Branch or secondary seat: the differences

Expanding into a new canton or entering Switzerland from a foreign company raises a practical question: do I open a branch, a new company, or is a simple operational address enough? The terms “branch”, “secondary seat” and “subsidiary” are often used as synonyms, but legally they carry different weight. Understanding the differences avoids unnecessary costs and unforeseen obligations. Let’s look at what distinguishes these forms in Swiss law.

What a branch is

The branch (in German Zweigniederlassung) is an establishment that carries out a commercial activity on a lasting basis in a place other than the main seat, with a certain organisational and managerial autonomy, but without legal personality of its own. It is legally part of the parent company: it has no distinct capital of its own and its debts are debts of the main company.

The typical elements of a branch are:

• legal dependence on the main seat, of which it is an emanation;
• operational autonomy, with its own premises, staff and the capacity to conclude business;
• duration, that is, not an occasional but a stable activity.

The branch has its own business name (as a rule that of the parent company with the indication of the branch and the location) and must be entered in the commercial register of the place where it is located.

”Secondary seat”: an improper usage

In everyday language people speak of a “secondary seat”, but Swiss law knows no third category halfway between a branch and a new company. In practice, when referring to a stable secondary establishment with a commercial activity, one is speaking precisely of a branch. If, on the other hand, it is only an operational address lacking autonomy — a warehouse, a representative office that concludes no business, a mere mailing address — there is often no branch and no obligation of separate registration is triggered. The distinction depends on the substance of the activity, not on the label.

Branch, subsidiary and company: the three routes

It is useful to line up the options:

• Branch: part of the same legal entity, with no capital of its own; the parent company is liable. Entered in the commercial register.
• Subsidiary company: an autonomous company (for example a GmbH or AG) controlled by the parent, with its own capital, legal personality and separate liability. It is a genuine company incorporation.
• Simple address/domiciliation: no autonomous structure, no obligation to register as a branch if a lasting and autonomous commercial activity is lacking.

The choice depends on how far you want to separate risks and assets. The subsidiary isolates liability; the branch is lighter but drags liability onto the parent company.

The branch of a foreign company

The most frequent case is the foreign business that opens a branch in Switzerland without incorporating a company. It is fully permitted, but entails specific obligations:

• entry in the Swiss commercial register, with the filing of the foreign parent company’s documentation;
• the appointment of a representative domiciled in Switzerland with signatory power, a requirement that serves to guarantee a point of reference on the territory;
• compliance with Swiss tax obligations for the activity carried out through the branch, which as a rule constitutes a taxable permanent establishment;
• any VAT obligations if the activity exceeds the liability thresholds provided by law.

Practical aspects to assess

• Liability: with a branch there is no asset shield, with a subsidiary there is.
• Costs and timing: the branch avoids incorporating and capitalising a new company, but still requires registration, a representative and dedicated accounting for the Swiss activity.
• Commercial perception: towards clients and banks, a company under Swiss law may appear more solid than the branch of a foreign business.
• Taxation: the choice between branch and subsidiary has effects on the taxation of profits and on distribution, to be assessed case by case.

In summary

The branch is a stable and autonomous extension of the same company, without legal personality; the subsidiary is a separate company; the simple address is none of these. Those expanding must choose based on liability, taxation and image, not on the label used.

Do you want to understand whether a branch or a company under Swiss law suits your expansion? The corporate division of SIH ONE analyses liability, taxation and structure and carries out the registration.