Checklist for Starting a Business

Setting up a business is an exciting and rewarding journey, but it requires careful planning and preparation. Whether you are a seasoned entrepreneur or a first-time business owner, having a comprehensive checklist can help ensure that you cover all the necessary steps. In this article, we will guide you through the essential elements to consider when starting a business in Switzerland.

Why set up a business in Switzerland?

Switzerland has long been known for its business-friendly environment, strong economy, and favourable tax system. There are numerous reasons why so many entrepreneurs choose Switzerland as the location to set up a business. Some of the benefits include:

• Political and economic stability
• Favourable tax system
• Business-friendly environment
• Strong economy and infrastructure
• Highly developed financial system
• Financial privacy
• Access to a wide range of international markets
• Fast and efficient incorporation process
• Strong global reputation
• Strong and stable currency
• Highly skilled workforce
• Intellectual property protection

A comprehensive breakdown of each of these benefits and a more in-depth exploration of the advantages of setting up a company in Switzerland can be found here.

How to choose the right legal form for your business?

Before you can take any steps on the road to starting your business, you have to choose what legal form it will take. This decision has a significant effect on various aspects of how your company is structured and the way it functions. It also has a decisive impact on the practical steps and requirements involved in setting up your company.

The three most popular legal forms in Switzerland are:

1. Sole proprietorship: This is the simplest and most common legal form for small businesses. A sole proprietorship is not a separate legal entity, and therefore requires no formal incorporation procedure. It is the default legal form for self-employed professionals and small businesses. As a sole proprietor, you have full control over your business, but you are personally liable for its debts and obligations.
2. Limited liability company (GmbH): A GmbH is a separate legal entity and is incorporated by one or more people who join to form the company. The owners may be either natural persons or corporate entities. A GmbH offers limited liability protection, meaning that its members are only liable for company obligations up to the amount that they have invested.  This form is most suitable for small to medium-sized businesses.
3. Stock corporation (AG): Like a GmbH, an AG is also a separate legal entity, but it requires a higher initial share capital and follows more complex regulations. It is often chosen for larger businesses or those planning to go public in the future, as it offers greater scope to raise capital through issuing shares and other means of financing.  

For more a more detailed comparison of legal forms in Switzerland, click here.

Checklist for starting a business

Once you have decided what type of business you want to form, it’s time to go through the practical setup process. We have put together this checklist for starting a business, so that you don’t forget any of the important steps along the way:

1. Budget your setup costs

You need to have a clear idea of how much it will cost to set up your business. Different legal forms have their own minimum initial capital requirements (see below for more details). You will also have to consider costs such as registration fees, legal fees, office space, equipment, and initial inventory. All these costs should be estimated and included in your business plan. The amount of capital you have available to start your business may determine the type of legal form you need to choose.

2. Choose a company name

The next step is to choose a unique and memorable name for your business. The name will be legally protected once it has been entered into the legal register. Each legal form has its own naming rules and requirements. If you opt for a sole proprietorship, the name must include your surname, which makes it quite restrictive. The name of a GmbH and AG can be chosen relatively freely (subject to a few minor limitations) but must include the legal form or its abbreviation in the name (i.e., “GmbH”, “AG”, etc.).

3. Determine the initial share capital

If you choose a legal form that has minimum share capital requirement, you will have to determine the amount needed. The minimum capital requirements vary depending on the legal form. A GmbH requires a minimum initial capital of CHF 20,000 (where 100% of the amount must be deposited upfront), whereas an AG requires a minimum of CHF 100,000 (50% of which must be paid up). There is no initial capital required by law for a sole proprietorship.

4. Appoint managers/directors if required

Certain legal forms, such as an AG and GmbH, require appointing directors or managers. It is important to select individuals who possess the necessary qualifications and skills to oversee your business. These two legal forms can also have more than one owner, and in fact most often do. An auditor may have to be appointed. If the company is not required to have an audit, it may waive it by consent of all shareholders or partners (opting out).

A sole proprietorship is limited to a single owner, but a partnership may be chosen instead. If two or more natural persons with a legal form similar to that of a sole proprietor join together to jointly operate a company according to commercial rules, this is called a general partnership.

The owners can usually act as managers or directors in the case of a GmbH or AG if so chosen. However, the articles of association may stipulate that certain areas of management should be delegated to third parties.

5. Prepare the documentation required for incorporating

The next stage is to prepare all the documents needed to incorporate the company. In the case of a sole proprietorship, no official incorporation process is required. However, if annual turnover exceeds CHF 100,000, it becomes necessary to enter into the commercial register.

Documents required for incorporating a GmbH and AG are similar. In both cases, you will have to draft the articles of incorporation/association. The articles of association outline the internal regulations and governance structure of the company. They contain important information such as the company’s name, purpose, share capital, number of shares, rights and obligations of shareholders/members, management structure, and other provisions relevant to the operation of the GmbH or AG.

Other documents and information which should be included are:

• Registered address of the company
• Amount deposited by each member in the case of a GmbH
• Names and personal information of the managing directors
• Any benefits in kind
• Proof of share capital deposited.

When founding a corporation in cash (AG or GmbH), a blocked account at a bank is required for the capital contributions/share capital, and a capital contribution confirmation from the bank is required in this regard.

6. Complete registration and enter the commercial register

After you have drafted the Articles of Association and prepared the necessary documents outlined above, it is time to formally submit your registration application. Once the incorporation has been approved and certified by a notary, you can proceed to register the company in the commercial register. You will be assigned a company identification number (UID) after registration, which formalises your business’s legal existence, and is needed for submission of tax returns, VAT registration, social insurance, etc.

7. Register with the compensation fund and other mandatory social insurance

Depending on your business activities and the type of legal entity, you may need to register with the compensation fund and other mandatory social insurances. This includes registering for accident insurance (UVG), occupational pension funds (BVG), and the AHV compensation fund. This is mandatory for all employees working in a GmbH or AG. As such, compliance with these regulations ensures the protection of your employees and yourself as an employer.

8. Clarify VAT liability and register if needed

Companies with a turnover exceeding CHF 100,000 per year must register for and pay Value Added Tax (VAT) on their sales. Determine if your business activities are expected to exceed the annual turnover threshold for VAT liability. If required, register for VAT with the Federal Tax Administration. VAT registration allows you to charge and reclaim VAT on your goods or services. In the case that the minimum threshold is not crossed, you may still consider voluntary registration for VAT, which comes with the benefit of being able to claim back input VAT deductions.

For more information on how VAT in Switzerland works, and when voluntary registration makes sense, click here.

What else should you keep in mind?

The checklist we have provided covers the basic steps of starting a business in Switzerland, but there are also many other factors to consider during and after the setup process. Some of these include:

• Intellectual property protection: If your business involves unique inventions, designs, or brand names, consider protecting your intellectual property rights through patents, trademarks, or copyrights. Consult with an intellectual property lawyer to understand the necessary steps.
• Opening a bank account: A company bank account is essential for managing the financial transactions of your business, including receiving payments from clients, paying suppliers, and managing your company’s finances. As soon as you have registered your corporation and obtained a UID, the release of the capital contribution/share deposit amount can be applied for at the bank (show extract from the commercial register) and the account can be converted into a company account. If you are acting as a sole proprietor, it is recommended to open a separate bank account in your own name to deal with business income and expenditures.
• Accounting and bookkeeping: Many new business owners find that accounting is a complicated, time-consuming, and costly aspect of starting a new business.  In the startup phase, you want to be able to concentrate on your core business and not be overwhelmed by having to comply with complex accounting standards. This is where it pays to outsource your accounting needs to a trusted service provider like Nexova AG.
• Licenses and permits: Depending on your business activities, you may need specific licenses or permits. Research and obtain the necessary approvals from relevant authorities to ensure legal compliance.
• Insurance coverage: You should assess your business risks and consider obtaining appropriate insurance coverage. This may include general liability insurance, professional indemnity insurance, property insurance, or other types of coverage specific to your industry.
• Hiring employees: Once your company is officially registered, you may need to hire employees to begin operating full-scale. In doing so, you should familiarise yourself with Swiss labour laws and regulations. Ensure compliance with employment contracts, working hours, minimum wages, and other legal obligations as an employer. It is useful to consult with a Swiss labour law expert to guarantee that you are complying with all relevant regulations and protocols.