A public limited company (AG) may be formed by one or more natural or legal persons in Switzerland. These bring in a certain amount of capital, broken down into partial sums (which represent the shares).
Together with the sole proprietorship, the AG is the most common legal form in Switzerland, as it is also advantageous for small companies in the case of liability, capital regulations, etc.
Only the company’s assets are used for the liabilities of the AG in Switzerland in case of bankruptcy. The shareholders lose so at most their share capital.
A shareholder agreement creates clarity when several parties are involved in a company. The formation of an AG in Switzerland requires at least one shareholder, which may be a natural or legal person or another commercial company. The founding process is more complex and start-up costs are higher than for partnerships or GmbHs, for example.
The AG is incorporated after the entry in the commercial register, preceded by the public certification of the foundation, the approval of the Articles of Association, the election of the Board of Directors and the appointment of the auditors. The company name can be chosen freely if it’s not already taken by another company. However, the addition “AG” must be specified.
Tax authorities make a distinction between private and legal persons. The AG in Switzerland is a legal person and is taxed separately like any other legal person. This creates a disadvantage for shareholders: if the company makes a profit, it pays income tax. If, in addition, it pays a dividend to the shareholders from the profits, once again the dividend is taxed as personal income. This is called double taxation.
The tax authority also applies taxes for share capital: the company owes capital taxes on the share capital, while the shares are taxable as private assets of the shareholders.
The disadvantages of the double economic burden were mitigated by the corporate tax reform II. The partial taxation of the dividend of 60% in private wealth and 50% in business assets for shareholders results in an approximation of the tax burden: companies that finance themselves through loans are no longer favored for tax purposes than those that seek entrepreneurial shareholders.
The share capital must amount to at least CHF 100,000. It must be at least 20% paid in, with the required minimum amount of CHF 50,000. The capital doesn’t necessarily have to be paid in cash. It can also be introduced in the form of contributions in kind (for example real estate, machinery, etc.).
When founding a company in Switzerland, the founder or founders have to open a blocked bank account. This is a bank account where the capital of the new company is deposited until it is entered in the Commercial Register. A capital deposit receipt will be issued and the money will remain in the blocked account until the company’s founding has been published in the Commercial Register.
After the publication of the company founding in the Swiss Official Gazette of Commerce, the money is transferred to the business account of the company and the blocked account is dissolved. Any number of shareholders may participate in the share capital.
Auditors and Annual Reports
An AG in Switzerland must use a certified auditor when it’s founded. They must submit an annual report to the Board of Directors on the management.
Every AG must prepare an annual report – consisting of annual accounts and annual balance sheet. The annual financial statements include the income statement, the balance sheet and an appendix with supplementary information that must meet the minimum legal requirements.
Differences Between AG and GmbH in Switzerland
Both the AG and GmbH have limited liability and the option to transfer shares between several beneficiaries, but it’s a little bit more difficult for the GmbH. For the AG, the governing body is made up of different shareholders that make the decisions through meetings, plus a board of directors and several company auditors.
On the other hand, for the GmbH the partners take decisions through general meetings, while the company’s management runs the entire company. Then we also have to discuss initial setup fees.
For the GmbH the minimum share capital must be 20,000 CHF, without the need to deposit a paid-up sum, and the new company must have at least one shareholder, one company director, one local director and a registered office in Switzerland. Also, no bearer shares are permitted.
For the AG, the minimum share capital must be 100,000 CHF and half of it must be paid up front. If you’re willing to pay up the entire share capital upfront, you could also get bearer shares for your future AG. This type of company should also have at least one shareholder, one director, one local director and of course, a registered office in Switzerland.
When it comes to shareholders, the shareholders of an AG may remain undisclosed, but for the GmbH they will be public. So every company has its advantages and disadvantages.
For taxes, both the AG and the GmbH must pay a corporate tax rate between 8 and 15%, even on the worldwide income. This will be a subject of taxation, but certain privileges are applicable to mixed companies.
If you have an annual turnover of 40 million CHF or more, if you hold assets worth 20 million or more or if your company will pass the 250 employee mark, you will have to make annual audits for your AG or GmbH.
Since it’s a bit cheaper and it has a bit less legal requirements, a GmbH might be more suitable for small businesses, entrepreneurs or start-ups looking to expand their activity in Switzerland, while the AG has a much better structure for corporations.
In both cases, these Swiss companies might benefit from important tax incentives, on the federal and cantonal level, which is why you should consider all the aspects offered by Switzerland before deciding to start a company in this country.