The Swiss Code of Obligations makes a distinction between two types of partnerships whenever this business structure is used for company formation in Switzerland. Therefore, it is possible to form general partnerships or limited partnerships. Partnerships are formed in Switzerland by at least two individuals that conduct business operations under a joint company.
Partnerships may not have legal entities as partners and have to be formed by individuals, whereas other business structure in Switzerland allow legal entities to form companies as well. Partnerships are considered legal entities in Switzerland and they must be entered into the Swiss Commercial Register in order to carry out business activities.
General partnerships are considered unincorporated companies in Switzerland and along with limited partnerships they are representative for approximately 19,000 legal entities registered in Switzerland.
How to open a general partnership in Switzerland
A general partnership (Kollektivgesellschaft) in Switzerland is most commonly used by small businesses or by two or more business partners that join forces to provide certain services or to sell similar or complementary products. A partnership is formed in Switzerland by having the partners sign the articles of partnership.
The name of the general partnership must consist of the family name of at least one of the partners and a suffix indicating the relation between the founding members. It is also allowed to add the type of business activity to the name of the general partnership.
No minimum share capital is required to open a general partnership in Switzerland. All members of the partnership have individual and joint responsibility for the debts and obligations of the general partnership.
It is also possible to extend the business activities, to bring more partners into the partnerships or to change the legal status of the general partnership.
If the annual turnover of a general partnership exceeds 500,000 CHF, it must be registered for taxation purposes.
Characteristics of general partnerships in Switzerland
As a legal entity, a general partnership does not have a legal personality. The partners are the only one responsible and have full liability regarding the debts and obligations of the general partnership.
Entrepreneurs interested in opening a general partnership in Switzerland must conclude a business contract, in which it is required to state the company’s trading name and its main business activities.
If the general partnership must be registered in the Swiss Commercial Registry (if it conducts business activities), the company’s founders, which are also the partners involved in the partnership, must sign a request for registration.
Drafting the article of association is not a compulsory procedure in the case of general partnerships and it all depends on the partners if they want to draft these types of documents or not.
General partnerships are usually managed directly by the founding partners, but it is also possible to delegate a third party.
The partners forming a general partnership may not be residents of Switzerland however they are required to obtain a Swiss work permit in order to be able to open a general partnership.
Taxation of general partnerships in Switzerland
Partnerships in Switzerland are taxed depending on their legal structure, if they are limited partnerships or general partnerships. In the case of general partnerships, the tax liability is attributed in Switzerland to the individual partners and not to the partnership as an entity. Partners must pay their taxes according to the capital they have invested into the general partnership. In addition, they must pay tax on the personal income, but deductions are granted for certain losses when it comes to the calculation of the taxable base.
Advantages of general partnerships in Switzerland
General partnerships are mostly suited for small enterprises and have the great advantage of not requiring a minimum share capital and it is also not mandatory to register the partnership with the Swiss Commercial Register if no business activity is carried out.
Forming a general partnership is a quick and easy process. Foreign citizens are able to form a general partnership in Switzerland as long as they obtain a Swiss work permit. Nevertheless, it is recommended to request the services of a specialized firm in company formation in Switzerland that will handle all the necessary documentation and legal procedures required to form a general partnership in Switzerland.