What is a real estate company anyway?
A real estate company is not a specific legal entity type. It usually refers to a company that buys, holds, rents, sells, develops, brokers, or manages properties.
Legally, a real estate company can therefore take various forms. It can be operated as a sole proprietorship, as an LLC, as a stock corporation, or in rare cases as a partnership. The decisive factor is not the term "real estate company", but the concrete activity and the chosen legal form.
If you hold real estate in the name of a company, the property does not belong to you privately, but to the company. This separation can bring advantages in terms of liability, financing, succession, and taxes. However, it also leads to more formalities, bookkeeping obligations, and sometimes complex tax consequences.
Which legal form is suitable for a real estate company?
For many real estate projects, the LLC and stock corporation are the obvious legal forms. The most important reason is the limitation of liability. In the case of an LLC, only the company assets are generally liable for liabilities (Art. 772 Abs. 1 OR). An LLC requires a minimum share capital of CHF 20'000 (Art. 773 Abs. 1 OR). It is established by public deed, articles of association, appointment of the governing bodies, and registration in the commercial register (Art. 777 OR, Art. 778 OR, Art. 779 Abs. 1 OR).
The stock corporation often appears more professional, is more flexible for larger real estate portfolios or multiple investors, and facilitates the transfer of shares. It requires at least CHF 100'000 in share capital (Art. 621 Abs. 1 OR). Upon incorporation, at least CHF 50'000 must be paid in (Art. 632 Abs. 2 OR). The stock corporation is also publicly notarized, entered into the commercial register, and only thereby acquires its legal personality (Art. 629 OR, Art. 640 OR, Art. 643 Abs. 1 OR).
A sole proprietorship can be sufficient for small brokerage, management, or consulting mandates. It is simple and cheap, but offers no liability protection. Anyone who carries on a business as a natural person and had a turnover of at least CHF 100'000 in the last financial year must have the sole proprietorship entered into the commercial register (Art. 931 Abs. 1 OR). For real estate purchases, development projects, or high levels of debt financing, the sole proprietorship is often risky because of personal liability.
Legal form | Typical use | Capital | Liability |
|---|---|---|---|
Sole proprietorship | Small management, brokerage, startup phase | No statutory minimum capital | Personal liability |
LLC | Small to medium-sized real estate company | Minimum CHF 20'000 | Generally company assets |
stock corporation | Larger portfolios, investors, scaling | Minimum CHF 100'000 | Generally company assets |
If you need support with the incorporation process, Jurata is always happy to help.
When is an LLC or stock corporation particularly worthwhile?
An LLC or stock corporation is particularly worthwhile if your real estate business goes beyond a mere sideline activity. Typical cases are the acquisition of several yield properties, project development, cooperation with investors, or a business with larger debt financing.
The main advantage lies in the separation of personal assets and company assets. This reduces personal risks, but does not replace careful financing and clean management. Banks often require additional security or personal guarantees from young companies. In such cases, despite an LLC or stock corporation, a personal risk can arise again.
The external perception is also important. An LLC or stock corporation with a clean entry in the commercial register, clear articles of association, and orderly accounting often appears more professional to banks, buyers, tenants, and business partners than a private structure.
How does the incorporation of a real estate company work?
In the case of an LLC or stock corporation, you first need a clear structure. This includes company name, registered office, purpose, capital, shareholding structure, and corporate bodies. The company must state its legal form, for example "LLC" or "stock corporation" (Art. 950 Abs. 1 OR).
The incorporation is done by public deed. In the case of the stock corporation, the founders declare in the deed that they are establishing a stock corporation, determine the articles of association, and appoint the corporate bodies (Art. 629 Abs. 1 OR). In the case of the LLC, the process is similar (Art. 777 Abs. 1 OR). The company is then entered into the commercial register. Only with this entry does it become capable of acting as an independent legal entity (Art. 643 Abs. 1 OR, Art. 779 Abs. 1 OR).
If a property is already to be contributed to the new company, incorporation becomes significantly more challenging. Real estate can serve as a contribution in kind if it can be capitalized, is transferable, and can be liquidated, and the company obtains a claim to registration in the land register after registration (Art. 634 Abs. 1 OR). The contribution in kind must be correctly documented and valued. The founders must account for the type, condition, and valuation of the contributions in kind in the incorporation report (Art. 635 OR). Errors can lead to incorporation liability (Art. 753 OR).
Which taxes do you need to budget for?
Taxes are often the decisive factor for real estate companies. An LLC or stock corporation is a separate taxable entity. Capital companies and other legal entities are tax liable if their registered office or actual administration is located in the canton (Art. 20 Abs. 1 StHG). The entire net profit is check to profit tax (Art. 24 Abs. 1 StHG). At the federal level, the confederation levies a profit tax on legal entities (Art. 1 lit. b DBG).
If the company distributes profits, these are taxed as dividends for the shareholder. In the case of qualified holdings, federal law provides for a partial taxation. Dividends from holdings of at least 10 percent are taxable to the extent of 70 percent under direct federal tax (Art. 20 Abs. 1bis DBG). At cantonal level, the framework of Art. 8 Abs. 2quinquies StHG applies, whereby the cantons can provide for higher taxation.
Real estate capital gains are particularly important. Gains from the sale of real estate forming part of private assets are subject to real estate capital gains tax (Art. 12 Abs. 1 StHG). Legal transactions that have the same economic effect as a transfer of real estate are also treated as equivalent to tax liability (Art. 12 Abs. 2 lit. a StHG). In addition, the transfer of participation rights in real estate companies can be relevant for tax purposes, provided that cantonal law so provides (Art. 12 Abs. 2 lit. d StHG).
It is precisely here that differences arise between cantons. Real estate capital gains tax, property transfer tax, and the treatment of economic transfers of ownership vary considerably depending on the canton. Therefore, a real estate company should never be planned solely based on the registered office of the company. The decisive factor is also where the properties are located.
What applies to VAT?
With regard to VAT, the general principle applies first. Anyone who runs a business, regardless of legal form, purpose, and profit intention, and provides services in Switzerland or has their registered office, place of residence, or permanent establishment in Switzerland is liable for tax (Art. 10 Abs. 1 MWSTG). Anyone who generates less than CHF 100'000 in turnover per year from non-exempt services is generally exempt from tax liability (Art. 10 Abs. 2 lit. a MWSTG).
Real estate is special for VAT purposes. The transfer and creation of in rem rights to real estate is exempt from tax (Art. 21 Abs. 2 Ziff. 20 MWSTG). The provision of real estate and parts of real estate for use or enjoyment is also generally exempt (Art. 21 Abs. 2 Ziff. 21 MWSTG). However, there are exceptions, such as for accommodation, certain parking spaces, or exhibition spaces (Art. 21 Abs. 2 Ziff. 21 lit. a MWSTG, Art. 21 Abs. 2 Ziff. 21 lit. c MWSTG, Art. 21 Abs. 2 Ziff. 21 lit. f MWSTG).
In the case of commercially used real estate, voluntary taxation can be interesting. A taxable person can generally opt for the taxation of exempt services (Art. 22 Abs. 1 MWSTG). However, in the case of real estate services, this option is excluded if the property is used or intended to be used exclusively for residential purposes (Art. 22 Abs. 2 lit. b MWSTG).
Which risks are often underestimated?
The first risk is the wrong structure. Anyone who starts privately and later wants to transfer properties to a company can trigger real estate capital gains taxes, property transfer taxes, notary, and land registry-registration costs. A real estate company should therefore be structured before the first major acquisition, not only afterwards.
The second risk is financing. Although an LLC or stock corporation limits corporate liability, it does not automatically protect against personal guarantees, joint and several guarantees, or liens. If banks require private collateral, part of the risk migrates back to the founder.
The third risk lies in accounting. Legal entities are subject to bookkeeping and accounting obligations (Art. 957 Abs. 1 Ziff. 2 OR). Sole proprietorships and partnerships with sales revenue of at least CHF 500'000 in the last financial year are also subject to the ordinary bookkeeping obligation (Art. 957 Abs. 1 Ziff. 1 OR). Taxpayers with self-employed economic activities and legal entities must attach annual financial statements or the equivalent summaries to the tax return (Art. 42 Abs. 3 StHG).
The fourth risk concerns foreign investments. The Federal Act on the Acquisition of Real Estate by Persons Abroad restricts the acquisition of real estate in order to prevent foreign domination of domestic land (Art. 1 BewG). In principle, persons abroad require authorization from the competent cantonal authority to acquire real estate (Art. 2 Abs. 1 BewG). Companies with their registered office in Switzerland can also be deemed to be persons abroad if persons abroad have a controlling position in them (Art. 5 Abs. 1 lit. c BewG). For real estate companies with foreign investors, this point must be examined early.
Conclusion: A real estate company needs structure before the first deal
If you want to establish a real estate company in Switzerland, you should not only think about registration in the commercial register. Decisive factors are the legal form, liability, financing, taxes, VAT, and the question of whether real estate is already to be contributed or only bought later.
A sole proprietorship can be sufficient for smaller activities. For real estate acquisition, renting, development, and investor setups, an LLC or stock corporation is often preferred. The LLC is cheaper and more personal. The stock corporation is closer to the capital market and more flexible for larger structures. In terms of tax, a real estate company is not auto-beneficial. It can make sense if profits remain in the company, risks are separated, or a succession is planned. However, it can become expensive if real estate is transferred carelessly or shares are sold without tax planning.
Frequently asked questions about real estate companies in Switzerland
Do I need a permit for a real estate company?
For normal real estate management, brokerage, or company formation, there is no general professional permit at federal level. However, authorization requirements may arise depending on the activity, canton, construction project, or real estate acquisition. The BewG is particularly important if persons abroad are directly or indirectly involved in a real estate company (Art. 2 Abs. 1 BewG, Art. 5 Abs. 1 lit. c BewG).
Is an LLC or stock corporation better for real estate?
For smaller real estate companies, the LLC is often the obvious choice because it can be incorporated with a minimum capital of CHF 20'000 (Art. 773 Abs. 1 OR). The stock corporation is more suitable for larger projects, multiple investors, or a subsequent transfer of shares. It requires at least CHF 100'000 in share capital (Art. 621 Abs. 1 OR).
Can I contribute an existing property to a new company?
Yes, in principle that is possible. A property can be contributed as a contribution in kind if the statutory requirements are met (Art. 634 Abs. 1 OR). From a tax perspective, however, such a transfer can trigger real estate capital gains taxes, property transfer taxes, and other costs. These consequences depend heavily on the canton and the specific case.
Is renting real estate subject to VAT?
The provision of real estate for use or enjoyment is generally exempt from VAT (Art. 21 Abs. 2 Ziff. 21 MWSTG). However, there are exceptions, such as for accommodation, parking spaces, or exhibition spaces. In the case of commercial real estate, an option to tax may be possible, but not for exclusive residential use (Art. 22 Abs. 2 lit. b MWSTG).
