How to Open a Company in Switzerland

Switzerland has established and maintained its reputation as an ideal location for setting up a company. It offers political stability, a strong economy, and a favourable corporate environment, among many other benefits. It is no surprise that entrepreneurs from around the world are attracted to Switzerland for setting up a company abroad. In this comprehensive guide, we will explore the process of opening a company in Switzerland, covering the advantages and disadvantages, the choice of legal form, various practical setup considerations, and the role of Nexova AG in assisting you through the process.

Why set up a company in Switzerland?

Switzerland has long been an attractive jurisdiction for company formation. It offers a multitude of advantages for businesses seeking to establish themselves in the country. These advantages have contributed to its reputation as a hub for global commerce and investment. Let’s take a closer look at some of the key reasons why entrepreneurs choose to set up a company in Switzerland:

Advantages of a Swiss company

1. Political stability: Switzerland is renowned for its long history of political neutrality and stability, which provides a secure business environment.
2. Favourable tax system: Switzerland has lower corporate and income tax rates compared to other European countries and offers businesses the opportunity to benefit from a tax system focused on territorial aspects.
3. Corporate-friendly environment: The Swiss government is supportive of entrepreneurship, and the country offers a streamlined process for setting up and operating businesses.
4. Highly developed banking system: Switzerland is known as an international financial centre due to its high-quality banking and financial services sector, which also offers a range of established funding options.
5. Strong economy and infrastructure: Switzerland has one of the most modern infrastructures and strongest economies in the world, which has consistently performed well even during global economic downturns.
6. Strategic location: Switzerland’s central location in Europe provides easy access to both EU and non-EU markets. It also has a well-developed transportation network which helps facilitate domestic and international trade.
7. Skilled workforce: Switzerland has a highly skilled and educated workforce, providing a talented pool of potential employees.
8. Strong global reputation: Switzerland has an excellent reputation worldwide, both in terms of the quality of products they produce, and in terms of financial credibility.

Disadvantages of a Swiss company

While Switzerland offers numerous benefits as a jurisdiction for setting up a company, there are also some potential downsides to keep in mind:

1. High cost of living: Switzerland’s high cost of living can also translate to higher business expenses such as rent, salaries, and other operational costs. However, it is also largely offset by the increased profit potential as products can be sold for an increased price.
2. Language difficulties: Switzerland has four official languages (German, French, Italian, and Romansh). This can sometimes lead to language barriers for foreign entrepreneurs looking to set up a company in Switzerland, depending on its location and business activities.
3. Stringent immigration laws: Switzerland has strict immigration laws, which means that obtaining work permits for non-Swiss employees may be a complex and time-consuming process. This also extends to challenges when opening a business as a non-EU/EFTA citizen (so-called “third-country” national).
4. Complex tax system: While Swiss tax rates are generally favourable, the tax system itself can be complex, especially for foreign business owners. Navigating Swiss tax regulations usually requires expert guidance to ensure compliance and optimise tax planning.

Despite these minor drawbacks, Switzerland remains an overall excellent jurisdiction to open a company.

Can a foreigner open a company in Switzerland?

Yes, foreign entrepreneurs can establish a business in Switzerland. The Swiss government actively promotes foreign investment and welcomes entrepreneurs from around the world. Favorable business regulations and a tax system with territorial elements are significant incentives for foreigners looking to start a business abroad. However, there are important considerations and requirements for foreign individuals or legal entities planning to establish a business in Switzerland. Read more about ”Setting up a company in Switzerland as a foreigner”.

Starting a Business as an EU/EFTA Citizen vs. Third-Country Nationals

It is essential to understand the differences in regulations for citizens of the European Union (EU) and the European Free Trade Association (EFTA) compared to third-country nationals (non-EU/EFTA citizens).

While both EU/EFTA citizens and third-country nationals can generally establish a legal entity (e.g., LLC or corporation) in Switzerland, there are significant differences in the requirements for personal self-employment or active business management, which typically require a valid residence and work permit.

Requirements for Establishing a Business in Switzerland as a Foreigner

The requirements for starting a business depend significantly on whether the entrepreneur is an individual or a legal entity, as well as their country of origin.

EU/EFTA Citizens

Citizens of EU or EFTA member states can establish a business in Switzerland relatively easily and become self-employed. Active business management requires a B residence permit. The following documents are typically required:

• A valid ID card or passport
• An address in Switzerland
• Proof of planned self-employment, such as:
  • A company identification number (UID)
  • A registration of the business in the commercial register
  • Registration in a professional register
  • Registration with social security as a self-employed individual
  • A comprehensive business plan

The B residence permit is issued for five years and allows geographical and professional mobility. If the self-employment fails and the individual becomes dependent on social assistance, the residence permit may be revoked. However, the individual can still seek employment as a salaried worker in Switzerland.

Important: For the creation of a legal entity (e.g., LLC or corporation), it is sufficient to appoint a representative residing in Switzerland with a valid residence and work permit. The founder does not necessarily need to reside in Switzerland.

Third-Country Nationals

For third-country nationals, the process of establishing a business in Switzerland is more complex, especially if they wish to become self-employed or take on active business management.

• Business Formation: Third-country nationals can establish a legal entity (e.g., LLC or corporation) if they appoint a representative residing in Switzerland. This representative must have a valid residence and work permit.
• Sole Proprietorship or Active Business Management: Individuals without a residence permit must file an application with the cantonal authorities. This application must demonstrate:
  • Sustainable benefits for the Swiss labor market, such as job creation or investments
  • A convincing business plan, including proof of capital and market potential
  • Proof of business formation, such as a commercial register entry

Permits for Third-Country Nationals

If the application is approved, third-country nationals may receive one of the following permits:

• L Permit: A short-term residence permit valid for one year, extendable for up to 12 months.
• B Permit: A residence permit valid for one year, renewable annually as long as the conditions remain fulfilled.

For individuals holding a settlement permit (C permit) or spouses of C permit holders, self-employment is generally straightforward.

Director Services from Nexova

For entrepreneurs from third countries who wish to establish a business in Switzerland but do not have a representative residing in Switzerland, Nexova offers a nominee Director Service. This service ensures compliance with legal requirements by appointing a managing director or board member with Swiss residency. This guarantees that your business meets all statutory regulations while allowing you to focus on growing your enterprise.

What legal form should you choose?

Choosing the right legal form for your Swiss company is a critical decision that has significant implications for your business operations, taxation, liability, and governance. Switzerland offers several legal forms for businesses, each with its own advantages and considerations:

1. Sole Proprietorship: A sole proprietorship is the simplest and most straightforward legal structure. It is suitable for small businesses operated by a single individual. It is not a separate legal entity, meaning the owner is personally liable for all debts and obligations of the business. No minimum capital is required for its establishment, and registration in the commercial register is only mandatory if the business generates annual revenues exceeding 100,000 CHF. While a sole proprietorship is simple and cost-effective, it is only suitable for low-risk personal ventures due to the lack of separation between personal and business assets.
2. Limited Liability Company (GmbH): The GmbH is a popular choice for small and medium-sized enterprises. It is a separate legal entity and offers its members limited liability, as they are only liable up to the amount of their capital contributions. Establishing a GmbH requires a minimum capital of 20,000 CHF, which must be fully paid in and deposited into a capital contribution account during the incorporation process. The GmbH offers a flexible management structure, making it an attractive option for businesses seeking a balance between liability protection and operational simplicity.
3. Corporation (AG): The corporation (AG) is another common legal structure in Switzerland, particularly for larger businesses or those planning an initial public offering (IPO), as it allows the issuance of shares to raise capital. It is a separate legal entity, providing shareholders with limited liability beyond their share investments. The required minimum capital for an AG is 100,000 CHF, with at least 20% (or 50,000 CHF) to be deposited into a capital contribution account at the time of incorporation. The formalized framework of an AG makes it a preferred choice for businesses seeking credibility and global recognition.
4. Partnership: A partnership allows two or more individuals or entities to share ownership and responsibilities. A general partnership is one where all partners are jointly and fully liable for the debts and obligations of the company and is therefore similar in nature to a sole proprietorship. A limited partnership allows one or more partners to enjoy limited liability to the extent of what they have invested in the company, and they therefore act more as shareholders in nature. The managing general partners have subsidiary, joint and unlimited liability.
5. Branch Office: A branch office enables foreign companies to expand their operations into Switzerland without establishing a separate legal entity. It acts as an extension of the parent company, meaning the parent company is fully liable for its obligations. While no minimum capital is required, the branch office must be registered in the Swiss commercial register and have a local address. Branch offices provide an efficient way for foreign businesses to enter the Swiss market while maintaining control under the parent company.

When choosing the right legal form, prospective business owners should carefully assess their business objectives and consult with legal and financial experts before making a final decision.

Can you establish a company with a contribution in kind?

In many cases, it is possible to found a company with contributions in kind instead of a monetary capital contribution. This approach is especially common when converting a sole proprietorship into a GmbH or AG. However, there are certain requirements and factors to keep in mind.

What is a contribution in kind?

A contribution in kind is a non-cash asset provided to a company – such as equipment, real estate, or intellectual property – which is assigned a monetary value based on specific valuation methods. This value counts toward the company’s capital during its formation. The process of founding a company with contributions in kind is known as a “qualified formation”.

What are the requirements for a contribution in kind?

For assets to qualify as contributions in kind during a company’s formation, they must meet the following four criteria:

1. Accountability: The asset must have a measurable and recordable economic value for inclusion in the company’s balance sheet.
2. Transferability: The asset must be legally and practically transferable to the company’s ownership without obstacles.
3. Availability: The asset must be immediately and unconditionally accessible for the company’s use after transfer.
4. Usability: The asset must have a realizable market value, ensuring it can cover liabilities if needed.

What qualifies as a contribution in kind?

Here are some common examples of assets which typically qualify as contributions in kind as per the above criteria:

• Real estate (land, buildings)
• Operational assets (equipment, furniture, vehicles, tools and machinery, inventory)
• Shareholdings and securities (stocks in another company, bonds)
• Obligatory rights (definite claims against third parties)
• Intellectual property rights (copyrights, patents, trademarks)
• Assets and liabilities transferred from a sole proprietorship or general partnership

What else should you keep in mind?

When founding a company with contributions in kind, you should consider the following important points:

• Auditor confirmation: An auditor must issue a confirmation verifying that the assets meet the stated value and have been properly transferred to the company (Art. 635a OR).
• Ownership transfer: For the contribution in kind to be valid, full ownership of the assets must be legally transferred to the company upon incorporation. This includes any necessary registration changes, such as transferring property titles or intellectual property rights.
• Asset quality: Only assets that are easily monetizable or directly relevant to the company’s operations are typically accepted. Assets with questionable or unstable valuations may face scrutiny from authorities or auditors.
• Tax implications: Transferring assets as a contribution in kind can have tax consequences, depending on the nature of the assets and the structure of the transaction. Professional tax advice is recommended to avoid unexpected liabilities.

Founding a company with contributions in kind can be an excellent way to use the assets at your disposal to start a company without needing to come up with the cash to cover stringent capital contribution requirements.

Contact Nexova for professional guidance on establishing a company using contributions in kind.

Where should you set up your Swiss company?

The choice of location for setting up a Swiss company has important implications. Switzerland has a multi-tier tax system, whereby businesses are taxed at the cantonal level in addition to the national level. Each Swiss canton has the power to set its own cantonal tax rates, as well having differences in regulations, business environment, infrastructure, and proximity to target markets.  All these factors should be kept in mind when selecting the right canton for your Swiss company. Some of the most popular cantons for incorporating a new business include:

1. Zug: Zug is the most popular canton for tech and financial startups in Switzerland. It has the more new businesses per capita than any of the other cantons in Switzerland (23 per 1000 inhabitants in 2022). This is primarily due to its low corporate taxes and favourable regulatory environment. It is also known as “Crypto Valley” as it is a worldwide hub for blockchain and cryptocurrency businesses.
2. Zurich: Zurich is Switzerland’s financial hub, offering an excellent infrastructure and direct access to international markets.
3. Geneva: Geneva is an international city which provides a diverse business community. It is especially popular for businesses in the finance, technology, and international trade sectors.
4. Basel: Basel is another canton with favourable corporate tax rates and is the preferred choice of many foreign business owners. It is particularly well-known as a hub for businesses in the pharmaceutical and life sciences industries.
5. Nidwalden: Nidwalden also offers favourable tax rates and corporate-friendly regulations. It has a high proportion of German-owned startups.

How to open a company in Switzerland

Once you have selected the appropriate legal form and location for your Swiss company, the actual setup process involves several steps and documentation requirements. Here’s an overview of some of the documents which are typically required, as well as a step-by-step guide on how to open a company in Switzerland:

Documents required

The specific documentation required may vary depending on the chosen legal form and canton, as well as whether you are an EU/EFTA citizen or a third-country national. In general, the following basic documents are needed:

1. Business plan: A detailed business plan outlining your company’s activities, financial projections, and market analysis.
2. Articles of Association (AoA): Notarised Articles of Association are required for incorporating legal forms such as a GmbH or AG.
3. Proof of capital: Proof of sufficient capital to cover initial costs, or to meet any minimum capital requirements set by Swiss corporate regulations (applicable to legal entities).
4. Identification documents: Valid identification documents should be submitted for all managing shareholders and directors of the company, including foreign owners.
5. Proof of registered address: The company must have a registered physical address in Switzerland where official documents can be sent.

In addition to the above mentioned documents, there may be additional requirements in certain cantons and for different legal forms. Furthermore, non-EU/EFTA citizens (third-country nationals) looking to incorporate a company in Switzerland will have to submit additional documents such as relevant permits and residence certificates (usually a C-permit).

Step-by-step guide

The exact steps for opening a company in Switzerland also varies depending on a few factors, but generally goes as follows:

1. Select a legal form and location: Choose the legal form and jurisdiction that best suits your business needs and goals. Consider factors such as liability, taxation, capital requirements, and management structure.
2. Choose and reserve a company name: After you know what legal form you are establishing; you can select a name for your company that is unique and distinguishable. Different legal forms and jurisdictions have their own naming requirements which should be adhered to. To ensure that your desired company name can be used, you should check in advance whether it is already in use. This can be done through the Swiss Commercial Registry database (Zefix) or the respective cantonal commercial registry. However, the name is only officially protected once it has been registered.
3. Draw up the business plan and articles of association: A detailed business plan is not a legal requirement for establishing a company in Switzerland but serves as an essential foundation for your business’s success. It should outline your business model, objectives, the products or services you offer, the team involved, and financial projections. However, for the formation of a GmbH (limited liability company) or AG (corporation), articles of association are legally required. These define the fundamental organizational structure, including the purpose of the company, capital structure, and governing bodies. The articles of association must be notarized and submitted as part of the registration process with the commercial register.
4. Register the company with the commercial register: Next, it is time to submit all the required documents, including the notarised Articles of Association and identification documents of shareholders and directors, to the local Commercial Register where your company will be based. Upon approval, you will be issued with a registration certificate which validates the existence of your company in Switzerland.
5. Obtain necessary permits: Depending on your business activities, you may need to obtain specific permits from relevant authorities to conduct these activities. Examples of businesses that require special permits include pharmaceutical companies, financial institutions, and restaurants.
6. Open a bank account: Having a designated company bank account in Switzerland is important to facilitate financial transactions and manage company funds. When establishing a legal business entity in Switzerland, such as a GmbH or AG, a special blocked account at a Swiss bank is required to pay in the share capital prior to registering. Once the company is registered and you have obtained a UID (tax number), the capital contribution can be released from the bank, and the account can be converted into an official company bank account.
7. Register for VAT: If your company’s annual turnover exceeds CHF 100,000, you must register for Swiss Value Added Tax (VAT). The standard VAT rate is 8.1 %, with reduced rates for certain goods and services.
8. Establish accounting and reporting systems: Swiss companies are required to maintain proper accounting records and financial statements in accordance with Swiss law. Ensure that you have a reliable accounting system in place to comply with reporting requirements. It is always advised to consult with an expert Swiss accounting firm such as Nexova AG to aid you in navigating the complexities of accounting and reporting in Switzerland.

Other considerations

Accounting and auditing requirements of a Swiss company

Swiss companies must comply with Swiss accounting standards and prepare financial statements, which includes a balance sheet and income statement. Sole proprietorships and general partnerships with an annual turnover of less than CHF 500,000 may be exempt from preparing and submitting detailed financial reports. All legal entities (which includes GmbHs and AGs) need to prepare financial statements irrespective of their annual turnover.

Publicly listed companies and those exceeding certain thresholds are required to conduct an ordinary audit which is performed by an external auditor. Most small-to-medium sized companies are only subject to a limited audit (also known as a review), which is less onerous and provides a lower level of assurance. Very small companies with an average of less than 10 full-time employees over the year are allowed to entirely opt out of undergoing an audit if all the shareholders unanimously agree.

Taxation of a company in Switzerland

The tax requirements of a company in Switzerland depends on the type of legal form you have chosen, and in which canton the company is registered. Tax treatment of legal corporate entities such as a GmbH or AG differs to that of companies which are not a distinct legal personality such as a sole proprietorship or general partnership. GmbHs and AGs are required to pay a corporate income tax on profits to the tax authorities, along with other business taxes such as capital tax, with the rate varying significantly across different cantons.

Sole proprietorships and general partnerships are not distinct legal entities, and the profits are therefore taxed as personal income tax directly to the owner/owners.

The primary types of taxes that businesses need to consider include:

• Profit tax: Levied on the net income generated by a company during a fiscal year. It applies to corporate entities such as AGs and GmbHs. Profit tax is applied at all three levels (federal, cantonal, and municipal). The federal profit tax rate is 8.5% on profit after tax (7.83% on profit before tax), and the cantonal rates vary substantially.
• Capital tax: Levied as a percentage of a company’s net equity value, which is calculated based on their share capital, additional paid-in capital, reserves and retained earnings. Capital tax is only applied at the cantonal and municipal levels.
• Wealth tax: A tax applied to natural persons, not corporate entities. For a sole proprietor, wealth tax is the equivalent of the capital tax which is levied on companies. Wealth tax is calculated as a percentage of the net worth of a natural person, usually around 0.3 to 0.5 percent.
• Value Added Tax (VAT): A consumption tax that is applied to the value added to goods and services at each stage of their production and distribution. Businesses themselves do not bear any of the VAT liability. Instead, they simply act as intermediaries which collect VAT on behalf of the government. All businesses, including sole proprietorships, with an annual turnover of more than CHF 100,000 are required to register for VAT and charge it on their taxable supplies. The standard VAT rate in Switzerland is 8.1%, with reduced rates of 3.8% for accommodation services and 2.6% for certain items like food, books, water, etc.

There are also various other taxes which may apply, including:

• Emission tax
• Church tax
• Federal withholding tax
• Waste tax
• Stamp duties
• Customs duties

Capital requirements

Different types of companies have certain legal minimum capital requirements in Switzerland. As things stand:

• There is no statutory minimum capital requirement for a sole proprietorship or general partnership.
• The minimum starting capital for a GmbH is CHF 20,000; all of which must be paid up to register the company.
• The minimum capital requirement for an AG is CHF 100,000; 50% of which should be paid up at the time of registration.

It’s important to keep these capital requirements in mind when deciding upon the legal form for your business, especially if you are on a tight budget. The possibility of using contributions in kind to incorporate your company can reduce or eliminate the cash capital contribution you need.