Private limited liability companies are very common among foreign entrepreneurs who decide to invest in Switzerland. In Switzerland, a LLC has the form of a GmbH, which is a company that acts as a legal entity. It can be formed by one or more individuals or by other companies with a predetermined capital. Each partner of a limited liability company is paying part of the initial share of the capital. The partner’s liability is limited to the predetermined nominal capital.
The most important advantage offered by this type of company is that it doesn’t matter if the founders are Swiss or foreign citizens.
What is a GmbH?
A GmbH (Gesellschaft mit beschränkter Haftung) is a German term used for company with limited liability, used in Germany, Austria and Switzerland. The name suggests that the individual owners or the legal entity that owns the company is not liable for the company’s debts. It is mandatory to have a supervisory board only if the GmbH has more than 300 employees.
Requirements to set up a GmbH
- The minimum required share capital is 20,000 CHF;
- The GmbH must have at least one shareholder and one executive director; however, a person may hold the same titles;
- At least one of the executive directors must be a Swiss resident.
Other costs involved are low, mainly to draw the necessary documents and for company registration.
Advantages of the GmbH
This type of company requires a low minimum share capital, which makes it accessible for start-ups and entrepreneurs who want to start their own business in Switzerland. The GmbH is also preferred because it makes it possible for the founder or founders to have only limited liability.
Another important characteristics of the private limited company in Switzerland is the flexibility, especially when it comes to internal relationships. The shareholders are allowed to impose each other rights and obligations that are specified in the company statues, making it easier to create a customized internal structure. The only statutory requirement of the shareholder or shareholders is to pay in the share capital. Other duties are not mandatory and can be established by choice. The minimum nominal value is 100 CHF and shareholders can hold more than one share.
Disadvantages of the GmbH
The main disadvantage of this company is the requirement to publish share transfers, when and if they are made.
Taxation of the GmbH
The GmbH is taxed as a legal entity as it follows:
- Direct federal tax consisting of 8.5% based on the profit;
- Cantonal tax, that may vary for each Swiss canton – for example, in Zug the tax rate is 6.5%, based on the profit;
- Capital tax: the determined cantonal tax is multiplied by the tax rate established by the respective municipality.
Other characteristics of the GmbH
Private limited liability companies may be incorporated in Switzerland for economic purposes. The maximum capital used by a GmbH should not exceed 2.000.000 CHF.
Shareholders are required to register with the commercial register and therefore, they are public. Secondary obligations of the shareholders can be set arbitrarily in the statues, however the duty of loyalty to the company is required by law. Written votes are excepted for shareholder meetings, which is very convenient for shareholders who are not able to attend them.
Company auditors are optional and not mandatory. In the case of a sale of shares, it is necessary to have the approval of 3 of 4 shareholders or a number that represents three quarters of the capital. The transfer of shares must be published, but in general, there is no additional tax required for publication.
If one or more shareholders decide to withdraw from the company, the resignation is possible for important reasons only, or if a withdrawal is provided by the company statues.
It is possible to choose any company name for a private limited liability company, but the suffix GmbH is mandatory in any case.
The GmbH should not by chosen as a form of legal entity only because of the lower initial capital. Any individual or individuals who decide to incorporate a company in Switzerland should weight in the advantages and disadvantages of each type of company, as well as considering the type of business activities that will be conducted.