How to form a Swiss LTD: the complete checklist
In Switzerland, the LTD (AG/SA) is one of the most common legal forms, with the LLC (GmbH/Sàrl) and Sole Proprietorship. It can be formed by one or more natural or legal persons. Do you want to form a LTD? Before you start, let’s check the advantages and disadvantages of this legal form. To what extent can the LTD be adapted to your project? And finally, what are the essential steps to get your company off the ground?
Let's zoom in on this reliable and very reputable legal form in Switzerland, which may help you deploy your professional projects!
Why form a LTD?
Since with a Limited Company, the share capital is higher than with a LLC, the collateral to third parties that you own is logically higher.
To know if this status is adapted to your activity, you will have to take stock of your prospects for development. In this sense, if the turnover forecasts are essential and your activity needs to deal with any third parties, it will be wiser to form a limited company than a limited liability company.
Moreover, if you are planning a rapid development of your activity, which requires the contribution of foreign funds, it is indeed this status that it is interesting to turn to.
Bank, investors, shareholders buy-in: if the involvement of third parties is essential to the development of your business, this status is particularly well suited.
Benefits and disadvantages of the Swiss LTD
Advantages of the LTD
When you form a Limited Company, you are free to choose your company name. Moreover, if you use your last name, you will have to add the entry "LTD", which is mandatory. Please also note that it will be entirely possible to change your company's name after its creation. However, an amendment to the articles of association by the general meeting will be necessary to do so. Indeed, this is an authentic deed, which will have to be registered in the commercial register.
One of the main advantages of a Limited Company is the level of responsibility incumbent on the shareholders: they are only liable for their stake in the share capital. However, in the event of negligent action, or case of a misdemeanor, the management can be made accountable for their assets.
Also, shareholders who work within a LTD are considered employees. Therefore, they are entitled to the social benefits associated with this status and are therefore compulsorily insured.
As far as taxes are concerned, the status of a Limited Company offers a significant advantage: indeed, the incrementality (i.e., the increase in tax rates for the higher portions of profits) can be interrupted by splitting profits.
The disadvantages of the LTD
To create a Limited Company, the minimum capital to be contributed is CHF 100'000.-. This is a large sum, which must be factored in when budgeting for formation costs. However, it is not necessary to pay this sum in cash: indeed, it is possible to distribute this amount as 'contributions in kind': machinery, real estate...
Also, beware: the management fees associated with this status are high. Indeed, with a Limited Company, you must produce management reports, set up a general meeting, draw up tax forms, and set up auditing bodies.
Also, with this legal form, you are subject to double taxation of the corporation yield and capital. In addition, you also have to pay income tax (dividend) and wealth tax to the shareholders.
Also, when you opt for the Limited Company legal status, you are obligated to follow stringent measures to carry out your accounting. Therefore, rigor is required, and you will need to surround yourself with a competent accountant who will accompany you in this task!
Checklist for setting up a LTD
Having considered the many benefits and the drawbacks associated with forming a LTD, it is time to move forward. To set up your Limited Company, here are the essential steps.
1. Budget for the creation costs that you will incur
This is an essential step in setting up any company. First of all, it will be necessary to budget your start-up costs. Then, this step will enable you to build a coherent forecast and calculate your project financing needs with precision.
This is the crucial step that gives you the possibility to optimize the durability of your company. However, you should not omit any costs: the cost of the market study, the cost of creating your business plan, communication expenses, the creation of a website, administrative fees, registration in the commercial register, notary's office, registration of your trademark or patent, etc.
Every detail must be well thought out to accurately determine the components of your budget.
2. Determining the company name
When the creation budget is completed, it is time to think about the name you will use for your Limited Company.
This choice is entirely free—however, the company name you choose plays a symbolic and essential advertising role.
It carries the reputation and credibility of your company. Turn to a name related to your company's activity, service, or product.
This way, customers and prospects will clearly understand what your business is all about: transparency is the order of the day!
3. Registering your Inc. in the Commercial Register
The next step in the formation of your LTD will be to register it in the Commercial Register, which will also support your credibility with third parties: if you want to open a bank account, a post office box, or a business telephone line, this registration in the Commercial Register is a considerable advantage!
4. Determining the amount of capital and organs
After that, you will have to determine the amount of your share capital. It will also be necessary to decide on the division of shares and their release.
To establish how your company will operate, it will be essential to appoint its constituent bodies: you will have to select the board of directors and the auditing institution. Also, at this stage, define the person or persons authorized to sign the official documents of the Limited Company being created.
5. Choosing your financial partner
To move forward in setting up your LTD, it will then be necessary to choose the bank where you will open your deposit account to pay the capital.
6. Drawing up the foundation deed and the foundation regulations
To set up your LTD, you must draw up a company memorandum and articles of association.
7. What must the articles of association of your LTD contain?
Several elements must be included in the Limited Company articles of association:
the company name
the company purpose
the head office
the powers of representation
the amount of share capital
the number of shares
the terms and conditions of general meetings
the appointment of directors
the selection of the auditor
The deed of foundation contains the introductory provisions on the company's organization, assets, and purpose. Thus, it has various information, such as the amount of capital, initial investments, the purpose of the foundation, the name and registered office of the foundation, and the organization and management of the company.
In addition to drawing up the deed of foundation, you will also have to draw up the foundation regulations: this document governs, in particular, the details of your company's organization and administration.
Once these two documents have been drawn up, you must submit them to the notary and the Commercial Register. Subsequently, it will be essential to require a declaration of acceptance by the auditors.
8. Organizing the incorporation meeting
To optimize your company's management and operation, it is essential to organize the foundation meeting carefully. For example, in a Limited Company, the board of directors convenes the shareholders' general meeting.
However, the auditor may call the meeting in some exceptional situations. For example, in a Swiss Limited Company, each shareholder who holds more than 10% of the capital may require the Board of Directors to convene a general meeting.
The board of directors, for its part, must include at least one member.
Furthermore, only a natural person may be appointed as a Limited Company director. Finally, it should be noted that at least one of the Board of Directors members must reside in Switzerland.
9. Releasing the payment of shares
The next step to forming your LTD will consist of releasing the payment of the shares with the bank of your choice. You will only need to present an extract from the commercial register to do so.
10. Drawing up a share certificate and opening a share register
Since the 1 July 2016 law, Limited Companies must establish a share register. This document mentions the names and addresses of the owners and beneficial owners of registered shares.
11. Registration with the compensation fund
When you create a new company, the issue of AHV/AVS has to be brought up next.
Every employee who works in your LTD will have to be registered with the compensation fund. It will also be necessary to subscribe to compulsory pension contracts:
BVG/LPP (Law on Occupational Retirement, Survivors and Disability Pension Plans);
UVG/LAA (Accident Insurance Act).
As a working founder, you are also considered an employee. Therefore, you will have to take these steps, even for yourself!
12. VAT liability
Depending on your sector, you will need to clarify your VAT liability.
If you are liable for VAT, you will have to file your return with the Federal Tax Administration.
If you wish to set up a Limited Company, these few steps are essential. Even if there are many points to consider, this highly prized legal status can be a real plus for the deployment of your entrepreneurial projects!
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