Have you always wanted to start your own business and form a GmbH? Then you’ve come to the right place! We’ve put together an overview of the process of forming a GmbH in Switzerland. Everything is covered, from the formation process to the pros and cons of a GmbH.
The Process of Forming a GmbH
Step 1: Initial Assessments and Determination of the Authorized Capital
First and foremost, you should decide with whom you want to form the GmbH. In general, a GmbH may be formed by one or more individuals or legal entities. You are therefore free to form the GmbH on your own or together with others.
Arguably the most important requirement for forming a GmbH is the share capital. This must amount to at least CHF 20,000. The GmbH’s share capital must be fully paid up, either in the form of cash or in-kind contributions. Since 2023, individual shares may have any par value greater than 0 (there is no longer a minimum par value of CHF 100).
There are additional costs involved in forming a GmbH, such as notary fees and the fee for registration in the commercial register. To keep track of everything, it’s a good idea to start by creating a budget for the formation process. The costs associated with forming a GmbH are explained in a later section.
Step 2: Preparing the Incorporation Documents
The law requires that a public notarization be obtained to form a GmbH. To do so, the following documents must be prepared:
- the bylaws
- The Founding Report
- the audit confirmation
- Confirmation of the deposit of cash
- the contribution-in-kind agreements
- existing asset transfer agreements.
The bylaws must include the following elements:
- Company Name
- Headquarters
- Purpose of Business Activities
- Amount of Share Capital
- The number and par value of the common shares
- Form of Announcements Issued by the Company
Important: You may choose any company name you like, provided it is still available. You can check its availability in the central company index. The name must include the suffix “GmbH.”
Step 3: Notarization
The next step is the public notarization of the formation. The founders must declare in a public deed that they are forming a GmbH, set forth the articles of incorporation therein, and appoint the governing bodies. The notary will conduct the founding meeting and perform the public notarization.
All founding members must be present for the notarization. Each person must be able to provide identification in the form of official documents. Anyone who is unable to attend the notarization may be represented by another partner. This is only possible if the person unable to attend grants the representative power of attorney for the incorporation.
Step 4: Registration with the Commercial Register
After notarization, the GmbH can be filed with the Commercial Registry Office for entry in the Commercial Register. To do so, the certificate of incorporation must be submitted along with the signed application and supporting documents.
You have the option of registering the GmbH with the appropriate cantonal commercial registry office or through the EasyGov online portal. According to the federal government, the registration process can take 5 to 60 days. The processing time depends on the complexity of the application and the workload of the relevant commercial registry office.
Step 5: Register with the compensation fund
After registration in the commercial register, the next step is to register with the compensation fund. Registration for AHV/IV/EO is mandatory for founders of a GmbH. In addition, mandatory accident insurance and occupational pension plans are also required.
Registration with the compensation fund must be completed at the appropriate cantonal compensation fund. An overview of the cantonal compensation funds is available here.
Step 6: Register for VAT
If a GmbH’s annual revenue exceeds CHF 100,000, the company is subject to value-added tax. Registration can be completed online through the federal government’s portal.
How much does it cost to form a GmbH?
The exact cost of forming a GmbH depends on the specific circumstances. However, we have compiled some guidelines based on information from the federal government to serve as a reference:
- Minimum capital: CHF 20,000
- Consulting on the procedures for starting a business: CHF 600–2,000
- Notary fees: CHF 700–2,000
- Fee for entry in the commercial register: CHF 600
If the paid-in equity (share capital) exceeds 1,000,000 CHF, an issuance tax of 1% is levied on the portion exceeding one million.
Key Aspects of a GmbH
Before you form a GmbH, there are a few important points you should be aware of. These include, among other things, tax regulations, accounting requirements, and the liability of a GmbH.
Liability of a GmbH
In the case of a GmbH, liability is limited to the company’s assets. However, the articles of incorporation may stipulate that shareholders are obligated to make additional contributions. Such additional contributions may be used only for the purposes specified in Article 795a of the Swiss Code of Obligations.
How does the taxation of a GmbH work?
A GmbH falls under the category of corporations. This means that the company is a legal entity and thus constitutes a separate taxable entity. Compared to partnerships, corporations feature a clear separation between the company and its shareholders for tax purposes. Specifically, this means that the GmbH is taxed as a business, while the shareholders are taxed as individuals.
The GmbH is taxed at both the federal and cantonal levels. A profit tax is levied at both levels, based on net income. At the cantonal level, a capital tax is also levied. The capital tax is based on the GmbH’s equity.
It is important to note that, in the case of corporations, there is an issue of double taxation. The company pays income tax on its net profit, and when the profit is distributed, the shareholders must pay income tax. Shareholders must also pay a wealth tax on their shares. Thus, both the profit and the capital are taxed at two levels and are therefore subject to a double tax burden.
Accounting Requirements for a GmbH
In Switzerland, legal entities are required to maintain accounting records. Since limited liability companies (GmbHs) are considered legal entities, they are also required to maintain accounting records. This requirement stipulates that an inventory, a complete balance sheet, and an income statement—along with all supporting documents—must be prepared. Therefore, anyone who establishes a GmbH must also handle the accounting.
It should also be noted that certain GmbHs are subject to a statutory audit. The statutory audit requirement applies if a GmbH exceeds two of the following thresholds in two consecutive fiscal years:
- Total assets: CHF 20 million
- Revenue: CHF 40 million
- Full-time positions: 250
Otherwise, the GmbH is subject to a limited audit. However, this requirement may be waived if the company employs fewer than ten people on average over the course of a year.
Building Reserves
The Swiss Code of Obligations requires limited liability companies (GmbHs) to set up reserves. Five percent of annual profits must be allocated to the statutory retained earnings reserve each year until the sum of the statutory capital reserve and the statutory retained earnings reserve reaches 50 percent of the company’s capital as recorded in the Commercial Register (for a GmbH: share capital); for holding companies, an allocation of up to 20% of this capital is sufficient. If there are accumulated losses carried forward from prior years, these must be offset before any allocation to the statutory retained earnings reserve; if a loss is incurred during the fiscal year, no allocation is made.
Advantages and Disadvantages of a GmbH
It’s worth taking a critical look at the pros and cons of a GmbH before you begin the process of forming one. We’ve put together a brief overview of the most important points.
Advantages of a GmbH
- Low Initial Capital: You only need CHF 20,000 to form a GmbH. That is quite low compared to the initial capital required for an AG, which is CHF 100,000.
- Liability Rule: The liability of a GmbH is limited to its capital stock.
- Simple Conversion to a Corporation (AG): It is possible to convert a limited liability company (GmbH) into a corporation (AG) without liquidation.
Disadvantages of a GmbH
- Double taxation: The GmbH’s profits and capital are taxed. The shareholders’ income and assets are also taxed. This is why it is referred to as double taxation.
- Start-up costs: The start-up costs for a GmbH are significantly higher than for a sole proprietorship.
- Public Disclosure: A GmbH is entered into the commercial register upon its formation. As a result, its governing bodies, capital, and capital contributions are publicly available.
More pros and cons are listed on the federal government’s website. To learn how a GmbH differs from an AG, see our guide.
Additional FAQs on Forming a GmbH in Switzerland
How much does it cost to form a GmbH?
The costs of forming a GmbH vary on a case-by-case basis. A minimum of 20,000 CHF in equity capital is required. In addition, there are costs for consulting services related to the formation (approximately CHF 600–CHF 2,000), notary fees (CHF 700–CHF 2,000), and the fee for entry in the commercial register (CHF 600).
What do you need to start a GmbH?
As with any business startup, you first need a business idea. Next, you must raise at least CHF 20,000 in startup capital.
What are the advantages of a GmbH?
The main advantages of a GmbH are that only a small amount of initial capital is required, the company’s liability is limited to its share capital, and conversion to an AG does not require liquidation.
When is it worth forming a GmbH?
If you don’t want to be personally liable for business transactions and have no more than CHF 20,000 in startup capital, it’s worth setting up a limited liability company (GmbH).