It is mandatory for all legal entities-partnerships and corporations alike to keep books. Nevertheless, this principle is not without exceptions and special cases.
As of January 2015, every legal entity and sole proprietor in Switzerland is obliged to keep accounts, even the ones that are not registered. Sole proprietors who generate more than CHF 100,000 annual turnover are obliged to get registered in the commercial register. However, the ones that generate less than CHF 100,000 annual turnover are not released from the obligation to maintain records and accounts.
Partnerships and sole proprietors who generate less than CHF 500,000 annual turnover are allowed to do simplified bookkeeping. This also includes those associations and foundations that are not required to register in the commercial register. Simplified bookkeeping means that the proprietor has to keep track of records of income and expenses in a way that makes it easy to read the net worth.
Types of companies who must do bookkeeping pursuant to the Swiss Code of Obligations
These are the types of companies that are obliged to keep in compliance with the rules of the Swiss Code of Obligations:
- Legal entities (GmbH, limited partnerships, associations, AG, and foundations);
- Partnerships and sole proprietors that generate more than CHF 500,000 annual turnover;
- Partnerships and sole proprietors that generate less than CHF 500,000 annual turnover – as previously mentioned, these proprietors have to maintain a simplified bookkeeping system.
In order to maintain accounts, it is necessary to prepare an inventory, a comprehensive balance sheet, and a profit and loss account with the necessary supporting documents.
It is mandatory for companies to keep bookkeeping records and reports for a minimum of ten years, and special provisions apply to documents stored electronically.
Closing the financial year
A financial year in most laws, including in Swiss law, lasts from the 1st of January to the 31st of December. Sometimes, companies and proprietors are allowed to select different dates.
Newfound companies are allowed two options on how to end the financial year. One is to go for a short year ending, which means if the company was established on the 01st of July, the annual accounting closes on the 31st of December the same year. Another option is the long year-end which means that the company can choose to close the financial year at the end of next year. This means that the first financial year can last up to 18 months. However, the rules may vary in different canton laws.
Taking into account that the first financial year brings many expenses, most newfound companies and proprietors opt for the long year-end. This way, the high expenses that come with starting a company can be offset against the profits that will accumulate later on.