Starting a Company in Switzerland: A Detailed Cost Overview

The legal form you choose has a significant impact on the initial and ongoing costs of your business. In this article, we will primarily focus on how the three main types of corporate entities—sole proprietorship, GmbH, and AG—differ in terms of startup costs, administration fees, and other key expenses. For a more in-depth analysis of the differences between these three types of legal forms, read our blog: Comparison of legal forms: How to make the right choice for your company.

The main cost differences arise from the variations in initial capital requirements, registration costs, administration fees, and various other expenses incurred during the early phases of starting a business. We will look at each of these cost categories later, and how they vary for each of the corporate entities mentioned.

Sole proprietorship

A sole proprietorship is the simplest (and default) legal form for a startup where there is a single owner. In this case, the business is not considered a separate legal entity from the owner. As a result, the costs associated with establishing a sole proprietorship are relatively low, as there is no formal incorporation process. There is also no minimum initial capital required for a sole proprietorship, which makes it the preferred choice for smaller businesses with limited access to funding.

A sole proprietorship must consider the following startup costs:

• Initial capital requirement: No statutory minimum requirement.
• Registration costs: A basic fee of CHF 80 for entry into the commercial register and VAT registration if the sole proprietorship has an annual turnover higher than CHF 100,000. Additional mandatory fees of CHF 20 for registration of function, CHF 20 for registration of signing authority, and CHF 30 for registration of the address, bringing total basic registration fees to CHF 150.
• Liability insurance: A crucial consideration for sole proprietorships as there is no legal distinction between the business and the owner’s assets.
• Other typical startup costs: Accounting and legal fees, business name registration, purchasing initial inventory and supplies if applicable, hiring staff, buying equipment and office space, and other small administrative fees.

While sole proprietorships are cost-effective to set up, the lack of legal separation between personal and business assets means that the owner is personally liable for any business debts. As such, a GmbH or AG is often the preferred choice for business owners.

Limited liability company (GmbH)

A limited liability company (GmbH) is a popular legal form in Switzerland that offers liability protection to its owners, separating their personal assets from the business. However, the complexity of setting up a GmbH, along with the more stringent regulatory requirements, leads to higher associated costs compared to a sole proprietorship.

Initial expenses for setting up a GmbH include:

• Initial capital requirement: CHF 20,000, 100% of which must be paid up.
• Registration costs: Basic fee of CHF 420 for entry into the commercial register, plus mandatory additional fees including CHF 20 per function, CHF 20 per signing authority, CHF 30 for audit waiver (if applicable), and CHF 30 for domicile registration. Total registration fees typically range from CHF 500-550.
• Legal and administrative costs: Fees for notarization, legal documentation, and setting up formal accounting systems.
• Liability insurance: While personal assets are protected, business assets are at risk, so liability insurance for the company is a must.
• Licenses and permits: May be required depending on the industry and nature of the business activities. Costs vary according to the industry and canton.
• Other ordinary startup expenses

Stock corporation (AG)

A stock corporation (AG) is more complex than a GmbH and is often preferred by larger businesses or those aiming to raise capital by issuing shares (although many SMEs also opt for the structure of an AG). Although there are a few additional regulatory and administrative requirements involved in establishing and maintaining an AG, the basic fees for incorporating are similar to that of a GmbH. However, the initial minimum capital requirement is significantly higher, and it’s also typical for other business costs to be greater due to the larger scale of the business.

Initial capital outlays for an AG include:

• Initial capital requirement: CHF 100,000 (at least 20% or CHF 50,000 must be paid up, whichever is higher)
• Registration costs: Basic fee of CHF 420 for entry into the commercial register, plus mandatory additional fees including CHF 20 per function, CHF 20 per signing authority, CHF 30 for audit waiver (if applicable), and CHF 30 for domicile registration. Total registration fees typically range from CHF 500-550.
• Legal and administrative costs: Fees for notarization, legal documentation, and setting up formal accounting systems. Additional expenses for issuing shares, filing annual reports, and auditing services.
• Liability: Similar to a GmbH, personal assets are protected, but the corporation’s assets are exposed to business risks.
• Other ordinary costs to get the business up and running, which depend entirely on the nature of the specific business activities and scope. Generally, these are likely to be higher for an AG due to the potentially larger scope of the business, but this is not a fixed rule.

Ongoing compliance and reporting requirements for AGs can be more demanding and, therefore, potentially more expensive. However, this is highly dependent on the nature of the business, where it is incorporated, its annual turnover, and various other factors.

Other legal forms to consider

In addition to these common legal forms, consider exploring other structures such as partnerships or cooperatives, depending on the nature of your business. These forms may offer advantages for specific types of companies but come with their own sets of rules and costs.

Swiss companies face a multi-layered tax structure at federal, cantonal, and communal levels. The federal corporate income tax is 8.5% on profit after tax (7.83% on profit before tax), while total effective rates range from 11.9% to 21% depending on location. Additional tax obligations include VAT (8.1% standard rate), capital tax, withholding tax, and mandatory social security contributions.

Taxes are a significant part of running a business in Switzerland and should therefore be carefully considered when deciding on your legal form, choosing the canton in which to set up the company, and planning your future finances. The tax obligations for startups include:

Corporate income tax (profit tax)

Companies in Switzerland are taxed at the federal, cantonal and communal levels. The federal corporate income tax (CIT), also known as profit tax, is a flat 8.5% on profit after tax (7.83% on profit before tax). Cantonal and communal CITs vary significantly and are added to the federal CIT. The result is that Switzerland’s overall effective corporate tax rates range from approximately 11.9% to 21%. Sole proprietorships are not subject to CIT, and the income is instead taxed as part of the owner’s personal income tax.

Value Added Tax (VAT)

All businesses with annual revenue over CHF 100,000 must register for VAT, which is currently 8.1% for standard VAT rated goods and services. There are reduced and special VAT rates of 2.6% and 3.8% for certain essential items and hotel services. For comprehensive information on Swiss VAT requirements and compliance, refer to our detailed guide: Value Added Tax in Switzerland.

Capital tax

Swiss cantons impose a capital tax as a percentage of a company’s net equity value, including share capital, additional paid-in capital, reserves and retained earnings. This tax varies by canton, ranging from 0.001% (in Obwalden) to 0.5% (in Neuchâtel). Some cantons also impose a minimum flat capital tax.

Withholding tax

If your company distributes dividends, you must consider the Swiss withholding tax. This tax is levied at the federal level on certain types of income (primarily dividends, interest, and certain insurance benefits) paid to individuals and companies in Switzerland. The standard tax rate is 35%. The purpose of the withholding tax is to ensure the proper declaration of income. If a double taxation agreement exists, the tax can be partially or fully reclaimed under certain conditions.

Social security contributions

In addition to taxes, you must also pay into Switzerland’s social security system, which includes old-age pensions (AHV), disability insurance (IV), and accident insurance. Contributions are mandatory for both employers and employees, and many of the basic contribution rates are standardized across the country.

Other taxes

There are various other taxes that you may need to consider when planning your startup’s future financial obligations. These can include emission tax, church tax, wealth tax (a sole proprietor’s equivalent of capital tax), waste tax, stamp duties, and custom duties.

For more extensive information on the various taxes which apply to businesses in Switzerland, read our blog about corporate taxes in Switzerland.

The costs of starting a business in Switzerland can vary significantly depending on your industry. Tech companies face high software development costs but low physical infrastructure expenses, while retail businesses require significant inventory and storefront investments. Manufacturing startups encounter the highest capital requirements due to specialized machinery and facilities.

Each industry presents unique financial challenges and opportunities, and understanding these costs is essential for planning your startup budget effectively. Some examples of industry-specific cost considerations include:

Tech startups

Tech startups typically have higher initial costs related to software development, but they may have lower physical office expenses, especially if the team works remotely. The primary costs include developing software or applications, purchasing licenses for necessary platforms, and investing in cybersecurity to protect sensitive data. Depending on the nature of the business, cloud storage or data hosting services may also be significant expenses. Additionally, tech startups often require highly skilled employees, such as developers and IT specialists, which can drive up personnel costs.

Retail businesses

Retail businesses have significant upfront costs for inventory and setting up a physical store. Finding a suitable location for the physical storefront can be expensive, especially in major cities, where rental prices are higher. Additionally, initial investment in marketing to attract customers, point-of-sale systems, and website development (if e-commerce is also involved) are important considerations. Retailers also need to account for ongoing expenses like re-stocking inventory, which can fluctuate based on supplier agreements and seasonal demand.

Manufacturing businesses

Manufacturing businesses tend to have some of the highest startup costs due to the need for specialized machinery and equipment. Other significant costs include securing production space, the cost of compliance with industry-specific regulations such as health and safety standards, ongoing staff training, hiring skilled technicians or engineers, and of course sourcing raw materials and maintaining an efficient supply chain.

Service-based businesses

Service-oriented businesses such as consulting firms, financial services, or marketing agencies often have lower physical setup costs but may face higher costs in terms of acquiring clients and building a reputation. They may need to invest in professional software, such as CRM systems, and marketing efforts to attract clients. The cost of compliance and licenses can also be expensive in regulated industries like finance or healthcare.

We have just mentioned a few industries where there are specific cost factors to consider. This applies to many other industries too, such as food and beverage, financial services, and more. By carefully considering the specific expenses for your sector, you can better ensure that your business is financially prepared for both the initial setup and ongoing operational costs.