Which legal form is suitable for a SaaS company?
For many SaaS founders, the LLC and the stock corporation are the most obvious legal forms. Both are legal entities, both are registered in the commercial register, and both legally separate the company from the founders.
The LLC is often the pragmatic starting point. It requires a share capital of at least CHF 20'000 (Art. 773 Abs. 1 OR). The company is established by public deed, during which the articles of association are determined and the corporate bodies are appointed, among other things (Art. 777 Abs. 1 OR). For incorporation, the contributions must be fully paid up (Art. 777c Abs. 1 OR). The LLC is entered into the commercial register at the registered seat of the company (Art. 778 OR) and obtains its legal personality through this entry (Art. 779 Abs. 1 OR).
The stock corporation often seems more investor-friendly because shareholdings are structured via shares. However, it requires a share capital of at least CHF 100'000 (Art. 621 Abs. 1 OR). Upon incorporation, at least 20 percent of the nominal value of each share must be paid up, but at least CHF 50'000 in total (Art. 632 OR). The stock corporation is also established by public deed (Art. 629 Abs. 1 OR), entered into the commercial register at its seat (Art. 640 OR) and only obtains its legal personality upon registration (Art. 643 Abs. 1 OR).
Therefore, for a SaaS company, it is not only the question of incorporation costs that is important. It is also crucial whether you want to take on investors later, let employees participate, or scale internationally.
Topic | LLC | stock corporation |
|---|---|---|
Minimum capital | CHF 20'000 | CHF 100'000 |
Payment upon incorporation | Fully | At least CHF 50'000 |
Typical suitability | Early phase, manageable team | Growth, investors, share participation programs |
Commercial register | Compulsory | Compulsory |
What must be considered regarding the company name and commercial register?
The company name in SaaS is more than just a formality. It is part of your brand, your domain, and your customer communication. Legally, for a commercial enterprise, the legal form must be indicated in the company name (Art. 950 Abs. 1 OR). Furthermore, the company name of a commercial enterprise must clearly differ from all company names already registered in Switzerland (Art. 951 OR).
Also important is the difference between company name, domain, and trademark. The commercial register entry does not automatically protect your branding against all imaginable uses. The law explicitly clarifies that the registration of a company name does not exempt it from other federal law provisions, in particular not from provisions for protection against deception in commercial transactions (Art. 955a OR). For SaaS products with a clear product brand, a separate review of trademark and domain is therefore worthwhile early on.
Which contracts does a SaaS provider need?
Legally, a SaaS model is almost always based on contracts. A contract is concluded if the parties have expressively or tacitly agreed on all essential terms (Art. 1 OR). In daily SaaS business, this typically happens online, for example by registering, accepting the GTC, or completing a subscription.
Clear terms of use are particularly important. They should regulate which services you perform, what availability is promised, how support works, what usage is permitted, when an account may be blocked, and how termination, renewal, and payment terms run. If you serve business customers, service levels, limitations of liability, confidentiality, and data export are also relevant.
A SaaS company should also clearly separate the contract with the customers from the contract with technical service providers. Cloud hosting, payment providers, analysis tools, support software, and email services can play a role under data protection law and contractually. Especially in B2B SaaS, customers today expect this supply chain to be transparently documented.
Who owns code, design, and software?
Software is one of the most important assets of a SaaS company. The Swiss Copyright Act explicitly states that computer programs are deemed to be works (Art. 2 Abs. 3 URG). The author has the exclusive right to determine whether, when, and how the work is used (Art. 10 Abs. 1 URG).
Where an employee creates a computer program in the course of carrying out his or her professional duties, the employer alone is entitled to exercise the exclusive rights of use (Art. 17 URG). This is important for startups that hire developers.
This can be different for external freelancers, agencies, or technical co-founders. There you should regulate the rights explicitly in contracts. Anyone who wants to start a SaaS company should ensure before the launch that all rights to the code, designs, texts, databases, and technical components actually belong to the company or are sufficiently licensed.
When does a SaaS company become liable for value added tax?
SaaS revenues can become relevant for value added tax purposes. The Value Added Tax Act covers companies regardless of their legal form, purpose, and profit intention if they carry on a business and perform services in Switzerland, or have their registered office, domicile, or permanent establishment in Switzerland (Art. 10 Abs. 1 MWSTG). A person carries on a business who independently and sustainably performs activities oriented towards generating revenue from services and acts outwardly under their own name (Art. 10 Abs. 1bis MWSTG).
In principle, anyone who generates less than CHF 100'000 turnover within one year from services not exempt from tax is exempt from tax liability (Art. 10 Abs. 2 lit. a MWSTG). For new companies, the decisive factor is whether, under the circumstances, it is to be assumed that this turnover limit will be reached within the following twelve months. If this cannot yet be assessed, a reassessment must be made after three months at the latest (Art. 9 Abs. 1 MWSTV).
Particularly important for SaaS is the classification as an electronic service. The Value Added Tax Ordinance explicitly mentions the electronic provision of software and its updates (Art. 10 Abs. 1 lit. e MWSTV). Web hosting, remote maintenance of programs, and the provision of databases are also mentioned (Art. 10 Abs. 1 lit. d MWSTV and Art. 10 Abs. 1 lit. f MWSTV). Anyone who wants to start a SaaS company and scale quickly should therefore not check the VAT question only at the end of the year.
Which direct taxes apply to SaaS companies?
LLC and stock corporation are capital companies and are taxed as legal entities (Art. 49 Abs. 1 lit. a DBG). A legal entity is liable to tax on the basis of personal attachment if its seat or actual administration is in Switzerland (Art. 50 DBG). In the case of direct federal tax, the net profit is the subject of the profit tax (Art. 57 DBG), and the profit tax of capital companies and cooperatives is 8.5 percent of the net profit (Art. 68 DBG).
In addition, cantonal and communal taxes play a major role. The Tax Harmonization Act states that capital companies are liable to tax if their seat or actual administration is in the canton (Art. 20 Abs. 1 StHG). The entire net profit is subject to profit tax (Art. 24 Abs. 1 StHG). In addition, capital tax is relevant for capital companies, the subject of which is equity (Art. 29 Abs. 1 StHG). The specific tax burden therefore depends heavily on the canton and municipality of residence.
For SaaS founders, this means: The registered seat is not just an address for the commercial register. It can also have tax implications. At the same time, the actual management should match the structure so that registered seat, administration, and operational reality do not drift apart.
What does data protection mean for SaaS?
Data protection is not a minor topic in SaaS. Personal data is all information relating to an identified or identifiable natural person (Art. 5 lit. a DSG). Processing means practically any handling of personal data, including, among other things, collecting, storing, using, modifying, disclosing, deleting, or destroying (Art. 5 lit. d DSG). Even user accounts, login data, billing information, support tickets, or usage data can therefore be relevant under data protection law.
The principles are clear. Personal data must be processed lawfully, in good faith, and proportionately (Art. 6 Abs. 1 DSG and Art. 6 Abs. 2 DSG). It may only be collected for a specific and recognizable purpose and must be deleted or anonymized as soon as it is no longer required for that purpose (Art. 6 Abs. 3 DSG and Art. 6 Abs. 4 DSG).
Depending on the constellation, a SaaS provider is a controller, a processor, or both. A controller is the person who decides on the purpose and means of the processing (Art. 5 lit. j DSG). A processor is the person who processes personal data on behalf of the controller (Art. 5 lit. k DSG). Many B2B SaaS providers process data of their customers as processors and their own data, for example for billing and marketing, as controllers.
If personal data processing is transferred to a processor, the controller must in particular make sure that the processor is able to guarantee data security (Art. 9 Abs. 2 DSG). The processor may only delegate the processing to a third party with the prior approval of the controller (Art. 9 Abs. 3 DSG). For SaaS, this means: Hosting providers, support tools, and analytical providers must be included in a clean subprocessor management.
Data security must also be regulated on a risk-based basis. Controllers and processors must determine the protection requirements and define appropriate technical and organizational measures (Art. 1 Abs. 1 DSV). This includes, among other things, the type of data, purpose, scope, circumstances of the processing, state of the art, and implementation costs (Art. 1 Abs. 2 DSV and Art. 1 Abs. 4 DSV).
What belongs in the privacy policy?
Anyone who wants to start a SaaS company and process customer data needs a comprehensible privacy policy. The controller must adequately inform affected individuals about the collection of personal data (Art. 19 Abs. 1 DSG). At least the identity and contact details of the controller, the purpose of the processing, as well as, if applicable, the recipients or categories of recipients must be communicated (Art. 19 Abs. 2 DSG).
If personal data is disclosed abroad, the state or international body must also be named. If guarantees are required, these must also be communicated (Art. 19 Abs. 4 DSG). A disclosure abroad is permissible if the Federal Council has determined an adequate protection for the state concerned (Art. 16 Abs. 1 DSG). In the absence of such a decision, appropriate guarantees are required, for example recognized standard data protection clauses (Art. 16 Abs. 2 lit. d DSG).
This is practically relevant, especially with cloud setups. Many SaaS stacks use providers from different countries. Therefore, the privacy policy should not remain generic, but reflect the actual data flows.
What does a sensible incorporation process look like?
To start a SaaS company means to create legal foundations parallel to product development. First of all, you should clarify who the founder is, how shares are distributed, and whether LLC or stock corporation fits better. After that, company name, seat, purpose, articles of association, capital contribution, public notarization, and commercial register entry follow.
In parallel, you should prepare the most important documents. These include terms of use, privacy policy, data processing agreement for B2B customers, internal data protection documentation, contracts with freelancers and employees, as well as IP transfer or licensing clauses. If you need support with the topic of incorporation, Jurata will be happy to help you at any time.
Frequently asked questions about starting a SaaS company
Can I start a SaaS company as a sole proprietorship?
Yes, in principle, a SaaS project can also start as a sole proprietorship. However, for scalable SaaS models, investors, clear separation of liability, and team building, an LLC or stock corporation is often more suitable.
Is an LLC or stock corporation better for SaaS?
For early stages, the LLC is often sufficient and easier in terms of capital. If you plan for investors, stock options, or a later financing round, the stock corporation may fit better.
Does a SaaS provider in Switzerland always have to account for VAT?
Not always. The central threshold is generally CHF 100'000 turnover per year from non-exempt services (Art. 10 Abs. 2 lit. a MWSTG). If the threshold is expected to be exceeded, registration should be reviewed early on.
Does every SaaS company need a data processing agreement?
Not every single one, but very many B2B SaaS providers need such a contract because they process customer data on behalf of their business customers. The crucial factor is which data is processed and who decides on the purpose and means of the processing.
