Before your company’s journey takes its course, you set the groundwork for your future success by making an important decision. In this article, we provide a clear summary of the three most common legal forms and include helpful advice from Bruno Leibundgut.
Einzelfirma (sole proprietorship)
The easiest of all company establishments is that of a sole proprietorship (Einzelfirma). You do not need a fixed capital contribution; however, you are liable for any risks with your private assets and continue to be taxed as an individual. This legal form is ideal if the overall risk of your company and the services offered remain manageable. If you are a self-employed IT specialist or a freelance journalist, for example, and you do not have to purchase expensive equipment nor need to hire staff. So, as a sole proprietor, you should only commit to yourself. With additional employees, financial risks and thus potential strains on your private assets are increased. In return, the formal requirements for a sole proprietorship are limited and it can be managed in an uncomplicated and inexpensive manner.
GmbH (limited liability company)
If your business model involves certain risks or if you are dependent on staff, it is worthwhile to establish a limited liability company (GmbH). To do so, you need at least CHF 20,000 in share capital. Due to the obligation of public notarization, you will also incur costs for the formation process of approximately CHF 3,000 to 6,000. Subsequently, however, you will be exempt from private liability as owner or partner. Compared to a sole proprietorship, you are more secure on the one hand and benefit from a certain creditworthiness for investments in any necessary infrastructure on the other. The GmbH must adhere to certain formal requirements, for example in its accounting. Here, the same regulations apply as for a stock corporation (AG) Likewise, the same legal provisions apply regarding the auditing obligation and tax treatment is also the same as for an AG. The GmbH is often found in smaller companies (e.g. handicraft businesses, gastronomy, etc.), in which the ownership is active in the operative business, too.
AG (stock corporation)
For the establishment of a stock corporation, a minimum capital of CHF 100,000 is required, of which you must deposit at least 50%. The higher minimum capital has a positive effect on the creditworthiness of the company, which is particularly important for larger investments where additional external financing is necessary. In addition, contrary to a GmbH, it is easier as an AG to involve new shareholders in the company, since the transfer of shares is more informal, and shares with a lower nominal value can be traded easier. In addition, shares held by employees, for example, are an increasingly popular and successful way of retaining key people in the company. However, the stock corporation is also the most demanding of these three legal forms in terms of formality, partly because it has an additional body in the form of the board of directors.
Overview
Even if the conversion of say a GmbH to an AG is evidence of a pleasing business success, it involves not only the capital increase but also an elaborate notarial procedure and the conversion of accounting. It is therefore advisable to decide on the right legal form at the beginning and to commit yourself to it in the long term.
Whichever way you choose to go, we wish you every success and will be happy to advise you at any time throughout your journey – whether you are establishing a company or seeking tax or business advice.
