It's in human nature to become defensive every time that we feel threatened. Evolutionarily, this strategy has had a positive outcome for us because we have survived and prospered. However, in the context of doing business, playing safe and not considering the changes occurring in the ecosystem where you are operating has not always resulted in success, especially nowadays when disruptive innovations transform the world and the way we live.
The last eleven months showed us that even if we plan everything to anticipate and avoid the potential risks, we are vulnerable to external factors such as the pandemic Covid 19. Many people responded to this situation by canceling their plans, increasing their savings, and avoiding other risks they anticipated.
However, on the other hand, another type of people saw and seized development possibilities instead of getting caught in fear. These entrepreneurs can be considered as a special breed who see opportunities where others are blinded by roadblocks. If you are thinking of starting a business in 2021, you belong to the second category. Congratulations!
If you have decided to form a company in Switzerland, you made a great choice. Many people decide to start a business in Switzerland, and there are many good reasons to do that.
First of all, Switzerland is a lovely country to settle down in and has a very high standard of living. When it comes to the startup ecosystem, despite having a small territory compared to its neighbors, it is a very well-connected country, and companies can easily reach out to people and obtain monetary funds.
Furthermore, Switzerland's education system belongs to the best in the world. Thus, companies have access to an extensive pool of talents. At this point, we shall stress that the Swiss banking sector is very developed and innovative. Even the Federal government has several programs which support innovation and research projects. Besides the Federal government, several startup incubators and investment & innovation promotion agencies offer various support programs.
The high standard of living makes customers less price-sensitive and more quality-oriented. This attitude makes them less reserved about trying out new things, and entrepreneurs can easily take advantage of this and test their business ideas on the market. These are only a few of the reasons why Switzerland constitutes one of the world's largest startup hubs.
Of course, the Covid 19 situation has also negatively affected the Swiss economy. Experts project the economy to shrink up to 6%, which is the largest since the seventies. Nevertheless, it's worth mentioning that the Swiss economy has better endured the Covid impact than most developed countries. The government offered the guarantee funds to banks to support the companies affected by Covid 19, which enabled most of them to avoid bankruptcy. They also did not close down the economy as lots of the other countries did. At the end of 2020, even the Swiss lockdown decisions did not stop Swiss entrepreneurs from starting their business and setting up their own company. Forty-seven thousand new companies were formed in 2020, which is 5% more than the previous year. Thus, 2020 is the year with the highest company formation in Switzerland despite Covid 19 situation.
Indeed, forming a company in Switzerland is very easy due to its favorable legislation and few administrative requirements.
Here is a more detailed guide on how to form your company in Switzerland, read on for an overview of the key steps any entrepreneur must take to start a business in 2021:
1st step: Do your research and prepare the Business plan
You need to know if people will be interested in your company's products or services. Your business plan will therefore be a pivotal element to the success of your company. Through it, you are going to be better prepared to join the market. You need to understand who your target market is and how intense competition is on your target. Your business plan will indicate which business model to implement, what range of price to set for your product or service, and how to approach your clients, notably through which media. In general, a business plan contains the following points:
- Market flaw and weakness. What is the market's weakness or an issue that needs resolution? For example, busy entrepreneurs want the convenience of a fast, efficient and inexpensive company formation service. Still, the current options are slow, very standardized, not transparent enough, and not tailored to meet the special consulting needs of startups.
- What solution are you going to offer to resolve the problem? For example, using the latest technology, NewCo has built an online platform that enables entrepreneurs to start the formation of their company by filling a simple form in only a couple of minutes, whereas the remaining steps of the procedure are entirely taken care of by NewCo.
- Products and services. What products and services are you going to sell? The products and services need to be detailed precisely.
- Target Market. Who are you targeting? The chosen group of customers is going to be the main focus of the company. If you have more than one product or service) you will have to explain each group's characteristics and which product or service is more suitable for them, and why. By conducting a market analysis, you will better understand your customers and achieve business success more rapidly.
- Who will you compete with in the target market? Knowing your competition is a must for every business, especially for startups. In this section, you need to describe your competitors and analyze their strategies. What do they offer, what are their most vital points and their weakest ones? Based on this, you will be able to assess better the market's opportunities and threats on which you are going to operate.
- Marketing and sales. How are you going to approach your clients? The marketing methods you are going to use to make your business visible to your customers are crucial to your business's success. In this section, you will notably describe your methods to generate leads and convert them into clients.
- Financial plan. What incomes and benefits are you aiming and what expenses will it generate? The numbers which you present on your financial forecast need to Concorde with the assumptions resulting from your market research, which are to be as realistic as possible. Presenting data based on a too optimistic scenario may compromise your entire business plan in front of possible investors, for example. Besides, it can also affect the decision-making once you become operative and compare your actual result with the projected one.
2nd step: Choose a company name
While picking your company's name, you should verify if the name you would like to assign is already registered in the Swiss Commercial Register and therefore taken.
You can check if the name is already used on zefix.ch. Verifications regarding brand names are to be made in the Trademark Register on swissreg.ch.
3rd step: Choose a legal form
After you think through your company idea and believe it will be successful, you need to pick your business's proper structure. In Switzerland, you can choose between several types of business structures. Some of the most popular types are the following:
1. Limited liability company (LLC/Ltd./GmbH/Sàrl)
An LLC or Ltd. is a combination of a PLC (Inc.) and a general partnership. The LLC represents the second-largest business category in Switzerland, after sole proprietorships and PLC. The initial capital needed to form an LLC in Switzerland is relatively low: CHF 20,000. This legal form does not impose any personal responsibility on the shareholders for the company's debts. Furthermore, an LLC can be transformed into a PLC without liquidation. Anonymity is, however, not guaranteed. Shareholders are mandatorily subscribed in the Commercial Register, whereas fiduciary detention remains possible.
2. Public limited company or Incorporation (PLC/Inc./AG/SA)
PLC is one of the most common legal forms in Switzerland. It's a perfect choice for small companies with private ownership as shareholders remain anonymous. It is often used in a situation when a general partnership requires extending the base of financing. In Switzerland, the minimum capital to set up a PLC is significantly high: CHF 100,000. This legal structure does not impose any personal responsibility on the shareholders for the company's debts.
3. Sole Proprietorship (Einzelfirma/Entreprise individuelle)
The entrepreneur owns the company alone. The profits and losses are not shared with anyone else. This type of company is the most common for trade, commerce, or manufacturing. A person can start a Sole Proprietorship at any time. It does not require any initial capital investment like LLC (GmbH/Sàrl) or PLC (AG/SA). It offers its owner higher independence because he can take all the decisions on his own because there is no other owner to dictate the company's strategy.
4th step: Form your company
According to Swiss law, at least one member of the board of directors must be authorized to represent the company and therefore be domiciled in Switzerland. Once you solve this issue, you are ready to form your company. Setting up a sole proprietorship or a general partnership: nothing complicated. All you have to do is apply for registration in the Commercial Register of the canton where the company's headquarters are located.
However, for an LLC (GmbH/Sàrl) or a PLC (AG/SA) you have to go through a notary. The notary has to prepare the articles of association, the deed of association, and the registration request. He will be responsible for registering the company in the Commercial Register. To do this the first step is to find a notary or to use a platform like NewCo. In a few minutes, you will have completed the necessary information from home. Then lawyers will accompany you throughout the incorporation procedure. You will also have to open a deposit account with a bank to deposit the company's capital. This capital will be paid up as soon as the company is registered in the Commercial Register and you can use it to pay expenses, salaries, etc. You will then also have to register your company with social or compulsory insurance and with the VAT if necessary.
5th step: Keep the account of your company
Bookkeeping of your company is one of the operations you can't avoid after setting up your company. Firstly, because it is a legal obligation required, and secondly, because it's crucial for management. The majority of business decisions are based on financial data. Therefore keeping accurate data is a must. Accounting information must be correctly recorded because the stakes are high. Besides, making wrong decisions can also have financial consequences as penalties from tax authorities. Hence, if you are not confident with accounting, you should consider hiring an accountant or outsource it to a specialized fiduciary. It's essential to know that if your company exceeds the turnover of CHF 100'000.- per year, you must register it to the VAT authorities and declare quarterly or half-yearly accounts.
At the end of each fiscal year, you need to draw up your financial statements (balance sheet and profit and loss statement) and declare them to tax authorities. Your corporate profit tax will be calculated based on them.
Final word: outlook for the future...
To conclude, 2020 was a turbulent year due to a pandemic situation. The pandemic has negatively affected the global economy. Consequently, it also influenced startups because of investors' and banks' funding sources and their rearranged priorities. Many expansion and investment plans were distorted. Despite the disorder, confusion, and many uncertainties since March 2020, many entrepreneurs got through with starting their business and forming their own company. They did not allow Covid 19 to hold back their business project. They worked hard to achieve what others were afraid to even think about, launching their idea into the market during a pandemic. Switzerland was one of the best examples of this, where during the pandemic, it broke a record of company formation. This number reconfirmed the status of Switzerland as one of the largest startup hubs in the world.
2021 looks brighter. The economy will be able to recover faster to pre-pandemic figures as Covid 19 vaccines have finally been developed. The Swiss Federal Government has already started to ease the lockdown decision and open the economy gradually. So now is the perfect time to set up your company.
Ready to get started? If you are looking for help to start your business and form your own company in Switzerland, you are at the right place. NewCo is your best partner. We will assist you all the way to allow you to form a thriving company in this business-friendly country.
Business Intelligence at NewCo Switzerland SA
