Corporate structures

Economic freedom, which is guaranteed under the Swiss Constitution, allows anyone, including foreign nationals, to operate a business in Switzerland, to form a company or to hold an interest in one. No approval by the authorities, no membership of chambers of commerce or professional associations and no annual reporting of operating figures are required to establish a business. However, foreign nationals must have both work and residence permits in order to conduct a business personally on a permanent basis.

Swiss law distinguishes between the following types of business entities: partnership-type unincorporated companies (sole proprietorship, limited partnership or general partnership) and capital-based incorporated companies (stock corporation or AG, limited liability company or GmbH). The newly created “limited partnership for collective investment” (KkK) corresponds to the “limited partnership” form common in English-speaking countries. The legal form referred to as GmbH & Co. KG, which is common in Germany and Austria, does not exist in Switzerland. Approximately 50% of Swiss companies operate under the AG and GmbH legal forms (the proportion of GmbHs is on the rise).

The appropriate form of business entity for a foreign company establishing a location in Switzerland depends on many factors, including the nature and time horizon of the business, general legal and tax conditions, and the strategic goals of management (headquarters, production facility, sales office, financial or service company, etc.). Companies and private individuals from foreign countries are allowed to determine the legal form that is right for their business. This requires careful evaluation, in which tax considerations play a crucial role. It is therefore advisable to engage an advisor or consultant familiar with the Swiss legal and tax system at an early stage in the process.

The following basic options are available for establishing a business in Switzerland:

• Forming an unincorporated or incorporated company
• Setting up a branch office
• Acquiring an existing company in Switzerland (either unincorporated or incorporated)
• Formation of a joint venture (unincorporated or incorporated company)
• Forming a strategic alliance with or without an equity interest

The most common choices for a foreign company locating in Switzerland are subsidiaries (in the form of a stock corporation or limited liability company, i.e. an AG or GmbH) and branch offices. The newly created limited partnership for collective investment is also an attractive option for risk capital.

The following criteria are crucial when selecting the right form of business entity:

• Capital: organization or incorporation expenses, capital needed and minimum capital required
• Risk/liability: the higher the entrepreneurial risk or financial investment, the more advisable it is to select a limited liability form of company
• Independence: freedom of action may be restricted depending on the legal form
• Taxes: the business income and assets of the company or owner(s) are taxed either separately or together, depending on the legal form
• Social security: certain social insurance plans are obligatory, voluntary or non-existent depending on the legal form