AG or GmbH: how to choose the legal form

The choice between AG (company limited by shares) and GmbH (limited liability company) is the first structural decision for anyone setting up a capital company in Switzerland. Both limit liability to the company’s assets, but they differ on capital, anonymity, governance and external perception. Let’s look at the concrete criteria.

Here lies the sharpest numerical difference.

GmbH: minimum capital of CHF 20,000, fully paid in before entry in the commercial register. Partial payment is not permitted.
AG: minimum capital of CHF 100,000, of which at least CHF 50,000 paid in (or 20% if higher) at incorporation. The remainder stays as a debt of the shareholders towards the company.

If initial liquidity is limited, the GmbH allows you to start with a smaller outlay. The AG requires more tied-up capital, but lets you register by paying in only half of the legal minimum.

Liability and assets

In both forms the shareholders are liable only up to the capital contributed, not with their personal assets. The company is liable with its own assets. This is the main reason for choosing a capital company over a sole proprietorship or a partnership.

Beware, however: banks and landlords often ask directors for personal guarantees, especially in the early years. Formal limitation of liability does not automatically eliminate all personal exposure.

Anonymity and transparency of shareholders

This is often a decisive point.

In the GmbH, the shareholders and their respective quotas are entered in the commercial register and are therefore public.
In the AG, the shareholders do not appear in the register. The shareholder base remains confidential (subject to the obligation to keep a share register and to report beneficial owners above certain thresholds).

Those who want confidentiality over ownership, or who anticipate frequent transfers of shares, tend to prefer the AG.

Transfer of participations

The quotas of a GmbH are transferred by a deed that, as a rule, must be documented and recorded; the articles may require approval by the members’ meeting.
The shares of an AG circulate more easily, which is an advantage if you anticipate the entry of investors or capital operations.

For projects geared towards fundraising, venture capital or a future listing, the AG is the natural structure.

Governance and bodies

Both have a members’/shareholders’ meeting and a management body. Some practical differences:

In the GmbH, management is in principle a matter for all members jointly, unless the articles provide otherwise by entrusting management to managing officers.
In the AG, the board of directors is the management body and at least one member with signing authority must be able to represent the company; a domicile in Switzerland is required for representation.

On audit, the rules are similar: both may opt for a limited audit or, below the legal thresholds and with few employees, waive it (opting-out).

Taxation

For tax purposes, AG and GmbH are treated the same way: they are autonomous entities taxed on profit and capital, with direct federal tax and cantonal/municipal taxes. The legal form as such does not change the rate. What matters instead is the canton of domicile and the remuneration structure between salary and dividend.

Perception and reputation

The AG has historically enjoyed a perception of greater solidity with banks, clients and international partners, helped by the higher capital. The GmbH is today extremely widespread among SMEs and professionals, and the reputational gap has narrowed, but for negotiations with large clients or abroad the “AG” label can still carry weight.

How to decide in practice

GmbH if: limited initial liquidity, few stable shareholders, simple structure, priority on the cost of incorporation.
AG if: confidentiality over ownership, entry of investors, growth and capitalisation ambitions, image towards international partners.

Many businesses start as a GmbH and convert into an AG as they grow: the conversion is possible without liquidating the company, but it entails costs and formalities worth factoring in from the outset.

The right choice depends on your objectives over three to five years, not just on the capital available today. If you want to assess the most suitable legal form for your project and its overall costs, SIH ONE supports you in the incorporation of your company in Switzerland with a tailored analysis.