GmbH: Pros and Cons

What is a Gesellschaft mit beschränkter Haftung (GmbH) (Swiss private limited company) and what are the pros and cons of this legal form?

The GmbH is one of the most popular legal forms in Switzerland. The main reasons are the low capital requirements and the fact that the company has its own legal personality. In the following, we have compiled a list of what you can and cannot do with a GmbH.

What is a GmbH?

Together with the Aktiengesellschaft (Swiss public limited company), the Gesellschaft mit beschränkter Haftung (GmbH) (Swiss private limited company) is one of the two forms for a corporate entity: It has its own legal personality, acts under its own name and is liable only up to the amount of its share capital.

In contrast to an Aktiengesellschaft (AG) (Swiss public limited company), the necessary share capital is only CHF 20,000. If you want to target profits, eliminate personal liability and not have to invest too much capital, then the GmbH is probably the right legal form for you.

Pros:

• The minimum capital is only CHF 20,000.
  
  
• Liability is limited to the company’s share capital – your private assets are protected.
  
  
• Several people can jointly form a GmbH and there is automatically a duty of loyalty and a fidelity duty to the company.

Cons:

• You probably won't get very far with an initial capital of CHF 20,000. If you need more capital, we recommend an Aktiengesellschaft.
  
  
• You are subject to double taxation: First, the company pays tax on its profits and, if it distributes them, the recipients also pay tax.
  
  
• External investors generally prefer the legal form of an Aktiengesellschaft.