The cooperative society in Switzerland : Definition and foundation

The cooperative society represents a distinct legal form in Switzerland, offering a structure well-suited for entrepreneurs and businesses eager to promote collaboration and the active participation of their members.

Characterized by a democratic approach to decision-making and an equitable distribution of profits, it significantly distinguishes itself from other legal forms like LLCs, Corporations, and General Partnerships, through its potential to strengthen community ties and support shared economic growth.

What is a cooperative society in Switzerland ?

Definition

The cooperative society in Switzerland is defined as an association of individuals or entities aimed at promoting or securing, through a joint venture, certain economic, social, or cultural interests of its members.

Unlike Corporations or Limited Liability Companies (LLCs), whose main goal is often profit-making, cooperatives focus on the services provided to their members rather than on maximizing profits.

Main characteristics of cooperative societies

The cooperative is the optimal choice for businesses that value openness, equality, and solidarity as essential principles of their activity and do not measure their success solely on the basis of generated profits.

Each member of the cooperative society has one vote at the general assembly, regardless of the number of shares they hold.

Members are generally liable for the cooperative’s debts up to the amount of their contribution, unless the bylaws stipulate otherwise.

Finally, they can often enter or exit the cooperative by transferring their shares, subject to the conditions set by the bylaws.

Structure and organization

Cooperative societies differ from capital companies mainly in their purpose and governance structure.

Structure of cooperative societies

While LLCs or Corporations primarily aim at generating profits to distribute to their shareholders, cooperatives seek to offer direct benefits to their members. Cooperative societies are often found in the agricultural sector, for example, les Laiteries Réunies de Genève (LRG).

The creation of a cooperative society requires at least 7 founding members, who can be individuals or legal entities. If this number decreases later on, dissolution may be pronounced.

The cooperative must have written bylaws. They are adopted during a constituting assembly and must contain the essential provisions whose conditions must be specified for their validity.

Organization

In a cooperative, governance is democratic, based on the principle of “one person, one vote,” regardless of the capital invested by each member.

Conversely, in an LLC or a Corporation, voting rights are generally proportional to the share of capital owned.

The cooperative society must include the following bodies:

• A general assembly;
• A management committee, which will consist of at least three members;
• A control or audit body.

Distribution of profits

The profits of a cooperative are either reinvested in the company to improve services offered to members or distributed to members if the bylaws allow it.

These fundamental differences make cooperative societies a preferred choice for initiatives that value mutuality, internal democracy, and a common social or economic objective.

What are the steps to creating a cooperative society ?

Creating a cooperative society involves several key steps:

1. Drafting the cooperative’s bylaws

The bylaws must detail the purpose, name, headquarters of the cooperative, as well as the rights and obligations of members, its objectives.

The competencies of the general assembly and the administration, which are not explicitly defined in the Code of Obligations, must also be mentioned.

After that, the founding members meet to approve the bylaws.

At Karpeo, we advise against replicating the bylaws of other cooperative societies. Each cooperative has its specificities, and it is important to be supported by professionals in such cases.

2. Registering the cooperative in the Commercial Registry :

Once the bylaws are approved and the bodies elected, the cooperative must be registered in the Commercial Registry to acquire its legal personality.

In accordance with the rules of the Swiss Code of Obligations, maintaining accounting that respects the principles of regularity and separation of periods is mandatory for cooperatives.

Taxation and benefits of the cooperative society in Switzerland

The cooperative society, due to its structure and purpose, benefits from a specific fiscal and financial framework in Switzerland.

These advantages can be particularly attractive for entrepreneurs and businesses looking for alternatives to traditional legal forms.

Taxation of cooperative societies

Cooperative societies enjoy generally favorable profit taxation.

They have the option of benefiting from reduced tax rates on profits reinvested in the cooperative’s objectives or used to support its members.

This measure encourages reinvestment and the pursuit of the cooperative’s social, cultural, or economic objectives.

Cooperatives that pursue public utility goals or are recognized as of general interest may, under certain conditions, be exempt from profit tax.

Subsidies and financial support

Cooperative societies have privileged access to specific forms of financing and subsidies, designed to encourage the development of collaborative and mutualistic projects.

These aids can come from public funds, private foundations, or cooperative-specific support programs.

The goal is to promote social innovation, sustainable development, and economic solidarity.

Cooperatives can also benefit from favorable conditions for financing their activities, through reduced-rate loans or facilitated bank guarantees.

Conclusion

The cooperative society in Switzerland is an interesting legal form for companies that emphasize collaboration, resource pooling, and the achievement of common goals.

Thanks to a favorable tax and financial framework, cooperatives can develop in an environment conducive to social and economic innovation.

Karpeo’s chartered accountants can assist you in the accounting management of your companies. Contact us to learn more.