One of the most chosen Swiss business structures are Gesellschaft mit beschränkter Haftung (GmbH) or Societé à Responibilité Limité (SARL), a combination of a public limited company and a partnership. The law imposes specific requirements to successfully create such an entity (art. 772-827 CO).
Businesses are governed under federal law in Switzerland, as articulated in the “Code of Obligations.” A company can acquire the status of a Swiss SARL under certain conditions that vary from one Swiss canton to another.
Requirements, procedures, and the tax regime may also differ according to specific factors: the legal form of the business and the canton where the company has been registered.
A SARL is a commercial company with its own legal personality and low start-up capital. It is an excellent choice for small and medium-sized businesses because it is relatively easy to incorporate, manage and operate. There are over 207.000 SARL entities registered in Switzerland.
To be duly incorporated, a SARL has to be registered in the Commercial Register at the site where it has its seat (art. 778 CO). The authentication of its establishment has to be notarized. The founders need to declare the establishment through an official deed, lay down the articles of association, convene the shareholders’ meeting, and appoint the management bodies and an auditor (art. 777 I CO).
There must be at least one shareholder, there is no maximum number, and each shareholder needs to hold a minimum of one share. Shares can generally be transferred freely; a written agreement between the parties concerned is enough to make the transfer.
The nominal capital must amount to at least CHF 20,000 (Art. 773 CO), and it needs to be contributed in the form of either cash contributions or contributions in kind. Opposed to the provisions of the prior law governing SARLs, there is no upper limit for the share capital. The lowest contribution per shareholder, whether it is in cash or in-kind, amounts to CHF 100 (Art. 774 CO)
In the case of a SARL, the company is fully liable for its debts. Shareholders are generally not responsible for any debt or liability of the corporation except for the payment of the share price, and in case there is an obligation to make an additional payment or provide an ancillary service written into the articles of association.
This obligation is meant to cover balance sheet losses to enable the company to continue its business. The total amount of supplemental payments must not surpass twice the nominal value of the share owned by an individual shareholder (Art. 795 CO).
One of the significant benefits of setting up a SARL in Switzerland is the attractive tax system that it will be subject to. Switzerland is currently offering one of the lowest tax rates in Europe.
Swiss businesses are subject to Swiss corporate income tax on their taxable profits generated in Switzerland. Companies are taxed at three levels – federal, cantonal, and communal.
In Switzerland, the direct federal corporate income tax rate is set at a flat rate of 8,5%, however as deductible tax payments are allowed, the federal income tax rate can be lowered to 7,8%. For the issue of shares with a value greater than 250’000 CHF, there will be levied a capital duty of 1%.
In addition, if the holding company holds 20% of the share capital of another company, it can also take advantage of a reduced corporate tax rate at the federal level.
In addition to the direct federal corporate income tax, each canton has its own tax law and levies cantonal and communal corporate income and capital taxes at different rates. As a general rule, the combined effective income tax rate typically is between12% and 24% for companies subject to ordinary taxation, depending on the company’s corporate residence in Switzerland.
SARLs that surpass two of the below-mentioned thresholds during two consecutive fiscal years will be subject to an ordinary audit (Art. 727 CO):
- A balance sheet of over CHF 20 million
- Turnover over CHF 40 million
- Number of employees: 250
Public companies and businesses that are obliged to prepare consolidated accounts must also carry out an ordinary audit.
According to Swiss law, a SARL must call upon the services of a state-approved auditor for a limited audit (art. 727a I CO). However, entities having up to ten full-time employees on an annual average may be dispensed from carrying out external yearly audits. (art. 727a II CO).
The shareholders’ meeting
The shareholders’ meeting represents the core of the SARL. The purview of shareholders meetings can:
- Adopt and amend the articles of association;
- appoint or discharge managers;
- approve the annual profit and loss account and the balance sheet and distribution of dividends;
- decides how to use profits
- vote the directors’ liability discharge;
- review the management.
The assignment of a capital contribution in a SARL has to be confirmed in writing (Art. 785 CO). Furthermore, it needs to be accompanied by the approval of the shareholders’ meeting. To finalize the assignment, at least two-thirds of the shareholders need to consent (Art. 786 and 808b I. no. 4 CO).
The assignment of the assets or business of a SARL is overseen by the provisions of the mergers law (Art. 181 IV CO). In the case of a transfer of employment relationships art. 333 CO is the applicable one.
The selected business name can be kept for an unlimited period. In the case of partnerships, changing shareholders will not impact the business name (Art. 954 CO).
A Switzerland Limited Liability Company (SARL) / (LLC) comes with numerous advantages such as the tax regime, business-friendly environment, and location. These key benefits have made the Swiss SARL a popular corporate vehicle for local and foreign business owners alike.