Legal forms and Structuring Options

1. Legal forms (including cross-border options):

AG (Switzerland): stock corporation, CHF 100.000 minimum initial capital, at least 20% and at least CHF 50,000 must be paid up with name shares (100% must be paid up with bearer shares). If the capital of registered shares is not paid in 100%, in case of insolvency the founder is liable for 2 years for the difference, even if he sold the shares.

Instead of cash it is possible to use contributions in kind, for this a contributions contract, a foundation report and a conformation by an official auditor is needed.

The owners of bearer shares are not registered, they need not be known by anyone (except professional trustees with their compliance regulations). Before a general assembly or before the receipt of a dividend, management has to control that the attendees are holders or legally represent shareholders) (e.g. by presenting the shares or a power of attorney).

The owners of registered shares (name shares) are entered into the register of shareholders, which is administrated by the general manager at the registered office of the company (shareholders are not registered in the public commercial register - www.zefix.ch).  Outsiders (even other shareholders) do not receive any information about the identity of shareholders. Transfer of shares can be made by formless contract, physical delivery and entry into the register of shareholders. To protect existing shareholders, the transfer of registered shares may be based on conditions.

It is possible to issue registered shares with low nominal value and bearer shares with high nominal value, and to define that voting rights are based on the amount of shares (independently of its value). Thus, the registered shares will receive a greater weighting in the vote.

If a Swiss corporate entity has an active parent company in Austria, Netherlands or some other countries, operating profits that were taxed in Switzerland may be transferred to the parent company due to the double tax treaty without withholding tax.

Ltd (GmbH Switzerland): limited liability company, CHF 20.000 minimum initial capital that has to be fully paid in. Management and owners can be publicly viewed in the commercial register (www.zefix.ch). If shares are held by a professional trustee who lives in Switzerland, the trustee has to keep documentation which he has to show periodically at the examination of the self-regulation organization (money laundering prevention).

Partnerships (Switzerland): they are easy to set up, their profits are treated for tax purposes directly with the owners, who constitute a limited tax liability in the country of the partnership. Usually double tax agreements define (in Article 7) that business profits shall be taxable only in the country of the business. If an owner has his residence in another country, taxation of his other income might have a higher tax bracket.

Personally liable partners of private companies in Switzerland need to be physical persons. Current forms of private companies are:

There are different obligations to contribute to social insurance: for residents in Switzerland this is mandatory; if owners have their residence in EU countries, exemptions are possible.

Silent Partnership: at a typical silent participation the silent partner shares profits, at an atypical silent partnership the silent partner in addition acts as a co-enterpreneur who takes economic risk and has certain co-management rights. The fundamental freedom of contract provides the opportunity to participate only in certain deals or sections. Since the silent company does not appear in the commercial register, the shareholder can remain in the background. Together with other legal forms and intelligent use of double tax agreements, a cross border silent partnership offers attractive opportunities for tax planning in many countries.

Austrian private foundation: a Foundation can act as a holding, receive dividends from an affiliated company free and often there is no tax on sales of shares in foreign corporations  (sales of shares in local companies receive preferential tax treatment). However, there is an initial tax of 2.5% on the contribution of assets.

If statutes are designed intelligent, there are no management costs and current costs are limited to the costs of a mandatory annual revision and a branch can be established in other countries.

Distributions from an Austrian private foundation to beneficiaries residing outside of Austria are exempt from Austrian withholding tax under certain circumstances (e.g. it is necessary to  present a certificate of residence) and there are countries where distributions from foreign foundations are not taxed as a personal income.

2. Possible setups:

Formation of a new company: this is our first recommendation: low costs, fast and safe solution, because all activities are known from scratch. If desired, we can create a company by ourselves and then sell it to you (Duration: approximately 2 weeks).

Acquisition of an existing company may be useful for different reasons: continuation of a company, avoiding payment of initial capital, visibility of an existing, well established company,  use of legal benefits such as concessions or tax rulings. Warning: The use of loss carry forwards is not always permitted. In addition, not all companies offered are without risk. We recommend that you purchase such a society only on condition of a confirmation of management

Before an acquisition we recommend to check the following points, especially if you suppose that the enterprise was run before by one of those trustees that we would call fraudster in pinstripe:

• complete transfer of all shares and (if registered shares or Ltd) of the share register, otherwise it needs the statutary time frame and procedures to hold an extraordinary general assembly that changes the board. (Note: if a trustee does not hand over the share register, check embezzlement! There are some trustees that have a contract where they keep one share in order to be informed about any minutes of a general assembly. But then in small print there is written that they are only obliged to hand in the share if the general assembly grants them discharge)
  
• termination of all board memberships and fiduciary mandates
• last annual accounts, signed in original by the old board member
• current interim, signed in original by the old board member

Establishment of a branch / establishment: in this case a foreign company establishes a branch in Switzerland, to arrange a portion of its business in Switzerland, for example marketing and order processing for the Swiss market. Often a branch with own office and qualified personnel is established to make transactions with third countries (e.g. Germany), because this offers interesting opportunities to take advantage of double tax arrangements. Another use is to connect favorable corporate laws of one country (e.g. English Limited) with tax advantages of another country (e.g. Switzerland).

A Swiss branch of a foreign company is subject to Swiss law. The business of the branch can differ from the business of the headquarters and so some branches engage in areas that are permitted in Switzerland but would need a special permission in the country of the headquarters.

In the EU member states the financial statements must be published, in Switzerland there is no reporting requirement. Solution: a branch of a Swiss company in an EU member state: in most EU countries, the result of a branch of a foreign corporation has to be published only to the extent it has to be published in the country of the headquarters: (e.g. § 280a UGB in Austria).

Outsourcing/Transfer of Functions: outsourcing of core processes, sub-processes or functions from the company to affiliated companies or third parties. Common reasons include proximity or contact with customers or suppliers (sales, distribution, purchasing), special know-how (e.g. online marketing, special planning tools, advertising concepts, software development), low wages (for manufacturing, software development) or legal aspects, if activities that are not permitted in the country of the company are permitted in the country of the outsourcing partner (e.g. telemarketing).