LLC : Responsibility, share capital, establishment

A limited liability company (SARL) (Art. 772827 CO) is a combination of a public limited company and a partnership. It is one of the most common legal forms in Switzerland.

A SARL is a commercial company with its own legal personality and a low start-up capital, which is particularly suited to SMEs and family-owned firms. It is a mixture of a public limited company and a partnership. There are around 130,000 limited liability companies in Switzerland (source: Structural Business Statistics STATENT, dated 24.08.2023).

General information

A SARL is established at the time of its entry in the Commercial Register. As in the case of a public limited company, the authentication of its establishment must be notarized. The founders of the firm must declare its establishment by means of an official deed, draw up its articles of association, convene the managing director’s meeting and appoint an auditor.

Each shareholder holds at least one share in the share capital. A written agreement drawn up between the parties concerned is sufficient in order to transfer shares. An official deed is no longer required.

Minimum share capital of CHF 20,000 must be raised (Art. 773, Swiss Code of Obligations) whether in the form of cash or contributions in kind. The share capital can also be denominated in the foreign currency in which the company mostly conducts its business. If the share capital is denominated in a foreign currency, the same currency must be used for both commercial accounting and financial reporting. Permitted currencies (along with the Swiss franc) are the euro, US dollar, pound sterling, and the yen. Cryptocurrencies are not permitted (Art. 621, Swiss Code of Obligations). The face value of the shares may be less than 1 rappen but more than zero.

Liability rules

The "limited liability" designation only relates to the shareholders and not to the company as a whole. The latter has unlimited liability for its debts. As the share capital must be discharged in full, individual shareholders bear no personal liability unless additional and secondary liability is set out in the articles of association.

This obligation is intended only to cover balance sheet losses, to allow for the continuation of the firm's business or for cases defined in the articles of association. The total amount of additional payments must not exceed twice the nominal value of the share owned by a particular shareholder (Art. 795 CO).

Preconditions for establishment of the company

A limited liability company must be formed by one or more natural and/or legal persons. As with a limited company, a "sole proprietorship" can be formed and operated.

There are various legal provisions which must be complied with when selecting a company name, for example, a name that is already used by another company cannot be chosen. The "Sàrl" suffix must be used (cf. Instructions and directive to the Commercial Register authorities regarding formation and auditing of companies and names, dated 1 April 2021 – only in German).

Like a limited company, a limited liability company must appoint an accredited external auditor. This auditor checks the accuracy of the accounts on an annual basis, and drafts a report for the General Meeting, as the limited liability company is responsible for keeping accounts and filing financial reports in accordance with the provisions set out in the Swiss Code of Obligations (Art. 957, Swiss Code of Obligations et seqq.).

Start-up costs and taxes 

The start-up costs for a SARL are slightly lower than those for a public limited company, but they are higher than those of a partnership. 

The establishment of a SARL requires an equity contribution of at least CHF 20,000. In addition to this basic capital, consultancy fees concerning start-up methods amounting to between CHF 600 and CHF 2,000, notarial fees relating to memoranda of association of between CHF 700 and CHF 2,000 as well as fees for registration in the Commercial Register of CHF 600 (provided that the share capital does not exceed CHF 200,000) also apply. Moreover, the founder must pay a tax referred to as “stamp duty” amounting to 1% of the share capital if the latter exceeds CHF 1,000,000. 

Further information can be obtained from:

A SARL is subject to double taxation. It is taxed on its net profit and the shareholders must declare the distributed profit as income. The share capital is subject to wealth tax for both the SARL and the shareholders.

Start-up capital

The share capital of the SARL (start-up capital) must amount to at least CHF 20,000 (Art. 773 CO). It must be paid up to a level of at least 100% or covered by contributions in kind at the time of the establishment of the company. The capital does not necessarily have to be paid in cash. It may be paid in the form of contributions in kind (e.g. immovable assets, machinery, etc.).

At the time of establishment of a limited liability company, the founder or founders must open a consignment account with a bank. This is the bank account used to deposit the capital of the company being established pending its registration in the Commercial Register. A consignment declaration is issued in exchange for the payment of funds, which remain blocked in the consignment account until the publication of the company's establishment in the Commercial Register. In order to open a consignment account with a bank, it is necessary to enclose a certified copy of an identity document of the person signing the application or an authentication of the applicant's signature.

After the publication of the company's establishment in the Swiss Official Gazette of Commerce, the funds are paid into the firm's current account and the consignment account is closed. The transfer is completed at the latest on the first working day following the publication in the Swiss Official Gazette of Commerce. The funds are released by the bank upon presentation of a certified true extract from the Commercial Register confirming the registration of the company.

Several shareholders may participate the share capital if they wish to do so. They are entered into the Commercial Register as shareholders.

If a holding in the start-up capital amounts to or exceeds 25%, the acquirers or holders must inform the company who is the beneficial owner of the holding. The SARL must keep an updated register of the beneficial owners.

The shareholders’ meeting in a SARL may decide to increase the share capital. The incorporation of new shareholders is required in this context. It will then be necessary to amend the articles of association and the Commercial Register entry accordingly (Art. 781 CO). 

Third-party financing in the form of credits and loans is possible in principle for companies with share capital provided that the necessary guarantees are supplied. The reputation of the company determines the interest rate to be paid by the creditor. 

In addition to the above-mentioned possibilities concerning the right of companies to call upon external investors, it is also possible to adopt financing solutions that combine external funds with stockholders’ equity. These mezzanine funds are allocated in the form of convertible loans or warrant bonds with an interest rate that depends on the success of the firm (related-party loans). 

Constitution of reserves 

5% of the annual profit must be allocated to the statutory retained earnings. If there is a loss carryover, it must be eliminated before allocation to the reserve. Dividends may only be determined after allocations have been made to statutory retained earnings and voluntary retained earnings.

The statutory capital reserve may be repaid to the shareholders if statutory capital reserves and retained earnings, after deduction of any losses, exceed half of the registered share capital.

Companies whose business purpose mainly concerns interests in other companies (holding companies) may repay the statutory capital reserve to the shareholders, if statutory capital reserves and retained earnings, after deduction of any losses, exceed 20% of the registered share capital. (Art. 671 and 672 CO).

Accounting system 

SARLs that exceed two of the thresholds below during two consecutive fiscal years are subject to an ordinary audit (Art. 727 CO):

  • Balance sheet total: CHF 20 million
  • Turnover: CHF 40 million
  • Number of employees: 250

Moreover, public companies and companies that are obliged to prepare consolidated accounts must carry out an ordinary audit in all cases.

Others are subject to a limited audit. They may dispense with the latter if they employ fewer than 10 people as an annual average.

The shareholders’ meeting

The shareholders’ meeting constitutes the main body of the SARL and sets forth specifications for the articles of association, the management and the auditor. It approves the profit and loss account and the balance sheet, decides how to use profits and discharges managers. SARLs are also subject to the accounting provisions that apply to public limited companies. The management board of a SARL corresponds to the board of directors of a public limited company. All the shareholders have the right and obligation in principle to assume the joint representation and management of the firm. They also have the right to entrust the management of the firm to third parties (non-shareholders).

All Swiss limited liability companies must be represented by someone whose place of residence is Switzerland. This individual must have access to the register of shareholders and beneficial owners. As in the case of the board of directors of a public limited company, the personal liability of the managers of a SARL is invoked in the event of damage caused by a violation of duty, either deliberately or out of negligence.

Withdrawal, transmission 

The assignment of shares in a SARL must be confirmed in writing (Art. 785 CO). The approval of the shareholders’ meeting must be obtained in this context. Unless the articles of association specify otherwise, approval is granted on the basis of a quorum of at least two-thirds of the votes represented and the absolute majority of the share capital for which the voting right may be exercised (Art. 786 and 808b I. no. 4 CO).

From a material point of view, the partial or total transmission of business is accomplished by means of the transfer of assets and liabilities. The assignment of the assets or business of a SARL is governed by the provisions of the law on mergers (Art. 181 IV CO). Art. 333 CO is applicable for the transfer of employment relationships.


Last modification 16.01.2024

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