Choosing a Legal Form for a Business in Switzerland

In a sole proprietorship (Einzelfirma), the business and the private individual are legally connected, whereas a limited liability company (GmbH) and a stock corporation (AG) are separate legal entities. The owner of a sole proprietorship is generally liable with all assets that can be legally attributed to them. In a GmbH and an AG, the company’s assets are generally liable, but personal guarantees and the owners’ own breaches of duty can create private risk. No statutory minimum capital is required for a sole proprietorship. A GmbH requires at least CHF 20 000 in fully paid-in share capital. An AG requires share capital of at least CHF 100 000; of this amount, at least CHF 50 000 in total and at least 20 percent of each share must be paid in. The ownership and management structure ranges from sole decision-making in a sole proprietorship, through a controlled group of shareholders in a GmbH, to a stronger separation of ownership and management in an AG. Taxation also differs: the profit of a sole proprietorship counts as the owner’s income, while GmbHs and AGs pay tax on their own profits. Legal form and social security status must be assessed separately because the social security compensation office (Ausgleichskasse) decides whether someone is recognized as self-employed. Owners of a GmbH or AG are generally considered employees of their own company in connection with their work and salary. Notarial services, the commercial register, corporate bodies, minutes, financial reporting and a possible audit increase the administrative workload for GmbHs and AGs. For growth, new participants, financing, succession or a sale, corporations usually offer more structural options than a sole proprietorship. A later change of legal form is possible, but it may require the transfer of contracts, assets, permits, personnel and tax positions. A comparison of legal forms for Switzerland should therefore assess liability, capital, ownership, management, taxation, social security, administration and planned development together.