Corporations and limited liability companies may be liquidated at the shareholders’ meeting or the general meeting of shareholders, respectively. In the event of a liquidation, the commercial register should be informed of the decision and the appointment of the liquidator. The suffix “in liquidation” will be added to the company name in the registry. After then, the official gazette shall issue three notices to creditors asking for notification of their claims against the corporation.
Liquidators must end the company’s continuing operations and liquidate its assets. After liquidation, the firm should pay its debts using its remaining assets and cash. A bankruptcy filing is necessary when a company’s debt exceeds its ability to refinance.
Final balance sheets should be prepared after the end of the liquidation process. A final shareholders’ meeting will determine the payment of a liquidation dividend if the financial statements are approved (if any).
Liquidation dividends may only be paid out if the final call to the creditors was published in the official gazette for at least one year. Even after three months, distribution may only begin if an auditor certifies that doing so would not prejudice the interests of third parties.
A corporation may be de-registered or deleted from the commercial register when its last liquidation dividends have been paid out to its creditors.
The tax consequences of a company’s liquidation
After the liquidation process has begun, a company is still liable for taxes (i.e., after the registration of the liquidation with the commercial register). A liquidation firm can make profits during this period, either via commercial activity or the discovery of hidden reserves.
After the shareholders’ meeting has approved the final liquidation balance sheet, a liquidation dividend may be paid. As with regular dividends, Swiss withholding tax applies to the distribution of liquidation dividends. Liquidation dividends may be paid through the notification method if the firm is allowed. Withholding tax does not apply to the return of capital and reserves from capital contributions, on the other hand.
The de-registration or deletion request in the business register will be sent to the appropriate cantonal tax authority and the Swiss federal tax authority. Afterward, the federal tax authorities in Switzerland provide the final tax declaration forms and questionnaires to the business (VAT). The firm’s liquidators must pay all overdue taxes since they may be personally accountable for the payment of these taxes. Unpaid social security payments are also a source of personal responsibility.
Until the company is ultimately de-registered from the VAT register, VAT declarations should be made to the tax authorities. After each financial quarter, a business will de-register from the VAT register.
Only once the federal and cantonal tax authorities have certified that there are no outstanding tax obligations can the company be de-registered from the commercial register.
Liquidation of sole proprietorships and business partnerships
If a sole proprietorship (“Einzelunternehmen”), a simple partnership (“Einfache Gesellschaften”), a general partnership (“Kollektivgesellschaften”), or a limited partnership (“Kommanditgesellschaften”) ceases to do business, it must be dissolved. If any are leftover, excess funds may be awarded to partners after all obligations and contributions have been repaid. The firm must be de-registered if the partnership is included in the commercial register.
Liquidation of sole proprietorships and business partnerships has tax ramifications.
Single proprietorships and company partnerships carry out these self-employed operations. Self-employment income is taxed at the individual level by the partners or owners of the business. Ordinary income tax and social security payments apply to any gain realized in connection with the cessation of self-employment, such as discovering concealed reserves.
Liquidation profits from a sole proprietorship may be taxed more favorably if the proprietor retires at age 55 or becomes physically incapable of working. These circumstances, however, also need the payment of social security payments.
Instead of going through with a liquidation, a self-employed individual considering selling their company could choose to explore incorporating their company. It is possible to carry out such a change without incurring taxes. As a rule, the profit from the sale of shares in such a legal organization is not taxed, meaning it is not taxable income. However, the conversion into a legal company must be completed at least five years before the sale of the shares, which is a significant criterion.