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Setting up a company: which legal form is most appropriate for my company?

01.05.2025

Sole proprietorship, limited liability company or private limited company? Anyone intending to set up a company must determine the legal form in the founding phase. So which legal form is most appropriate for your company?

At a glance

  • The choice of legal form – from sole proprietorship through to private limited company – determines the liability, founding costs and organizational requirements of a company in Switzerland.
  • Sole proprietorships and partnerships are often easier and more cost-effective to found, but offer less liability protection than legal entities such as limited liability companies (GmbH) or private limited companies (AG/Ltd).
  • The decision also depends on the company’s growth plans and financial risks – legal entities are particularly suitable for companies with a high risk of loss and greater growth ambitions.

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Are you setting up a garage, an architect’s office, a cleaning company or another business? Then you will need to decide on the appropriate legal form. When choosing a legal form, company founders decide on the type of liability for their company – i.e. who is liable for what.

An overview of the main legal forms

The Swiss Code of Obligations provides for different legal forms of companies that are legally defined according to specific conditions. The entrepreneurial risks and associated personal liability, the organizational expenses and the running costs resulting from the legal form are key factors in this choice. Growth plans also play a role. Below is a list of the main legal forms under the Swiss Code of Obligations.

Partnerships. Sole proprietorship. Commercial operation by a single individual. Simple partnership. Affiliation between multiple natural persons, usually temporary. General partnership. Affiliation between multiple natural persons. Legal entities. Company with limited liability. Commercial operation by a single individual or a merger of multiple natural persons or legal entities. Private limited company (Ltd). Commercial operation by a single individual or a merger of multiple natural persons or legal entities.

Useful to know

Both natural persons and legal entities have legal capacity, which means they have rights and obligations. While natural persons have legal capacity from birth, legal entities need to have been registered on the commercial register, for example.


A sole proprietorship is the least binding and most common form of enterprise. One characteristic of this legal form is that it can be founded and discontinued informally. A sole proprietorship is a particularly suitable legal form for microenterprises and sideline businesses, but can also employ staff and subsequently be changed to another legal form.

This legal form is advisable for anyone wanting to go into business for themselves and run a company with limited financial risks. While optional, registration on the commercial register is advisable as it sends a strong signal to suppliers and customers. The founders should also clarify recognition of their self-employed status at an early stage with the compensation office to avoid conflicts with social security law. 

  • Character: commercial activity by an individual
  • Commercial register: registration possible, mandatory from revenue of CHF 100,000
  • Minimum capital: no capital requirements
  • Contract: no contract required
  • Liability: with all private and company assets
  • Company name: must contain at least the last name of the owner

With partnerships, it is common that all or some of the partners bear joint liability for company debts with their private assets. This legal form is generally suitable for small companies with manageable financial risks. Partnerships can be a suitable legal form for a company with manageable liability risks set up within the family, while a legal entity is the advisable legal form for all other startups.  A simple partnership is always created when several people start an informal profit-making activity. One example is implementing an event or a project. 

Simple partnership

A simple partnership (as the simplest form of partnership) can be suitable when operating a shared office which is not visible externally. For independent companies of a more permanent nature, a simple partnership is not suitable.

  • Character: association of several people, for the most part temporary
  • Commercial register: registration not possible
  • Minimum capital: no capital requirements
  • Contract: agreement in writing recommended
  • Liability: with all private and company assets
  • Company name: only visible externally as an interest group

With a general partnership, two or more natural persons join forces to operate a company together in accordance with commercial rules.

  • Character: combination of several natural persons
  • Commercial register: registration mandatory and authentication of signatures may be required
  • Minimum capital: no capital requirements
  • Contract: agreement in writing recommended
  • Liability: with all private and company assets
  • Company name: must contain a last name accompanied by “and partner”, “& Co.”, “and son” or all last names

As a rule, legal entities are suitable for all companies, and especially for those with growth plans, an increased risk of losses and a group of founders who are independent of one another. The main difference with regard to partnerships lies in the limited liability of the partners to the legally and contractually stipulated capital contribution. The shareholders are therefore only liable up to the amount of their shares, but in general not with their private assets. Founding this form of company involves greater obligations than for partnerships. Examples of this are notarial certification of the certificate of incorporation and the articles. Furthermore, limited liability companies and private limited companies are subject to audit requirements if they employ more than ten staff.

Limited liability company (GmbH)

  • Character: commercial activity of an individual or combination of several natural persons or legal entities
  • Commercial register: registration required
  • Minimum capital: share capital of CHF 20,000 in cash or contributions in kind
  • Certification: by notary
  • Transferability: capital contributions can be transferred in writing
  • Liability: with all company assets
  • Audit: can be waived for companies with up to ten full-time equivalents

Private limited company (Ltd)

  • Character: commercial activity of an individual or combination of several natural persons or legal entities
  • Commercial register: registration required
  • Minimum capital: CHF 100,000 in cash, of which at least CHF 50,000 at founding
  • Certification: by notary
  • Transferability: free or limited by articles, depending on class of shares
  • Liability: with all company assets
  • Audit: can be waived for companies up to ten full-time equivalents

Get going with our startup package

PostFinance supports company founders on their first steps in entrepreneurship: our startup package includes two years of free account management with e-finance. We also offer many other useful services with favourable conditions.

Insurance policies are brokered in partnership between PostFinance Ltd, Mingerstrasse 20, CH-3030 Bern (“PostFinance”) and TONI Digital Insurance Solutions AG, Seefeldstrasse 5a, CH-8008 Zurich (“TONI”). Both PostFinance and TONI act as tied insurance intermediaries for the insurance company AXA Insurance Ltd.

Source

Publication “ku – Managing small enterprises”, topic: Founding a company, published by: PostFinance Ltd in cooperation with the KMU-HSG at the University of St. Gallen

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