How to form a Swiss LLC: the complete checklist
When you form your company, two paths are possible: the choice of the sole proprietorship, or opting for the limited company. While the latter is more expensive to start up, it still allows businesses to evolve quickly. Among the most popular statutes, the private limited liability company seduces many entrepreneurs and could well fit your project! But before deciding to create a limited liability company in Switzerland, it is necessary to know the modalities of its constitution. So, here is a guide to enlighten and guide you!
Why form a Swiss LLC?
If you are planning to form a family business or an SME, the LLC may be for you. This legal form is one of the most common in Switzerland, with around 92,000 companies on the books.
To form a LLC, the company must be represented by at least one person resident in Switzerland. This status represents a kind of a mix between the Corporation and the Partnership, whose management and operation attract every year more and more entrepreneurs who wish to start a profit-oriented activity. You will see its assets are numerous!
Benefits and drawbacks of the LLC
The benefits of a LLC
The LLC (GmbH/Sàrl) requires a relatively low initial investment capital (CHF 20'000.-) compared to other legal forms. The company can be founded by a single natural or legal person.
The LLC does not impose personal liability for debts, which is a great advantage that can weigh in the balance. Indeed, the liability is secured only by the assets and the share capital or shares of the company. So, if you are about to embark on a risky business (which will be determined as part of your market analysis and business plan), or if you are planning heavy purchases of goods to get started, this protection offered by the LLC can be an essential safety net. That is because, in the event of the company's bankruptcy, the managers are not sued for their private assets and wealth.
Since 1 January 2008, it has been possible to set up an LLC with a single natural or legal person. This is known as a one-person company. The advantage is that if you decide to go it alone, but later wish to bring in new partners or shareholders, you can do so easily, without the need for a notarial deed. It is then that the company will go from being a single-person company to a multi-person one.
Also, an LLC can be converted into a public limited company without liquidation. This leaves you an interesting margin of maneuver to easily develop your activity and ensure an interesting continuity.
The drawbacks of a LLC
When setting up an LLC, the founders are not eligible for unemployment benefits, unless they leave the company permanently. This is a major disadvantage, which should be borne in mind if you wish to set up a company under this status. Besides, the organization and allocation of corporate bodies are quite complex. The limited liability company will indeed give rise to a compulsory limited control from ten employees, and a compulsory ordinary control if two of the following thresholds are exceeded:
Balance sheet total: CHF 20 million
Turnover: CHF 40 million
Number of jobs: 250
In addition to auditors, you will also be required to set up a shareholders’ meeting and submit it to a management body.
From these bodies, these protocols, and the shareholders' meeting, you will incur substantial management costs, which you should take into consideration before embarking on the adventure!
Also, it is essential to specify that the LLC must face double taxation. When setting up a limited liability company, you should also be aware that corporate bodies, the capital, and shares can be freely consulted in the commercial register. Moreover, partners’ anonymity is impossible.
The last negative point is that the credibility attributed to the LLC by creditors, suppliers, or customers is lower than that of a Limited Company. This is a brake that can be important for the development of your business. Nevertheless, you should know that this status enjoys a better image than individual reasons!
Checklist for setting up a LLC
Formation Cost Planning
When you create your activity, the first step is to budget your creation costs. You need to incorporate the minimum capital amount (CHF 20'000.-) and then, using a detailed business plan, incorporate every detail regarding administrative and management fees. These include:
Consultancy fees for advice on how to set up the company, which can be up to CHF 2'000.-.
Notary fees, which are related to the deeds of incorporation and can range from CHF 700.- to CHF 2'000.-.
There is a fee for entry in the commercial register of CHF 600.-.
Stamp duty: this is a 1% tax of the share capital (if this capital does not exceed CHF 1'000'000.-).
Determining the company name
The company name you choose will be protected throughout Switzerland. Choosing this company name is completely free, but you will have to add an indication of the legal form. Thus, the name “GmbH”, "Sàrl", “LLC” must be specified in the name of your company.
Setting the share capital
When you set up your LLC, you must determine the share capital and each participant's basic contribution. If this participation in the initial capital reaches or exceeds 25%, purchasers or holders must notify the company who is the beneficial owner of the participation.
Please note that to be entitled to the profits, each partner must participate in the share capital with at least one share. The share capital amounts to at least CHF 20'000.- and is divided into shares with at least CHF 100.- nominal value. Also, it must be paid in or covered by contributions in kind. You must therefore choose the bank of the blocked account for the basic contribution. Your loan can only be unblocked when you submit an extract from the commercial register.
Designate the management and partners
When you form a limited liability company, you can be alone or with others. Therefore, it is necessary to designate each person's role to establish a flawless organization! In principle, all partners must fulfill management functions, and take decisions on all matters that are not the general assembly's responsibility.
However, the articles of association may regulate the management of the company differently, for example by entrusting the management of certain aspects to third parties.
Drawing up the notarized deed of foundation
To form the LLC, you will need to draw up the deeds of the foundation and submit them to the notary.
When you draw up the articles of association, you should leave nothing out and address various points:
The company name
The amount of share capital
The purpose of your activity
The company's headquarters
The partners, their role, and their number of shares
The company's management
Registering in the commercial register
After notarizing the foundation, you must register it in the Commercial Register. Following your registration, you will be assigned a company identification number (CID / IDE) in the Swiss Company Register.
Defining the organs
Here are the various LLC bodies you must submit to:
The shareholders’ meeting: this is the most important body. Actually, it is the assembly that approves the annual report and appoints the management body. Its role is also to determine the use of the profit or losses made by the company.
The management body: this body can be endorsed by each partner of the LLC.
The auditor: employers employing more than 10 full-time employees must have their accounts audited by a certified auditor. This independent body will be responsible for checking the accuracy of the accounts each year. It draws up a report that will be submitted to the shareholders' meeting.
Appointing these bodies, beyond being mandatory, is essential for your company's proper functioning. So take the time to organize yourself properly!
Organizing the founding meeting
When setting up your LLC, you must organize the founding meeting. It must be held at least once a year. It must adopt and/or amend the articles of association, appoint or dismiss the managing directors, approve the annual accounts, but also give discharge to the managing directors.
Taxation
As a legal entity, the LLC is subject to double taxation. It will be taxed not only on its profit and capital but also on its assets, i.e. on the partners' shares and income.
Registration with the compensation fund
Registration with the compensation fund and the conclusion of contracts for BVG (LPP) and UVG (LAA) is mandatory for all employees working in the LLC. Better covered than the self-employed, company managers who have a regular income are considered as employees: they, therefore, benefit from a normal occupational pension plan for wage-earners.
Thanks to its status as an independent legal entity, the LLC can be very easily recognized by the AHV or Suva, contrary to sole proprietorships. It is a great advantage to set up a limited liability company, so think about it!
VAT
You will need to clarify your VAT liability, based on both your sector and your turnover. As long as your company does not have a turnover in Switzerland of at least CHF 100'000.-, it is not necessarily subject to VAT. Furthermore, for VAT to apply to you, this amount of turnover must be generated from private individuals or companies that have their "domicile" or registered office in Switzerland.
If you are subject to VAT, you must register with the Federal Tax Administration by going directly to their website.
Conclusion
The modalities for creating a limited liability company are more complete and more complex than for a sole proprietorship! But it's worth the effort: the advantages of this status are considerable and allow your business to grow easily. And even if the procedures to launch may seem huge at the beginning, know that you won't be alone for the management! Surround yourself with professionals to carry out the functions that determine the success of your business. For example, you can entrust the accounting and certain areas of management to third parties, to be in line with the auditing bodies in particular.
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