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Created on 17.12.2018

How much does it cost to set up a company?

Setting up a company can quickly become expensive. This is why anyone starting a business should find out what expenses are involved at an early stage. These include starting capital to found the company, as well as also money to ensure this actually materializes. Find out here which one-off expenses are incurred when setting up a company.

Starting a business in Switzerland is relatively straightforward compared to many other countries – most information on the process of setting up a company and who you need to contact can be found online on the websites of the federal offices. Becoming an entrepreneur is not cheap though. Firstly, there are various administrative costs for the:

  • Entry in the commercial register (from around CHF 120, depending on the type of company)
  • Company foundation fee
  • Notarial services
  • Lawyers to draft contracts
  • Patent registrations

These fees vary in Switzerland depending on the canton, which is why it is difficult to put an exact figure on them. Founding a simple partnership or a sole proprietorship is obviously less expensive than setting up a private limited company. The State Secretariat for Economic Affairs has produced a clear table to provide an overview. 

How much starting capital is required to set up a company

It’s not just administrative costs where the legal form matters. It also makes a difference in terms of capital requirements. If you wish to set up a private limited company, for example, you need starting capital of at least CHF 100,000 in Switzerland. A minimum of 20% of the planned equity capital must be paid in. However, the minimum amount to be paid in is CHF 50,000, which is why private persons are often dependent on investors for financing.

CHF 20,000 in starting capital is required to set up a limited liability company. In contrast, there are no requirements for proprietorships and simple partnerships. Entry in the commercial register is not mandatory. The legal form is most important in relation to liability. This is why you should seek advice, which in turn constitutes an expense. The federal government’s The link will open in a new window website for SMEs provides a good introduction to this topic.

Why starting a company quickly becomes expensive

The administrative expenses and costs to set up a company are relatively low in Switzerland. They stand at between CHF 700 to just over CHF 1,000 for sole proprietorships, from CHF 2,000 to just over CHF 8,000 for a limited liability company and they can exceed CHF 15,000 for a private limited company.

Other necessary one-off investments also involve significant cost. These include for example:

  • Product development
  • Production (e.g. technical systems, equipment and machinery)
  • Marketing (for the launch)
  • Business equipment (furniture, hardware, telephones, etc.)
  • Warehousing

To work out how much money the company actually needs, a simple budgeted income statement and the assets side of a planned balance sheet are ideal and both are things you should use when founding your company. Your cash requirements can really start to mount up if you include salaries, social security contributions, materials and investment in machinery and vehicles, etc. Entrepreneurs starting their own company should ideally provide 30% to 50% of their starting capital from their own funds or, in the case of a private limited company, from shareholder loans (equity). The remainder is made up of debt capital and can come in the form of bank loans, (interest-free) loans from family and friends or from venture capitalists. 

Venture capital: an option for start-ups

In Switzerland, investors and banks are rather restricted when it comes to granting loans to recently established companies and start-ups. However, venture capitalists provide them with an alternative source of finance: venture capital companies invest, in particular, in start-ups that offer strong growth opportunities and require several million Swiss francs in capital. This form of financing is ideal for establishing equity until the first customer payments arrive. However, investors often expect higher capital appreciation within the first five to six years and are increasingly using business models which can be scaled in other regions, sectors or countries.

Whether with the help of friends, venture capital companies, banks or co-founders – the financing of your company is undoubtedly a challenge to which you should dedicate sufficient attention.

You need to keep a close eye on costs, particularly at the beginning

Your company should not splash out on luxury items in the early stages. Savings can be made in all areas – for example, on market research, coaching and consulting costs. Carry out your own market analysis and call in consultants from your own personal network. Find out more about this in the article entitled «Market analysis – does my idea have a chance of succeeding?». Use the facilities of start-up centers and business incubators instead of renting expensive premises of your own. If you really need your own office, you could, for example, buy second-hand equipment and furniture to cut costs. When acquiring machinery and vehicles, leasing can be an attractive alternative to purchasing.

It is not just the start-up phase that’s expensive

You also need to think of the future. It will presumably take some time before your company starts turning a profit. In the meantime, it will constantly incur costs which you should calculate before starting your business. These obviously include your salary, but also expenses on tax, insurance and interest. You should draw up a financial plan to give you an idea of your overall cash requirements. The financial plan is the main part of your business plan. You can read all you need to know about the business plan in the article «Launching a successful business in ten steps».

Summary

Various costs are incurred when you start your own company. The amount varies depending upon the company. Online calculators can help you work out the costs for your new business.

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