Company transformation for Swiss startups

Company transformation for Swiss startups: From sole proprietorship to LLC (most common case), LLC to AG during growth, or merger/split during strategic changes. Consider tax and legal aspects. Costs: CHF 2,000-15,000 depending on complexity.

Reasons for Legal Form Change:

Sole Proprietorship to LLC/AG:

• Liability Limitation: Protection of private assets
• Investors: Enable external financing
• Credibility: More professional appearance
• Employees: Attractiveness as employer
• Taxes: Optimization of tax burden

LLC to AG:

• Capital Market: Prepare for IPO
• Large Investors: Institutional investors
• International Expansion: Better acceptance
• Employee Participation: Stock option plans
• Image: Higher credibility

Most Common Transformation Types:

Sole Proprietorship to LLC:

• Procedure: Contribution in kind or cash assets
• Valuation: Determine company value
• Tax Consequences: Disclosure of hidden reserves
• Costs: CHF 2,000-5,000
• Duration: 4-8 weeks

LLC to AG:

• Capital Requirement: Minimum CHF 100,000
• Organs: Board of directors necessary
• Audit: Often mandatory
• Costs: CHF 5,000-10,000
• Duration: 6-12 weeks

Merger:

• Absorption: One company takes over others
• Combination: New company emerges
• Due Diligence: Comprehensive review
• Costs: CHF 10,000-50,000
• Duration: 3-12 months

Legal Procedures:

Transformation According to Merger Act:

• Scope: Corporations and cooperatives
• Transformation Report: Justification of transformation
• Audit: Review by audit experts
• Creditor Protection: 3-month objection period
• Commercial Register: Registration of new legal form

Liquidation and New Formation:

• Alternative: For simple structures
• Asset Transfer: Transfer individual values
• Tax Consequences: Different treatment
• Simpler: Fewer formal requirements
• Disadvantages: Loss of company history

Tax Aspects:

Contribution of Sole Proprietorship:

• Hidden Reserves: Disclosure upon transfer
• Tax Consequences: Income and profit tax
• Valuation: Market value or book value
• Optimization: Timing of transformation
• Depreciation: Takeover or revaluation

Restructuring of Corporations:

• Tax Continuity: For certain transformations
• Participation Deduction: For holding structures
• Loss Carryforwards: Takeover possible
• Capital Gains Tax: For shareholders

International Aspects:

• Double Taxation: Consider agreements
• Withholding Tax: Recovery possibilities
• Transfer Pricing: Appropriate valuation
• CFC Rules: Controlled Foreign Company

Valuation Methods:

Substance Value Method:

• Assets: Individual valuation of all assets
• Liabilities: Deduction of all obligations
• Hidden Reserves: Disclosure of added values
• Liquidation Value: In case of dissolution intent

Earnings Value Method:

• Future Earnings: Discounted cash flows
• Capitalization: Sustainable profit
• Discount Rate: Risk-appropriate interest rate
• Terminal Value: Value after planning period

Practitioner Method:

• Mixed Procedure: Substance and earnings value
• Weighting: 1/3 substance value, 2/3 earnings value
• Swiss Standard: Widely used
• Adjustments: Industry-specific modifications

Process Flow:

Preparation Phase:

• Strategic Planning: Define objectives
• Legal Advice: Feasibility study
• Tax Advice: Optimization possibilities
• Valuation: Determine company value
• Financing: Clarify capital requirements

Implementation Phase:

• Resolutions: Shareholders' meeting
• Documentation: Transformation agreement
• Review: Audit experts
• Creditor Protection: Public announcement
• Registration: Commercial register

Follow-up Phase:

• Registrations: Taxes, social insurance
• Contract Adjustments: Customers, suppliers
• Banking Connections: New account opening
• Insurance: Policy adjustments
• Employees: Information and new contracts

Transformation Costs:

Notary Costs:

• Basic Fee: CHF 500-1,500
• Value-dependent: 0.1-0.3% of transformation value
• Certifications: CHF 50-100 per document
• Contract Creation: CHF 1,000-3,000

Consulting Costs:

• Legal Advice: CHF 2,000-10,000
• Tax Advice: CHF 1,500-8,000
• Valuation: CHF 2,000-15,000
• Due Diligence: CHF 5,000-25,000

Official Fees:

• Commercial Register: CHF 500-1,000
• Publication: CHF 150-300
• Tax Authorities: CHF 200-500
• Land Registry: For real estate transfers

Timeline and Milestones:

Planning Phase (4-8 weeks):

• Week 1-2: Strategy development
• Week 3-4: Valuation and structuring
• Week 5-6: Contract draft
• Week 7-8: Prepare approvals

Implementation Phase (8-16 weeks):

• Week 1-2: Resolutions and contract signing
• Week 3-6: Review by auditors
• Week 7-12: Creditor protection period
• Week 13-16: Commercial register entry

Completion Phase (4-8 weeks):

• Week 1-2: Authority registrations
• Week 3-4: Contract adjustments
• Week 5-6: Operational implementation
• Week 7-8: Follow-up control and optimization

Risks and Challenges:

Legal Risks:

• Formal Errors: Invalidity of transformation
• Creditor Objections: Delays
• Contract Violations: Liability risks
• Compliance: Regulatory requirements

Tax Risks:

• Subsequent Taxes: Unexpected burdens
• Valuation Disputes: With tax authorities
• Loss of Benefits: Tax advantages
• Double Taxation: For international structures

Operational Risks:

• Business Interruption: During transformation
• Employee Turnover: Team uncertainty
• Customer Confidence: Customer confusion
• Supplier Relations: Contract adjustments

Success Strategies:

Early Planning:

• Strategy Development: Define long-term goals
• Timing: Choose optimal time
• Resource Planning: Reserve capacities
• Communication: Inform stakeholders

Professional Support:

• Specialized Consultants: Experienced lawyers and tax advisors
• Project Management: Structured execution
• Quality Control: Regular review
• Risk Management: Early risk identification

Industry-Specific Particularities:

Fintech:

• Regulation: Transfer FINMA licenses
• Licensing: New permits required
• Compliance: Increased requirements
• Capital Requirements: Consider minimum capital

Medtech:

• Approvals: Swissmedic licenses
• Quality System: ISO certifications
• Product Liability: Insurance coverage
• International Approvals: CE marking

IT/Software:

• IP Rights: Transfer of patents
• Licenses: Adjust software licenses
• Data Protection: GDPR compliance
• Employee Participation: ESOP programs

International Transformations:

Cross-Border Transformations:

• EU Directive: Simplified procedures in EU
• Bilateral Agreements: With various countries
• Tax Recognition: In both jurisdictions
• Complexity: Higher requirements

Holding Structures:

• International Holdings: Tax optimization
• IP Holdings: Optimize licensing
• Finance Holdings: Capital structure
• Operational Holdings: Group management

Digital Transformation:

Digitization of Procedures:

• Online Applications: Electronic procedures
• Digital Signatures: Paperless processing
• Blockchain: Transparency and security
• Automation: Standardized processes

New Business Models:

• Platform Economy: New legal forms
• Token Economy: Cryptocurrencies
• Shared Economy: Shared resources
• Subscription Models: Recurring revenues

Conclusion: Company transformations are complex undertakings that require careful planning and professional support. With the right strategy, however, they can bring significant advantages for company growth.