Limited liability companies and corporations are particularly popular legal forms in Switzerland. One of the strengths of these two corporate structures is limited liability. These corporate forms differ primarily in terms of ownership: The shareholders of a limited liability company (GmbH) often participate in the management of the business. Shareholders of a stock corporation (AG), however, may also hold a purely financial stake in the company.
What types of legal structures are there?
In Switzerland, there are 9 different legal forms for businesses. The sole proprietorship is particularly popular because it is very easy to establish. However, the stock corporation (AG) and the limited liability company (GmbH) are also frequently used. A distinctive feature of these two legal forms is limited liability. General partnerships and limited partnerships are significantly less common. This also applies to unincorporated partnerships, associations, and cooperatives. The limited partnership corporation is particularly rare; in 2019, there were just 7 of these companies.
The Corporation
The public limited company (AG) is the primary legal form for large and publicly traded companies in Switzerland. The AG is a corporation. Liability is limited to the paid-in capital. Forming a public limited company is relatively complicated and comparatively expensive. One advantage, however, is that it is easier to raise capital.
A minimum of CHF 100,000 is required to form a stock corporation. At least 20% of this share capital must be actually paid in. However, the minimum amount that must be paid in to form an AG is CHF 50,000. This does not have to be contributed entirely in the form of a cash contribution, as contributions in kind are also permitted.
The Limited Liability Company (GmbH)
A limited liability company (GmbH) is a legal entity and one of the most popular legal forms for businesses in Switzerland. A GmbH can be established by one or more individuals or by a legal entity. The liability of the shareholders is limited to the share capital. The share capital must be at least CHF 20,000.
A limited liability company (GmbH) is a very flexible legal form, as it is suitable for both small and large businesses. A company organized as a limited liability company can operate in any industry and have its registered office in any canton in Switzerland. Another advantage of a limited liability company is that it is relatively simple and quick to establish.
For more information on forming a GmbH, see our guide
Which legal structure is better—an AG or a GmbH?
For companies that require a significant amount of capital, the stock corporation is the appropriate legal form. Its high minimum capital requirement makes it particularly attractive to investors. The stock corporation is also a legally sound corporate structure, which is especially important in international business.
A limited liability company is suitable for founders who want to be heavily involved in the business. In addition, this structure allows capital costs to be kept low.
Differences Between an AG and a GmbH
| Corporation | LLC | |
| Minimum Capital | CHF 100’000 | CHF 20’000 |
| Minimum Capital Deposit | 20%, at least 50,000 | 100% |
| Deposit Options | Contributions in cash or in kind | Contributions in cash or in kind |
| Face value | Any value, must be > 0 CHF | Any value, must be > 0 CHF |
| Common Stock / Shares | Shares can generally be transferred freely. | Any transfer of shares must be approved by the shareholders and entered in the commercial register. |
| Liability | – Applies only to business assets / stock capital – No personal liability | – Generally, no personal liability, unless the obligation to make additional contributions is explicitly stipulated in the articles of incorporation |
| Accounting | Requirement to Maintain Proper Accounting Records | Requirement to Maintain Proper Accounting Records |
| Auditor | Annual audit by a state-authorized auditing firm | Annual audit by a state-authorized auditing firm |
Advantages and Disadvantages of the AG and the GmbH
The stock corporation (AG) is the traditional legal form for publicly traded companies. This popular corporate structure offers many advantages. The most important are likely the limited liability of shareholders and the ability to go public. This not only provides shareholders with an exit strategy but also makes it easier to finance the company. In addition, it is particularly stable due to its high equity base and strict legal regulations. However, it is also relatively expensive to establish and is often not the first choice for smaller companies.
The limited liability company (GmbH) is the legal form chosen by many small and medium-sized businesses, as well as large companies. It is less expensive to establish and involves fewer bureaucratic hurdles.
Advantages of a LLC
A GmbH is a legal entity and therefore has its own legal personality. This has the advantage that the shareholders of the GmbH are not personally liable for the company’s debts. Liability is limited to the company’s assets. In addition, a GmbH can easily expand into other countries, as it is recognized everywhere as a legally independent entity.
Another advantage of the GmbH is that it is relatively easy and inexpensive to establish. Unlike other legal forms, fewer documents need to be submitted, and the statutory minimum capital requirement is relatively low. In addition, foreign nationals may also be shareholders in a GmbH.
Disadvantages of a LLC
However, the high liability limit and low share capital also have their drawbacks. As a result, lenders may be skeptical about granting loans to a GmbH. In the event of insolvency, lenders would typically have a hard time recovering their money.
Advantages of an corporation
The stock corporation (AG) is the most common legal form for companies in Switzerland. It is suitable for both small and large companies and offers a number of advantages. The AG is a corporation, which means it is financed through the investment of capital in the form of shares. This has the advantage of limiting the risk for investors and making it easier for the company to access financing. The AG is a legally and financially independent entity, which means that the company’s business activities are not affected by the personal financial circumstances of its shareholders.
Furthermore, the AG is subject to stricter legal rules and regulations than other legal forms, which makes it more attractive to investors. Finally, the AG is a transparent organization because it is required to disclose its annual financial statements. This ensures high quality standards and increases public confidence in the company.
Disadvantages of an AG Compared to a LLC
The costs of forming and maintaining a public corporation (AG) are higher than those for a limited liability company (GmbH). This is primarily because public corporations are subject to stricter legal requirements and involve more administrative tasks. For more information on how much it costs to form a company, see our guide.
In a stock corporation, the liability of the managing directors and members of the supervisory board is unlimited. This means that managing directors and members of the supervisory board may be held personally liable. This is the case if the stock corporation falls into financial distress or is forced to file for bankruptcy as a result of negligent or criminal conduct.