How to start a business and create a company in Switzerland ?
You’re looking to start a business in Switzerland and need advice before getting started. Are you wondering how to open a company in Switzerland? You’re in the right place!
Whether you’ve decided to create your company in Switzerland or it’s just a project for now, Karpeo accounting and legal experts will explain everything about opening a business in Switzerland.
Company creation in Switzerland – Key steps
Starting a business is a significant decision in an entrepreneur’s life. If you’re reading this, you’ve likely weighed the pros and cons of your project. You’ve probably put together a business plan that will guide you for the coming months and years.
Now, the question of opening your business arises. We will go through the main steps and considerations that will mark this journey. Opening your business means setting up a legal structure that will accompany you for the years to come. Therefore, you need to be prepared and understand each of the steps and legal obligations.
Step 1 – Choosing the legal form for your business
In Switzerland, there are two types of corporate entities: the Limited Liability Company (LLC) and the Corporation.
These two structures are quite similar, but there are key differences, two of which are outlined below:
- Share capital: the minimum for an LLC is 20,000 CHF (approximately 24,000 USD), while for a Corporation it must be at least 100,000 CHF (approximately 120,000 USD), half of which must be paid up at the company’s foundation.
- Anonymity of shareholders : this is guaranteed in a Corporation, whereas LLC shareholders do not enjoy this anonymity, unlike Corporation associates.
Furthermore, it’s entirely possible to create an LLC and later transform it into a Corporation.
If you’re a foreign business, you also have the option to create a branch in Switzerland without having to open an LLC or Corporation. However, if you’re a cross-border worker, even with a valid work permit, you can only create your business in Switzerland if you find a manager who lives in Switzerland.
Partnerships : Sole proprietorships and general partnerships
When considering opening your own business, starting with a self-employed independent business activity can be preferable.
As with all legal forms, there are advantages and disadvantages to creating a sole proprietorship. The main advantage is the ease of establishment and the absence of initial capital requirements. The primary disadvantage lies in the fact that the sole proprietor has unlimited liability for their business activities and any damages they may cause.
Step 2 – Choosing a name and a corporate identity for your business
You’ve probably been thinking about it for a long time: what will your company name be ? This is also known as the company’s trade name. Under this name, your business will operate, and it’s important to consider several aspects:
- Does my trade name already exist? To find out, check the website of the Commercial Registry.
- Should it be the name of my brand? This depends on your business plan and your medium-term objectives.
- Is it pronounceable in multiple languages? This can be important, especially if you plan to market your products/services internationally.
Ultimately, the choice is yours, and you can select almost any trade name. However, there are still some rules when choosing your company’s name, and your notary will alert you to these.
Step 3 – Choosing the headquarters and domicile of your business
In Switzerland, there are significant fiscal differences, especially in tax rates, between cantons and municipalities. The tax rates vary greatly among cantons. A company will not be taxed in the same way if its headquarters are located in the canton of Geneva, the canton of Vaud, or in Valais.
The same applies to certain social benefits. For example, the canton of Geneva offers a minimum wage, which is not the case in the canton of Vaud.
Therefore, the choice of your company’s domicile is quite important for tax and social considerations, especially for holding companies.
Step 4 – The creation of the company
Once you have determined your legal structure, the name of your company, and its tax domicile, you can proceed with the actual establishment of the company.
Again, the establishment processes differ depending on whether you are a corporate entity or a partnership. It’s worth noting that once your company is established, it will have a UID (Unique Identification Number), regardless of its legal form.
Creation of an LLC or a corporation
The creation of an LLC or a Corporation must be done in an authentic form. This means you will need to go before a notary who will validate the company’s statutes, confirm that the company’s capital has been duly blocked in a deposit account, and verify that the shareholders and managers are real.
When creating an LLC or a Corporation, it’s important to know that it must be represented by a manager residing on Swiss territory.
Creation of a sole proprietorship
The establishment of a sole proprietorship is done through a file submitted to an AVS fund, such as the Cantonal Office of Social Insurance (OCAS). The acceptance of this file by social insurance is not automatic. We recommend seeking assistance in obtaining your independent status from a trust company like ours.
Company formation in Switzerland: the entrepreneur’s obligations
The saying goes: ignorance of the law excuses no one. This also applies in entrepreneurship.
Opening a company in Switzerland means facing a significant number of laws and legal obligations. Therefore, it’s important to know the main ones to avoid missteps during the initial months of your activity.
VAT registration when creating a company
In Switzerland, the obligation to register for VAT depends on the company’s annual turnover. If the turnover exceeds CHF 100,000 (about USD 120,000), the company must register for VAT with the Federal Tax Administration (FTA) and is subject to VAT.
However, even if the turnover is less than CHF 100,000, the company may choose to voluntarily register for VAT in order to reclaim the VAT paid on purchases. The legal basis for this VAT obligation is the Federal Act on Value Added Tax (VAT Act), which defines the rules for VAT in Switzerland.
Note that different VAT rates apply depending on the products you sell. We recommend contacting Karpeo for more information.
Social insurances
When you hire staff, you must register with social insurances. There are various social insurances to which employees of a company must be enrolled.
Private insurances
Private insurances allow you to protect your business against the risks it will face throughout its existence.
There are numerous private insurances available. Commonly mentioned are liability insurance, property insurance, and legal protection insurance.
FAQ – How to create a company in Switzerland
What legal forms of business are possible in Switzerland?
The legal forms of business possible in Switzerland are the Corporation (SA), Limited Liability Company (LLC or SARL), General Partnership (SNC), and Sole Proprietorship (EI). It’s crucial to choose the legal form most suited to your business project, considering factors like liability, taxation, and financing.
What is the minimum capital required to start a business in Switzerland?
The minimum capital required to create a business in Switzerland depends on the chosen legal form. For a Corporation (SA), the minimum capital is CHF 100,000 (approximately USD 120,000), of which at least CHF 50,000 must be paid up at the company’s inception. For a Limited Liability Company (SARL), the minimum capital is CHF 20,000 (approximately USD 24,000).
What are the accounting obligations of a company in Switzerland?
The accounting obligations of a business in Switzerland are defined by the Code of Obligations (CO). Limited Liability Companies (SARLs) must prepare annual accounts including a balance sheet, an income statement, and notes. VAT-registered businesses are required to file regular VAT returns (quarterly or semi-annually in the case of net tax rate accounts).
How to choose a business name in Switzerland ?
The choice of a business name, also known as a trade name, in Switzerland must adhere to certain rules, especially those related to brand protection and the use of reserved legal terms. It’s advisable to check the availability of the chosen name with the commercial register and to consult a trademark law specialist to avoid any confusion with existing brands (also see the website of the Federal Institute of Intellectual Property (IPI)).
What are the taxes and duties for businesses in Switzerland ?
The taxes and duties a business in Switzerland is subject to depend on its legal form and geographic location. Generally, businesses are liable for Value Added Tax (VAT), profit tax, and capital tax, as well as communal and cantonal taxes such as the professional tax in Geneva. The legal basis for these taxes and duties includes the Federal Law on Direct Federal Tax (LIFD) and the Federal Law on Value Added Tax (LTVA).
Your startup with Karpeo!
As you can see, opening a business in Switzerland requires careful consideration of many aspects. If you are looking to start your business in French-speaking Switzerland and are in search of a quality partner, consider using Karpeo’s company formation services.
With your accounting firm Karpeo and our chartered accountants located in Geneva, you benefit from personalized support and tailor-made advice that will guide you through each step of your entrepreneurial journey. Contact us for more information.
