The direct comparison of LLC and stock corporation
Criterion | LLC | Stock corporation |
|---|---|---|
Minimum capital | CHF 20'000 share capital | CHF 100'000 share capital |
Payment at incorporation | To be paid in full at the time of incorporation | At least 20 percent per share and a total of at least CHF 50'000 |
Liability | In principle, only company assets | In principle, only company assets |
Owners | Shareholders are visible in the commercial register | Shareholders are in principle not visible in the commercial register |
Transfer of participations | Approval of the shareholders' meeting as a basic rule | Shares are in principle easier to transfer, depending on the type of share and the articles of association |
Governing bodies | Shareholders' meeting and management | General meeting and board of directors |
Taxes | No legal form-specific difference to the stock corporation in the basic structure | No legal form-specific difference to the LLC in the basic structure |
Accounting and auditing | Same basic rules as for the stock corporation | Same basic rules as for the LLC |
Typical use | SMEs, consulting firms, family businesses, smaller founder teams | Growth companies, investor setups, larger projects, professional investment structure |
The LLC as a suitable legal form for many founders
The limited liability company is a person-related corporation. This means it is legally independent, but more closely tailored to the people involved than a stock corporation. The law expressly states that only the company assets are liable for the obligations of the LLC (Art. 772 Abs. 1 OR).
The minimum capital is CHF 20'000 (Art. 773 Abs. 1 OR). For founders this is often the decisive advantage: the LLC offers limited liability without having to pay in at least CHF 50'000 at incorporation, as is the case with a stock corporation.
The LLC is founded by public deed. In this deed the founders declare that they are forming an LLC, adopt the articles of association and appoint the governing bodies (Art. 777 Abs. 1 OR). It is therefore not formed informally, but requires a notary, articles of association and entry in the commercial register.
The LLC is particularly suitable if you:
want to start with less paid-in capital
want to retain control within the founding group
do not want to take on external investors straight away
are founding a consulting, service, trading or family business
are looking for a reputable legal form with limited liability
The person-related character is also apparent in the management. Under the statutory default model, all shareholders manage the business jointly unless the articles of association provide otherwise (Art. 809 Abs. 1 OR). This suits smaller teams in which the founders themselves work actively in the business.
The stock corporation as a flexible legal form for growth and investors
The stock corporation is a corporation. Only the company assets are liable for its obligations (Art. 620 Abs. 1 OR). Shareholders are only obliged to make the contributions set out in the articles of association (Art. 620 Abs. 2 OR).
The share capital amounts to at least CHF 100'000 (Art. 621 Abs. 1 OR). At 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 Abs. 1 OR, Art. 632 Abs. 2 OR).
The stock corporation is also founded by public deed. In it, the founders declare that they are forming a stock corporation, adopt the articles of association and appoint the governing bodies (Art. 629 Abs. 1 OR).
The stock corporation is a particularly good fit if you:
want to take on investors
want to transfer participations more easily
want to grow or sell in the medium term
need a more professional external image
want a clearer separation of ownership and management
expect several financing rounds
The stock corporation has a clearer separation between ownership and management. The general meeting is the supreme governing body (Art. 698 Abs. 1 OR). The board of directors manages the business unless it has delegated management (Art. 716 Abs. 2 OR). This is practical when external board members, executive officers or investors join later on.
The most important cost difference lies in the paid-in capital
The most striking difference lies in the capital. The LLC requires CHF 20'000 of nominal capital, the stock corporation at least CHF 100'000 of share capital. With a stock corporation, however, the full CHF 100'000 does not necessarily have to be paid in at incorporation. By law, at least CHF 50'000 is sufficient, provided the remaining requirements are met (Art. 632 Abs. 2 OR).
Important: the capital is not simply a fee. After incorporation it belongs to the company and can be used for the business within the scope of its corporate purpose. Even so, you have to have it available first.
Apart from the paid-in capital, the LLC is not generally cheaper than the stock corporation. Notary fees, commercial register fees, articles of association, advice, bank confirmation, accounting and ongoing administration can be similar for both legal forms. The practical cost advantage of the LLC therefore lies above all in the fact that you have to provide and pay in less capital to get started.
According to the federal SME portal, in addition to the nominal capital an LLC incurs costs for advice, notary fees and the commercial register in particular (SME portal on the LLC). For the stock corporation, the SME portal likewise names costs for advice, notary fees and the commercial register, in addition to the required share capital or the required minimum payment (SME portal on the stock corporation).
In short: the LLC requires less paid-in capital. That does not mean, however, that it is automatically cheaper beyond this question of capital.
Liability is limited in both legal forms, but not excluded
For both legal forms the basic principle applies: the company is liable for company debts with its own assets, not automatically the private individual behind it.
For the LLC this principle is set out in Art. 772 Abs. 1 OR. For the stock corporation it is set out in Art. 620 Abs. 1 OR. This is one of the main reasons why founders choose an LLC or stock corporation in the first place.
But be careful: limited liability does not mean risk-free. Managing officers, board members and de facto governing bodies can be personally liable if they breach their duties. In addition, banks, landlords or suppliers frequently require personal guarantees, sureties or collateral from young companies. The risk then arises not directly from the legal form, but from an additional personal commitment.
In the case of the LLC, the articles of association can also provide for obligations to make additional capital contributions and ancillary performance obligations (Art. 772 Abs. 2 OR). This is an important difference from the typical stock corporation structure. Anyone joining an LLC should therefore examine the articles of association closely.
Capital requirements differ significantly between the LLC and the stock corporation
The minimum capital is the clearest difference:
LLC: at least CHF 20'000 of nominal capital (Art. 773 Abs. 1 OR)
stock corporation: at least CHF 100'000 of share capital (Art. 621 Abs. 1 OR)
Paying up a stock corporation: at least 20 percent per share and at least CHF 50'000 in total at incorporation (Art. 632 Abs. 1 OR, Art. 632 Abs. 2 OR)
For bootstrapping founders, the LLC is therefore often more attractive. You can build a company with limited liability using less paid-in capital.
For capital-intensive business models, the stock corporation can make more sense. This applies in particular if you are planning larger investments, want to take on investors or need a participation structure that can easily be scaled later on.
The participation structure often determines the right legal form
A major difference lies in the transfer of participations.
For the LLC, the assignment of nominal shares requires written form (Art. 785 Abs. 1 OR). In addition, the transfer generally requires the approval of the shareholders meeting. That meeting can refuse approval without stating reasons, unless the articles of association provide otherwise (Art. 786 Abs. 1 OR). The articles of association can deviate from this, for example by waiving the approval requirement or by defining specific grounds for refusal (Art. 786 Abs. 2 OR).
For founding teams this is often an advantage. Nobody simply sells their stake to an unknown third party without the other shareholders having a say. For investors, however, exactly that can be cumbersome.
In a stock corporation, participations are typically easier to structure. Shares are designed as participation rights to be transferable. There are restrictions, for example for registered shares that are not fully paid up, which may only be transferred with the company approval (Art. 685 Abs. 1 OR). Overall, however, the stock corporation is the more flexible legal form where participations are to be transferred, issued or used for financing rounds on a regular basis.
In practical terms this means:
If the founders want to remain among themselves in the long term, much speaks for the LLC.
If participations, investors, employee shares or exit scenarios become important, much speaks for the stock corporation.
The same basic tax rules apply to the LLC and the stock corporation
In terms of tax, there is no legal form-specific difference between the LLC and the stock corporation in the basic structure. Both are corporations and are taxed as legal entities (Art. 49 Abs. 1 lit. a DBG). The object of profit tax is net profit (Art. 57 DBG).
When the company distributes profits, dividends come into play. For natural persons, dividends, profit shares and monetary benefits from participations are in principle taxable as income from movable assets (Art. 20 Abs. 1 lit. c DBG). In the case of qualified participations, dividends from shares or LLC participations are taxable to the extent of 70 percent if the participation rights represent at least 10 percent of the share or nominal capital (Art. 20 Abs. 1bis DBG).
For both legal forms this leads to the familiar economic double burden:
First the LLC or stock corporation pays tax on its profit.
Then the owner pays tax again personally on the distributed dividend.
There is no difference in the basic tax logic between the LLC and the stock corporation. The actual tax burden does not depend on the choice between the LLC and the stock corporation, but in particular on the canton of domicile, on profit, on salary and dividend strategy and on the private tax situation.
One important point: in both legal forms, dividends may not be distributed at will. In a stock corporation, dividends may only be paid out of the balance sheet profit and out of reserves formed for that purpose (Art. 675 Abs. 2 OR). For the LLC, the company law provisions on dividends apply accordingly (Art. 798 OR).
The same rules also apply in principle to accounting and auditing
In accounting and auditing there is no difference between the LLC and the stock corporation in the basic structure. Both are legal entities. Both are therefore subject to the obligation to keep accounts and prepare financial statements (Art. 957 Abs. 1 Ziff. 2 OR). It is therefore wrong to say that only the stock corporation needs proper bookkeeping.
The same rules also apply in principle to the audit of an LLC and a stock corporation. An ordinary audit is required, among other things, if certain thresholds are exceeded, namely two of the three thresholds of CHF 20 million in total assets, CHF 40 million in revenue and 250 full-time positions on annual average in two consecutive financial years (Art. 727 Abs. 1 Ziff. 2 OR). Where no ordinary audit is required, a limited audit applies in principle (Art. 727a Abs. 1 OR).
Small companies can waive the limited audit under certain conditions. For a stock corporation this requires the consent of all shareholders and no more than ten full-time positions on annual average (Art. 727a Abs. 2 OR). For the LLC, the company law provisions on the auditor apply accordingly (Art. 818 Abs. 1 OR).
In practice this means that small LLCs and small stock corporations can often work with an opting-out. Even so, bookkeeping, annual financial statements, tax returns, minutes and commercial register obligations remain.
The external image can be decisive for the choice of legal form
For commercial companies, the company name can in principle be chosen freely. The legal form must, however, be stated (Art. 950 Abs. 1 OR). The suffix GmbH or AG is therefore mandatory.
In commercial dealings, a stock corporation often appears larger, better capitalised and more investor-ready. That can help with banks, international customers or B2B business.
The LLC, by contrast, comes across as more personal and down-to-earth. For many local SMEs, consulting firms, agencies, practices or family businesses this is not a disadvantage but actually a good fit.
For foreign founding teams there is a further important point: both a stock corporation and an LLC must be capable of being represented by a person who is resident in Switzerland. In a stock corporation this person must be a member of the board of directors or a director (Art. 718 Abs. 4 OR). In an LLC they must be a managing officer or a director (Art. 814 Abs. 3 OR).
The LLC is the better fit in these cases
The LLC is usually the better choice if you are starting with less paid-in capital and want to build an operating business in which the founders work themselves.
It is a particularly good fit for:
consulting firms
agencies
trade businesses
online shops with manageable risk
family businesses
smaller founding teams
companies with no immediate investor plans
Its greatest advantage is the combination of limited liability, lower paid-in capital and stronger control over the group of shareholders.
The stock corporation is the better fit in these cases
The stock corporation is usually the better choice if growth, investors or participation programmes play a role from the outset.
It is a particularly good fit for:
startups with financing rounds
technology-intensive or capital-intensive business models
companies with several investors
businesses planning to expand internationally
participation and holding structures
companies with an exit perspective
Its greatest advantage is the more flexible capital and participation structure. It requires more paid-in capital, but is often better prepared for scaling, investors and later transactions.
Misconceptions about the LLC and the stock corporation you should avoid
«With an LLC I am never personally liable.»
It is not that simple. The company is in principle liable with its own assets. Personal risks can arise, however, if you breach your duties as a governing officer or sign private collateral.
«A stock corporation is better for tax.»
Not because of the legal form alone. The LLC and the stock corporation are both taxed as corporations (Art. 49 Abs. 1 lit. a DBG). The actual tax burden depends on profit, salary, dividends, canton and participation structure, not on a general tax advantage of the stock corporation over the LLC.
«An LLC cannot grow later on.»
It can. An LLC can grow, hire employees and generate larger revenues. If investors or transfers of participations become important, however, a later conversion into a stock corporation can make sense.
«A stock corporation is only for large companies.»
No. Small companies can also be organised as a stock corporation. The question is rather whether the higher capital requirements and the structure fit the strategy.
How to make the right choice between the LLC and the stock corporation
If you want to start pragmatically and with less paid-in capital, the LLC is often the better choice. It offers limited liability, clear structures and enough credibility for most SMEs.
If you want to take on investors, transfer participations flexibly or align your company with growth, financing rounds and an exit from the outset, the stock corporation is usually the more suitable legal form.
The short decision rule is:
LLC, if you want to start in a controlled, personal way and with less paid-in capital.
stock corporation, if you want to scale, raise finance and structure participations flexibly.
The best legal form is therefore not the most prestigious one, but the one that fits your capital, your risk, your team and your growth plans.
