AG vs. GmbH –Switzerland’s most popular business structures

AG vs. GmbH –Switzerland’s most popular business structures

If foreign investors, legal entities and entrepreneurs decided to incorporate in Switzerland with business structures then they choose this most popular business structures AG and GmbH.

The main reason for their popularity is the accessibility of their legal requirements regarding share capital. AG which is known as the Swiss Corporation and GmbH is known as the private company of liability is considered to be the first choice for entrepreneurs who want to trade the foreign markets.

These companies have limited liabilities and also the option to transfer limited beneficiaries. If we talk about trading with GmbH then the whole process is pretty much difficult. The governing bodies of AG consist of shareholders that are responsible to make decisions through general meetings.

They take help from the board of directors and company auditors to execute the decisions. If we talk about GmbH, then the decisions are made through general meetings while the company has been run by company management.

It is a well-known fact that setting up other corporate structures will be less expensive as compared to setting up these popular business structures. This entire process will take one to two weeks including the condition where all legal formalities are fulfilled. In this process, the domicile of the company will get transferred from one Swiss canton to another.

This can be done under the condition that the taxation is based on the residency of the company’s management team. Before getting into the comparison of these large business structures, we should first get into the basic information about these two. So lets’ get started:

Basic Information about Switzerland’s most popular business structures

Public Limited Company (AG)

This popular legal structure in Switzerland is considered to be the best choice for foreign investors. This is the legal company whose legal entity has been covered exclusively by its own assets. The base capital that is determined in advance will be divided into shares.

This limited company is not only suitable for large investors but also provides a chance for small investors or medium-sized companies to invest in it. It is considered to be the most leading firm for holdings and financial companies.

The main advantage for choosing this company is that it is widely anonymous for investors and provides limited liability. It also allows simple transfer of shares.

Limited Liability Company (GmbH)

GmbH is a company that has its own legal entity formed by at least one or more members with pre determined capital. Each partner who forms this company has to pay some initial share of the capital.

The partner who joins hands in the company has liability limited to predetermined nominal capital. The main advantage of joining this firm is that if you have low minimum capital then also you can join with limited liability.

Now, you get an idea of what these companies are all about and below we will compare them on the basis of different points. Let’s discuss.

AG vs. GmbH: Comparison on the basis of different factors

Generalization

If we compare these two business structures on the basis of liability then we all know from above information that they have limited liabilities and also the limited option to transfer shares to different beneficiaries, but GmbH makes the process more difficult.

AG provides limited liability to its shareholders and that will be based on the contribution they made in regard to capital. You can easily transfer shares of AG and can be transferred to Swiss Canton and tax will be based on the residency of management. 

The GmbH comes with limited liability where the company shares are transferable from one Canton to another and depending on the documents the setting up procedure may take up to several weeks.

Legality

If we talk about AG Company then the company who invest in this must have 100,000 CHF in which they need to give half of the total amount at the time of incorporation. The possessor shares are allowed only if they provide fully oaid amount. It is necessary that the company director or management team should have Swiss resident. Also, the AG must have the registered office in Switzerland.

If you want to work with GmbH then it is necessary to have one shareholder and one director and one company director should have resident in Switzerland.  Also, it is important to have a minimum share capital of 20,000 CHF and there is no minimum amount you have to submit like in AG Company. It is also important to have a GmbH office based in Switzerland.

Main difference between these two business structures is that the Swiss corporation needs higher share capital from which you need to pay minimum sum. But the bearer shares are allowed in the full capital that needs to be paid.

Taxation needed

If we compare these two business structures on the basis of taxation then these two structures are very much similar. The taxation rate depends on the location of the company and therefore, certain companies will get relaxation or tax exceptions on this basis. Dividends and Interests tax rate are refundable and it depends on the provisions of applicable double taxes.

These type of privileges includes participation exemptions and 35 percent of withholding tax dividends are refundable. This all depends on double taxation treaties. Withholding tax on remaining interests varies from 0 to 15 percent and this also depends on double taxation treaties. The VAT in Switzerland is 8 percent and the group has to pay it to complete taxation formalities.

Disclosure and Reporting

For money laundering cheques, the beneficial owner of AG is disclosed only to the bank members. While the share holders may remain anonymous, the director group of AG is listed in the public register of directors. The large companies that meet certain criteria need to provide annual reports as well as ordinary audits.

This type of requirement is also needed while you work with GmbH. Only the small difference between AG and GmbH reporting is that the GmbH shareholders are also listed along with directors in the public register of shareholders, while in case of AG only directors are listed.

So, these are some factors on the basis of which you can easily understand how these structures differ from.

Conclusion

In this article, we have mentioned several points on the basis of which you can seek knowledge about these two popular structures. They have many common features that are suitable for their business needs. These are some major points you can keep in mind while working with these two business structures.

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