Switzerland is a beautiful country and is considered a haven for starting a new business due to the various benefits an entrepreneur can avail in the country. The country’s lenient tax policies, transparent government policies and the lavish quality of life are some of the qualities that every entrepreneur would want in a country.
After reaching at a decision of setting up a business in Switzerland, the first thing that is required of an entrepreneur is to choose the type of the corporate structure the business would have. This is a very major decision as any wrong decision in relation to the structure can potentially destroy the business.
Let’s have a look at the various factors which should be considered before choosing a corporate structure.
Factors to be Considered Before Choosing a Business Structure
Choosing a business structure to require an in-depth study in the various factors that influence it. Some of the important factors to consider before choosing a type of business structure are:
- Ease of Formation
- Risk Associated
- Tax Obligations
- Initial Capital Required
- Cost of Keeping the Business Running
Keeping these five factors in mind would help an entrepreneur in choosing the correct corporate structure that would be suitable to the business and would be flexible enough to adjust to any changes in the business environment.
Now, let us try to understand the various types of business structures that are available to a business in Switzerland.
Types of Business Entities in Switzerland
Before starting a business in Switzerland, the first step that every entrepreneur must take is to decide on the type of business structure of the company. There are various corporate structures to choose from in Switzerland, such as:
A general partnership is a situation in which two or more people operate a business together. The partners in the business must be a resident of Switzerland and the business must be accessible through an address in Switzerland. The name of at-least one of the partners must appear in the business name of the company and all the partners have an unlimited amount of liability. This kind of corporate structure has no legal entity but it can be prosecuted. All the partners need to be registered to the Chamber of Commerce and once registered; full records need to be maintained.
Branch of a foreign company is not dependent on its parent company in monetary terms. It can conduct its own business and can generate its own revenue, but legally it would still be a branch of the mother company. It would be taxed as a Swiss company and in case of any lawsuits it has the option available to hire a non-Swiss national as the lawyer representing the company.
3.Corporation/Joint Stock Company
The Joint Stock Company is considered as the most common form of business mostly used by the businesses in Switzerland. In this the business is considered as an autonomous being. For a Joint Stock Company, it is required that there are at least three shareholders. The liability of these shareholders is limited to the value of the assets of the company and each shareholder’s share of equity to bring in the company is CHF100,000 out of which CHF 50,000 should be brought up front and fully paid for. The major share of the board of directors must be comprising Swiss or European citizens who reside in Switzerland and each of the board members is personally held liable for the payment of the various taxes and the social security benefits. It has also been mandated by the government that a business must appoint an auditor.
In a Sole Proprietorship the business is run by only a single person who is the resident of Switzerland. This type of business structure suits sole owners and freelance professionals. The people opting for this corporate structure, need to register themselves with the Chamber of Commerce if their annual sales exceed CHF 100,000. This kind of business has unlimited liability.
5.Limited Liability Company
In an LLC, at least one of the managing directors must be a Swiss resident. It is not necessary that this managing director is a citizen of Switzerland or Europe. The company can have two non-Swiss nationals on the board of directors. The original founders and shareholders of the company can act as the governing body for the company. The transfer of shares in this kind of structure is possible but is a very long and tedious process. It is the most common and most liked structure among entrepreneurs as this structure is a bit on the cheaper side in comparison to the limited company.
This type of partnership is not very prevalent in Switzerland. Here, the general partners’ have an unlimited liability on the other hand, the limited partners are liable for a pre-decided or an agree upon amount. All the partners of the company must be registered with the Chamber of Commerce.
Each of the above mentioned six types of business entities have their own pros and cons. It is up to the entrepreneur to choose the best structure that suits the needs of the business. These initial decisions are very crucial for the life of the business and require extreme care. So it is recommended that you should take the assistance of a firm that would do all the work for you and leave you to worry about other important business matters.
We at Business Setup Worldwide would provide all the necessary help to start your business in Switzerland. Our business setup experts are well-versed with all the rules and regulations and will take care of the entire Banking, Visa, Legal, and Licensing formalities, without letting you worry about the bureaucratic red tape and legal formalities. To know more about the various services we provide,do reach out to us.