Starting a business or self-employment in Switzerland
If you're thinking of starting a business or self-employment in Switzerland, this guide explains the types of Swiss registered companies and the processes.
Switzerland has strict allocation for foreign workers moving to Switzerland, although one option is to set yourself up as a self-employed or freelance worker, or start a business in Switzerland. Included below are some key areas to help you think about the business you would like to start and identify the Swiss legal structure that best fits your business startup in Switzerland.
How to start a business in Switzerland
There are a number of things you need to consider before starting your business. Firstly, it is essential to understand whether you have a successful business idea and secondly, to choose the right Swiss business legal structure for it.
For foreigners wanting to start a business in Switzerland, one main factor is that you must also be a Swiss resident, or have a Swiss legal entity or partner who is a Swiss resident. You can read more about Swiss visas and permits, and Swiss work permits for conditions.
What do I need before I start?
Before you get started, find out if people are interested in buying your products or services. Find out who your competitors are and whether the market can sustain your business. You can also see which company names are already registered, via Switzerland's commercial register.
Conduct some research to see whether your idea is really feasible. This will involve gathering, analysing and evaluating information to help you formulate your business goals.
Some questions to consider are:
- What product/service will you provide?
- Is your idea feasible?
- How will you protect your idea?
- Is there a market for your product/service?
- What skills do you need?
- Who are your competitors?
- What difference will you bring to the market?
- Do you have the financial capacity?
Which Swiss business structure should I choose?
Choosing your business structure is an important decision, so you need to investigate each option carefully. What type of business structure will you use? Will you be a sole trader, in a partnership, or established as a legal entity? There are advantages and disadvantages to consider for each.
If you are thinking of starting a company in Switzerland, you need to be aware that there are seven different types of companies to choose from:
1. Single-owner company or sole proprietorship
This is the most common type of company after the standard corporation or 'joint-stock' company. It is most suitable for sole owners of a business or other professionals who work for themselves, such as freelancers, small businesses and individual entrepreneurs. They tend to refer to businesses run by one individual, who must be a Swiss resident.
There is unlimited liability and the individual’s name must appear in the business name (such as 'John Smith Consultancy' or 'Smith IT services'). Registration with the Chamber of Commerce is mandatory if annual sales exceed CHF 100,000.
2. General partnership
A general partnership is an association of people operating a commercial business; it is similar to sole proprietorship but with more than one person involved. This category is used when two or more people jointly operate a company. No limited capital is required, all partners must be Swiss residents and the company must have a Swiss address. The name of one of the partners must appear in the business name of the company (such as 'Smith and Co').
All partners have unlimited liability and registration with the Chamber of Commerce and Commercial Registry is mandatory. The general partnership is not an incorporated enterprise and therefore has no legal entity, although it may prosecute and be prosecuted under the firm’s name. Once the partnership has been registered, full accounts with profit and loss statements need to be kept.
3. Limited partnership
This is a much less common version of the general partnership. In this type of company, general partners have unlimited liability, while limited partners may be liable up to an agreed amount. Registration with the Chamber of Commerce is mandatory.
4. Corporation/Joint-stock company (AG/SA)
This is the most common form taken by businesses, where the corporation is considered an independent legal entity. A member of the board or a director must be a resident of Switzerland, with sole signatory rights. This prerequisite can also be met if two members of the board or two directors have joint signatory rights and are residents of Switzerland.
Liability is limited to the value of the company's assets and the minimum amount of shareholders' equity is CHF 100,000, of which CHF 50,000 must be fully paid for. The company must comply with formal incorporation procedures. Processing the registration generally takes between two and four weeks, after which the company is a legally recognised entity.
5. Limited liability company (GmbH/Sàrl)
Another legal entity, this type of company requires a minimum shareholders' equity of CHF 20,000, of which CHF 10,000 must be fully paid for. At least one managing director who is authorised to sign on behalf of the company must be resident in Switzerland.
In general, all members participate jointly in the management and representation of the GmbH/Sàrl, however, the management of the company may be conferred to non-members. This type of company is cheaper to start than a limited company, but – contrary to the AG/SA – the shareholders are publicly listed in the commercial register. Members are jointly liable for the company's debts up to the registered capital amount.
A subsidiary is a legally independent company affiliated to a foreign entity, and tends to operate more as a 'Swiss' than a 'branch' company. It can take the form of a corporation or a limited liability company.
A branch is a legally dependent but financially independent wing of a head office that operates outside of its home country. In this type of company, the foreign parent company is liable and the branch is taxed in Switzerland as a Swiss company. One Swiss resident with legal authority is required.
Setting up a business as a foreigner
You must be a Swiss resident to run a company either as a self-employed person (sole proprietorship and partnership companies) or as director/employee of a legal entity (corporations and limited liability companies). Read more about Swiss visas and permits.
Switzerland has a dual system for granting Swiss work permits to foreign workers. Employees from the EU/EFTA area can benefit from the Agreement on the Free Movement of Persons. Permits for people from countries outside the EU/EFTA area – so-called third states – are restricted to highly qualified workforce.
The Federal Administration’s SME portal provides further information on this topic.
Accounting for businesses in Switzerland
All businesses must maintain proper books of account and retain accounting records and associated documents for 10 years. But the structure and quality of accounting depends on the company’s financial size.
The duty to keep accounts and prepare financial reports is applicable to the following:
- Sole proprietorships and partnerships, which generated sales revenues of at least CHF 500,000 in the last financial year.
- Legal entities.
The following are only obliged to keep accounts on their receipts and disbursements (cash method of accounting) and their financial position:
- Sole proprietorships and partnerships, which generated sales revenues of less than CHF 500,000 in the last financial year.
- Associations and foundations without obligation to register with the commercial register.
- Foundations exempt from appointing an auditor as per art. 83 para. 2 of the Swiss Civil Code.
Auditing requirements in Switzerland
By law, privately held Swiss companies require a statutory audit if certain thresholds are met. The law sets thresholds for companies requiring 'ordinary audits' or 'limited statutory examination'.
Companies exceeding two of the following thresholds in two consecutive business years are required to have their accounts ordinary audited:
- balance sheet total of CHF 20 million;
- revenue of CHF 40 million;
- annual average of 250 full-time equivalent employees (FTEs).
Companies below the aforementioned thresholds are subject to limited statutory examination or can even opt out of an audit and examination entirely if there are less than 10 FTEs and with the consent of all shareholders.
How long does it take to establish a company, and how much does it cost?
After you have clarified everything from business plan, legal structure and company name to the residence permits and financing, you can launch your company. A detailed summary of the bureaucratic and legal steps to incorporate and register a new legal entity in Switzerland has been compiled by the World Bank, including estimates of costs and timeline.
Recognition of self-employment by the AHV (Old Age and Survivors’ Insurance) is necessary when establishing a sole proprietorship or in the case of participation in a partnership. From a social insurance perspective, a natural person is considered self-employed if he/she:
- works in his/her own name and own account;
- holds an independent position;
- carries his/her own economic risk.
As a rule, recognition of self-employment resides with the cantonal social insurance office. New immigrants must first get a valid residence and work permit.
Should you be unable to get social security recognition for the formation of a sole proprietorship, establishing a capital company (AG or GmbH) may be an alternative.
Swiss taxes for self-employment and companies
Depending on the legal form of the business, taxes on the company’s profit are either due by the business owner directly (in the case of sole proprietorships or partnerships) or by the legal entity (corporations and limited liability companies).
In the latter case, the business owner either receives remuneration as an employee or dividends from the company. Remunerations are a deductible expense for the company but taxable income for the individual, which is also subject to social security and pension contributions. Dividends are paid by the company from its profit after tax and are not subject to social security and pension contributions.
To eliminate economic double taxation, the dividend amount taxable for the shareholder is reduced by 40 percent at the federal tax level and even more in most of the cantons. Often a reasonable combination of both, salary and dividends has proven beneficial.
- Swiss-American Chamber of Commerce
- British-Swiss Chamber of Commerce
- Canadian-Swiss Chamber of Commerce
- Swiss-Australian Chamber of Commerce (SACCI)
- Swiss-Indian Chamber of Commerce (SICC)
Please note: The information contained within these articles is for guidance only. Items herein are general comments, do not constitute or convey advice per se and should not be relied upon without obtaining professional advice regarding your direct circumstances.
Beat Meyer / Expatica
Beat Meyer is a Swiss Certified Public Accountant and qualified tax consultant. He is owner and CEO of Bonfina Treuhand GmbH / Expat Tax Switzerland (www.expattax.ch).
Need advice? Contact Beat via our Ask the Expert channel (in the Tax category).
Updated: 2012; 2015.
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