Sàrl, RI)

Which legal form should be chosen and what are the criteria? Each type of company has its own advantages and disadvantages. What are the pitfalls to avoid when incorporating a company in Switzerland? What are the steps involved in forming a company?

Which legal form should one choose and what is the criteria? How can you protect yourself and your business? The choice of structure for your business is a crucial factor in the process of setting up a company. By making the right choice, you can optimize your legal protection and tax situation from the start. Here’s a brief summary of the different options available to you.

The LLC

Benefits

Capital : The minimum capital to be paid at the time of incorporation is 20,000. This is less capital than for the SA. However, it must be paid in full at the time of incorporation. This capital can be contributed in kind (in the form of shares, real estate, receivables, etc.).

Disadvantages (see below).

Liability: limited to the fully paid-up share capital of 20,000 Swiss francs.

Company name: unlike a private company (self-employed, own name, sole proprietorship), the choice of company name – or business name – is unrestricted. However, the term “Sàrl” must appear after the company name.

Formation: a single entrepreneur can now form a limited company.

Taxes: Profit sharing can slow down and limit tax progressivity. The salary of the manager of the Sàrl is considered an expense of the company, which means that taxes can be reduced or at least maintained, depending on the situation.

Selling shares: Profits from the sale of shares are not taxable. However, to sell shares, you must go through the Commercial Registry.

Disadvantages

Incorporation: Incorporation costs are higher than for a sole proprietorship (official and notarized deeds, registration with the Trade Registry).

Publicity: the company’s organs, capital and shares are freely available for inspection in the Commercial Register (open to the public).

Administrative costs: The administrative costs of a limited liability company are higher than those of a sole proprietorship. These include minutes, general meetings and tax returns.

Taxation: As a limited liability company, the director is subject to double taxation. He will be taxed on the income and capital of the Sàrl and on his personal income and assets.

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OUR LLC INCORPORATION SERVICE

Here are the 5 key steps to incorporate a Limited Liability Company in Switzerland:

1. Meeting with RISTER to determine the elements of the company’s purpose, business analysis, advice, analysis of ICC/IFD taxation, VAT, withholding tax, salary, shareholder dividends, social security contributions, compulsory insurance, employment contract, work permit, rights and obligations of the managers.
2. Verification that the company name is available in the Trade and Companies Register.
3. Open a consignment account to pay in the share capital (min. CHF 20,000).

The private limited company (PLC)

Benefits

Liability: Shareholders of a PLC are liable only to the extent of their share in the company’s capital.

Publicity: The distribution of assets is not official as the shareholders are not entered in the commercial register.

Social benefits: Shareholders of a PLC are considered as employees and are therefore subject to compulsory insurance and protection.

Company name: The name of the company can be freely chosen. Unlike the self-employed status, which requires the name of the employer to appear in the company name, and the limited liability company, which requires the legal status to appear in the company name, a PLC is free to choose its name.

Taxation: The progressive nature of taxation can be broken or even interrupted by profit splitting. In fact, the much more flexible accounting of this status and the separation between the personal income of the shareholder and the dividends (which are called “business income”) make it possible to optimize a situation from a tax point of view, in a perfectly legal way.

Influence : The founder can increase the influence within the company. The founder can use shares with preferential voting rights (class A and B shares), restrict the transfer of shares, distribute his shares within his own circle, etc.

Sale of shares: the sale of shares is made easier, the founder can sell a share by simple transfer, without having to go before a notary.

Taxation: the founder is not taxed on the profit generated from the sale of a share, considered as a capital gain (and therefore tax exempt).

Disadvantages

Capital :The minimum capital required to incorporate a PLC is higher than for a LLC. It must be at least $100,000 (NB: unlike the LLC, where the capital must be fully paid up, the capital of an LLC. may be paid up to a maximum of $50,000 at the time of incorporation).

Incorporation: the formalities involved in incorporating a company are extensive, time-consuming and, in some cases, costly.

Double taxation: As with all limited companies (including LLC), the owner is taxed on the profits and capital of the company and on dividends and personal assets. This double taxation (for the reasons mentioned above in the advantages section) is often more advantageous from a tax point of view than certain self-employed situations (to be studied with a RISTER expert).

Administrative costs: minutes, management reports, accounting, general meetings, tax forms and auditors (NB: changes in company law, and in particular in the law on limited companies, mean that auditors are no longer compulsory under certain conditions, which considerably reduces these costs, and also means that in certain cases it is still possible to use electronic means for part of the administrative work, making it easier and more economical to manage a limited company today).

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OUR SERVICE

Here are the 5 key steps to setting up a PLC in Switzerland

1. Meeting with the company to determine the elements of the corporate purpose, advice, analysis of ICC/IFD taxation, VAT, withholding tax, salary, shareholder dividends, social security contributions, compulsory insurance, employment contract, work permit, shareholder rights and obligations.
2. Verification of the company name in the Commercial Register.
3. Open a consignment account to pay in the share capital (min. CFH 50,000).

 

The sole proprietorship

The sole proprietorship is often used for activities directly related to the owner, such as :

• Doctors
• Craftsmen
• Small businesses
• Lawyers
• Veterinarians etc.

It’s easy to set up a sole proprietorship (also known as a “nom individuelle” or “sole proprietorship”) in Geneva or elsewhere in Switzerland, as no start-up capital is required and the business can begin immediately

Registration in the Commercial Register is mandatory for annual sales of CHF 100,000 or more.

The name of the sole proprietorship must include the owner’s surname and may include an additional suffix to distinguish the activity.

The founder and owner of the sole proprietorship has unlimited liability for the company’s losses and risks.

Benefits

Freedom: As a sole proprietor, the entrepreneur can decide on the strategic direction of the business and how it will be run, with complete autonomy. This legal status gives the business a great deal of freedom.

Capital : In theory, a sole proprietorship can be created without any capital contribution. In practice, whatever the business, the entrepreneur will have to invest a minimum amount of start-up capital in one way or another.

Incorporation: this requires no special formalities and therefore involves few costs and fees. The only cost is the registration in the commercial register.

Taxation: the self-employed person is taxed only once on all income, whether personal or commercial, so there is no double taxation. NB: there is also a real disadvantage to this advantage: progressive taxation.

Administrative burdens: In theory, these are very limited. In reality, however, they are often higher than expected, given the legal obligation to keep accounts and the fact that the self-employed most often choose to use accounting firms or trustees such as RISTER for these tasks.

Disadvantages

Liability: In terms of liability, the self-employed owner is liable for the full amount of his or her combined business and personal assets. He is also solely responsible for the company’s activities, even if an error is made by one of his employees or a commercial intermediary.

Publicity: Unlike a limited company, the owner of a sole proprietorship is publicly known and therefore does not enjoy anonymity.

Name of the company: the name of the owner must appear in the name of the company and cannot be freely chosen.

Balance sheets: Sole proprietorships are required by law to keep accounts (in accordance with balance sheet requirements) as long as they are registered in the Commercial Register. This obligation entails administrative and management costs.

 

Taxation: the self-employed are not subject to double taxation, which can be a real disadvantage depending on the situation and the activity. In fact, by combining private and business assets on the same tax form, the self-employed person is subject to progressive taxation. This is a major disadvantage that sometimes leads to situations in which the commercial activity is clearly overtaxed.

Poursuites par voie de faillite : dans la mesure où l’indépendant est inscrit au registre du commerce, il s’expose à une procédure sévère de poursuites pour dettes, ayant pour objet la réalisation forcée de l’ensemble des valeurs patrimoniales du débiteur. Il répond donc sur ses biens personnels, même si ceux-ci ne sont pas en Suisse (notez que les biens immobiliers à l’étranger peuvent être saisis, par exemple).