Preparation Legal Forms

Legal Forms

Which legal form is best suited to your business idea? What are the advantages and disadvantages of each one? Get an overview here.

Sole Proprietorship

This legal form is suitable for small businesses where the activities are carried out by one person. A sole proprietorship comes into being when a natural person starts up business activities. No special incorporation document is required. An entry in the commercial register is mandatory if the annual turnover exceeds CHF 100,000, provided that the business is run as a commercial operation. An obligation to make an entry in the commercial register also means that accounting is mandatory. As a result of entering the sole proprietorship in the commercial register, the business will enjoy legal protection and its proprietor will be subject to debt collection under bankruptcy proceedings.

+ The proprietor is the sole owner
+ No statutory capital requirements
+ Low administrative costs
+ No formalities required for startup

– Unlimited personal liability
– No unemployment insurance
– Lower creditworthiness
– Debt collection under bankruptcy proceedings after entry in the commercial register

Limited Liability Company (GmbH)

This form is suitable for small businesses that center on the activities of individuals. A GmbH consists of at least one partner (shareholder) and has share capital of at least CHF 20,000. All the partners are authorized and obliged to manage the company jointly, unless the articles of incorporation contain a different provision regarding management. The General Meeting elects the auditors, although companies with no more than ten full-time posts on average for the year may choose not to have audits conducted, subject to certain conditions (this is known as "opting out").

+ Low share capital required; liability is limited to this sum (which must be fully paid up on incorporation)
+ Legal entity
+ Can be converted into a stock corporation without liquidation
+ Only one person required as founder

– Equity shares can only be transferred by written disposition. Articles of incorporation may tighten or waive statutory restrictions on transfers
– High formal requirements for incorporation (officially authenticated documents, commercial register, articles of incorporation, etc.)
– Names of partners are entered in the commercial register

Stock Corporation (AG)

The stock corporation is a suitable legal form for almost all profit-oriented companies. The Board of Directors is designated by the senior governing body, the General Meeting of Shareholders. The General Meeting also elects the auditors, although companies with no more than ten full-time posts on average for the year may choose not to have audits conducted, subject to certain conditions (this is known as "opting out"). The shareholders are only liable in respect of the capital they invest.

+ Separation of private and business assets, liability only in respect of equity capital
+ The company shares (equities) are easily tradable, but restrictions may also be stipulated by agreement or by the articles of incorporation
+ High creditworthiness
+ Ownership structure is not made public

– Minimum capital of CHF 100,000 is required, at least CHF 50,000 of which must be paid up on incorporation
– High formal requirements for incorporation (officially authenticated documents, commercial register, articles of incorporation, etc.)
– Shareholders and Board of Directors may have rights of codetermination

General Partnership

This type of partnership is used by small businesses that center on the activities of individuals. It is created when a partnership agreement is concluded by at least two partners (who must be natural persons). A general partnership has to be entered in the commercial register. A general partnership is not a legal entity in its own right, but it may act in its own name, institute debt collection proceedings and may itself be subject to such proceedings.

+ Partnership agreement stipulates authorities and responsibilities
+ No capital requirements
+ The partnership's capital is primarily liable

– Partners' right to express an opinion reduces independence
– Subsidiary joint and several unlimited liability of partners for the amount of their own personal assets
– Partners continue to be liable for five years after they leave the partnership
– Partners are subject to debt collection under bankruptcy proceedings
– Competition ban on partners unless all other partners agree
– Not suitable for startups

Limited Partnership

This corporate form is used in special cases, e.g. if external investors are involved. They are known as the limited partners (and they may be natural persons or legal entities). They are liable up to the amount of their contribution known as the "Kommanditsumme." Management is in the hands of general partners (who may only be natural persons). The business shares and the method of sharing profits are regulated by the partnership agreement. A limited partnership has to be entered in the commercial register. This type of partnership is not a legal entity in its own right, but it may act in its own name, institute debt collection proceedings and may itself be subject to such proceedings.

+ The partnership's capital is primarily liable
+ Limited partners have subsidiary joint and several liability, only up to the amount of the limited partner's contribution
+ Clear separation between operational management and financial investors

– General partners have subsidiary joint and several unlimited liability
– Limited partners and general partners continue to be liable for five years after they leave the partnership
– General partners are subject to debt collection under bankruptcy proceedings
– Not suitable for startups

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