The simple partnership: the first step between partners

The simple partnership (einfache Gesellschaft) is the most basic form of collaboration between two or more people in Switzerland, governed by Article 530 and following of the Code of Obligations. It often exists without the partners even realising it: all it takes is pooling resources or activities for a common purpose. Precisely because it comes into being so easily, it needs to be well understood — above all for the risks it entails.

How it arises (even unintentionally)

A simple partnership is formed when two or more people join forces to pursue a common purpose with common resources or efforts. No written contract is needed, no notarised deed, no registration in the commercial register, no capital. All it takes is an agreement — even merely verbal or tacit — to collaborate.

That is why many situations are, legally speaking, simple partnerships without anyone having formally decided so: two professionals sharing an office and its costs, a few friends buying a property together, a group organising an event, the partners in a project before setting up a proper company. Even a consortium between businesses for a single contract is often a simple partnership.

The flip side: liability

Here lies the most important point. In a simple partnership the partners are liable for the debts in a personal, unlimited and joint manner. That means two weighty things:

• unlimited: you are liable with your entire assets, not just with what you contributed;
• joint: a creditor can claim the entire debt from a single partner, who will then seek recourse against the others.

There is no separation of assets. It is the exact opposite of the GmbH or the AG, where personal assets are as a rule protected. This is why the simple partnership is perfectly fine for early stages or well-defined projects, but becomes dangerous when the activity grows, generates debt or takes on significant risks.

Who decides and how profits and losses are shared

Unless otherwise agreed, rather rigid default rules apply:

• decisions are taken unanimously: each partner effectively holds a right of veto;
• every partner has the right and duty to manage, unless management is entrusted to some of them;
• profits and losses are shared equally among the partners, regardless of contributions, if the contract says nothing else.

These rules can be changed by an agreement among the partners — and that is precisely what is advisable to do.

Why a written contract is worthwhile anyway

The simple partnership requires no written form, but putting it in writing is among the most useful things you can do. A clear contract defines:

• each partner’s contributions (money, assets, work, know-how);
• the allocation of profits and losses;
• the decision-making rules and who manages;
• what happens if a partner leaves, dies or wants to sell;
• how and when the partnership is dissolved.

Without these rules, at the first disagreement you fall back on the default rules — unanimity and equal shares — which rarely reflect what the partners actually wanted. Many conflicts between partners arise precisely from an agreement that was never written down.

No legal personality

The simple partnership is not a distinct legal entity: it has no legal personality of its own, cannot be registered in the commercial register as such, and cannot be a party to legal proceedings under its own name. It acts through the partners. This makes it lightweight, but limiting: it cannot, for instance, have a registered company name or appear as an independent holder of rights, as a GmbH would.

When to move to a corporate form

The simple partnership is an excellent starting point: it reduces costs and red tape to zero while an idea is being tested or a short project is being completed. But as soon as the activity becomes stable, takes on employees, enters into commitments or involves risks, the issue of unlimited liability becomes decisive. That is the moment to consider the move to a GmbH (minimum capital CHF 20,000) or an AG, which offer the separation between personal and business assets.

How we help you

We help you correctly frame your collaboration, draft a partnership agreement that avoids conflicts, and choose the right moment to move to a corporation. Let’s talk about your project.