Partnerships in Switzerland: GP, LP & Sole Proprietorship

Swiss law divides business structures into two broad categories: capital companies (Kapitalgesellschaften), such as the GmbH and AG, and non-capital forms – sole proprietorships and partnerships – where personal commitment matters more than contributed capital. This guide covers the three non-capital structures available under the Swiss Code of Obligations (OR): the sole proprietorship (Einzelfirma), the general partnership (Kollektivgesellschaft), and the limited partnership (Kommanditgesellschaft).

These forms share several traits: no minimum share capital, pass-through taxation, and comparatively light administrative requirements. They also share a common drawback – at least some degree of unlimited personal liability. Understanding exactly how that liability works, and when it makes sense to accept it, is the central question this page addresses.

For a broader overview of all Swiss business structures, including the GmbH, AG, and special-purpose vehicles, see our complete guide to company types in Switzerland.

What Are Non-Capital Company Forms?

Capital companies like the GmbH and AG have separate legal personality: they own assets, enter contracts, and bear liability independently of their shareholders. Partnerships and sole proprietorships work differently.

A sole proprietorship has no separate legal personality at all. The business and the owner are legally indistinguishable. The owner’s personal assets secure every business obligation.

Partnerships occupy a middle ground. A general partnership (Kollektivgesellschaft) can hold assets and enter contracts in its own name, but it is not a separate legal entity in the way a GmbH is. Its partners remain personally and jointly liable for all partnership debts. A limited partnership (Kommanditgesellschaft) introduces a distinction between general partners (unlimited liability) and limited partners (liability capped at their contribution), but the general partner’s exposure remains unlimited.

These structures are governed by distinct sections of the OR:

• Sole proprietorship: OR Art. 945-953 (business names and registration)
• General partnership: OR Art. 552-593
• Limited partnership: OR Art. 594-619

Despite their differences, all three forms are united by the principle that the people behind the business bear direct financial risk. This personal exposure is the trade-off for simpler formation, lower costs, and the absence of minimum capital requirements that characterise the GmbH and AG.

Why You Can Trust This Guide

This overview draws on OR Art. 552-619 (partnerships) and OR Art. 945-953 (sole proprietorships), supplemented by Federal Social Insurance Office (BSV) contribution rate schedules for 2026. Tax crossover estimates between partnership and corporate structures use ESTV federal tables and cantonal calculators from Zug, Zurich, and Geneva. Formation cost data reflects published cantonal register fee schedules. Our team has advised on over 100 conversions from sole proprietorship or partnership to GmbH.

How Do Partnerships Compare at a Glance?

The table below sets out the key differences across the three non-capital forms. Refer to it as a quick reference before reading the detailed sections that follow.

What Is a Sole Proprietorship?

The sole proprietorship is the simplest and most common non-capital business form in Switzerland. It requires no incorporation procedure, no notary, no share capital, and no articles of association. A natural person simply begins trading under their own name.

Formation and Registration

There is no formal “founding” of a sole proprietorship. The business comes into existence the moment the owner starts commercial activity. However, registration in the cantonal commercial register becomes mandatory once annual revenue exceeds CHF 100,000. Below that threshold, registration is voluntary but advisable – it protects the business name and provides credibility with banks and counterparties.

The business name must include the owner’s surname. It may also include a description of the activity (for example, “Mueller Consulting” or “Schneider Elektrotechnik”), but invented names without the surname are not permitted. Registration costs are modest: CHF 120-200 for the commercial register entry, plus any fees for a notarised signature specimen if required by the canton.

Liability

This is the critical point. A sole proprietor bears unlimited personal liability for every business obligation. There is no legal separation between personal and business assets. If the business fails, creditors can pursue the owner’s savings, real estate, and other personal property. Conversely, personal creditors can seize business assets.

For low-risk activities – consulting, freelance writing, graphic design – this exposure is manageable. For businesses that carry inventory, take on significant contracts, or employ staff, the liability risk deserves serious consideration. Many sole proprietors mitigate it through professional indemnity insurance, but insurance cannot replicate the structural protection of a limited liability company.

Taxation and Social Security

Business profits are taxed as the owner’s personal income. There is no corporate tax return. The owner declares revenue and expenses on their personal tax return, and profits are subject to both federal and cantonal/municipal income tax at progressive rates. Business assets form part of the owner’s taxable wealth.

The owner is classified as self-employed (selbstaendig erwerbend) and must register with the cantonal compensation office (Ausgleichskasse) for AHV/IV/EO contributions. The contribution rate for self-employed individuals is currently 10.0 per cent on net income (reduced rates apply below CHF 58,800). Unlike employees, self-employed persons do not automatically participate in the second pillar (BVG occupational pension); voluntary affiliation is possible but not mandatory.

Who Should Choose a Sole Proprietorship

The sole proprietorship is best suited to freelancers, independent consultants, sole traders, and anyone testing a business concept before committing to a formal company structure. It is the fastest way to start a business in Switzerland – you can be operational within days rather than weeks. The absence of capital requirements, minimal administrative overhead, and straightforward tax treatment make it attractive at the early stage.

The tipping point typically arrives when revenue grows beyond CHF 100,000, the owner hires employees, or the business takes on contractual obligations that create meaningful liability exposure. At that point, converting to a GmbH provides the limited liability protection that a sole proprietorship cannot offer.

For a complete walkthrough of requirements, social security obligations, and practical formation steps, see our dedicated sole proprietorship guide.

What Is a General Partnership?

The general partnership is designed for two or more natural persons who want to run a commercial business together. It is the oldest partnership form in Swiss law and remains common among professional service firms – law practices, medical partnerships, architectural studios, and accounting firms.

Formation and Partnership Agreement

A general partnership is formed by agreement between two or more natural persons to operate a business under a common name. The partnership must be registered in the commercial register; this registration is mandatory and constitutive, meaning the partnership’s rights to act under its firm name depend on it.

While Swiss law does not require the partnership agreement to be in writing, a written agreement is strongly recommended. The agreement should cover at a minimum:

• Each partner’s capital contribution (cash, assets, or labour)
• Profit and loss allocation
• Management and decision-making authority
• Procedures for admitting new partners or handling withdrawals
• Non-competition clauses
• Dissolution and settlement terms

Without a written agreement, the default rules in OR Art. 552-593 apply. These defaults allocate profits equally regardless of capital contribution, grant all partners equal management authority, and require unanimity for certain decisions – arrangements that may not reflect the partners’ actual intentions.

Liability

Every partner in a general partnership bears unlimited joint and several liability (Solidarhaftung) for all partnership debts. This means that a creditor can pursue any single partner for the full amount of a partnership obligation, regardless of that partner’s ownership share. The partner who pays can then seek contribution from the other partners, but the creditor is not required to pursue all partners proportionally.

This liability is the most significant characteristic of the general partnership and the main reason it is less popular than the GmbH for general commercial ventures. Partners are essentially staking their personal wealth on the success of the business and the prudence of their co-partners.

Management and Decision-Making

By default, all partners have equal rights to manage the partnership. Any partner can act on behalf of the partnership and bind it in transactions with third parties. The partnership agreement can restrict management to specific partners or require joint signatures for certain types of transactions.

This default structure works well for small, trust-based partnerships where all partners are actively involved. It becomes problematic in larger partnerships where different partners have different roles, expertise levels, and risk appetites. Careful drafting of the partnership agreement is essential.

Use Cases

General partnerships are most commonly found among regulated professionals who are required or accustomed to bearing personal liability for their work: lawyers, doctors, auditors, and architects. In these professions, the unlimited liability aligns with existing professional liability obligations, and the pass-through tax treatment avoids the double taxation that affects GmbH and AG structures.

For more detail on formation requirements, sample clauses, and practical considerations, see our general partnership guide.

What Is a Limited Partnership?

The limited partnership introduces a two-tier structure that distinguishes between partners who manage the business and partners who merely invest in it. It is governed by OR Art. 594-619.

Structure

A limited partnership consists of at least two types of partners:

• General partner (Komplementaer): bears unlimited personal liability for partnership debts and manages the business. Must be a natural person.
• Limited partner (Kommanditaer): liability is capped at the amount of their agreed capital contribution, which is recorded in the commercial register. The limited partner may not participate in the management of the business.

This structure creates a clear separation: the general partner runs the enterprise and accepts the corresponding risk, while the limited partner provides capital and receives a share of profits without personal exposure beyond their investment.

The Management Restriction

The limited partner’s liability protection is conditional on staying out of management. If a limited partner participates in the day-to-day management of the partnership, they risk losing their limited liability status and being treated as a general partner for liability purposes. This rule is strictly applied by Swiss courts and is one of the main constraints on the structure.

Limited partners retain certain protective rights – they can inspect the books, participate in major decisions specified in the partnership agreement, and share in profits – but they cannot direct the business operations.

Prevalence and Practical Use

The limited partnership is the least common of the three non-capital forms. Fewer than 2,000 limited partnerships are registered in Switzerland, compared to hundreds of thousands of sole proprietorships and tens of thousands of general partnerships. The structure’s relative obscurity reflects the availability of alternatives: the GmbH offers limited liability to all shareholders without the management restriction, and the AG provides even greater flexibility.

That said, the limited partnership serves a genuine purpose in specific scenarios:

• Family businesses where senior members want to invest without managing
• Investment structures where passive investors contribute capital alongside an active manager
• Professional firms transitioning from a general partnership, where retiring partners become limited partners while remaining financially invested
• Real estate ventures where a managing partner handles operations and limited partners provide funding

For a full analysis of limited partnership formation, capital contributions, and dissolution, see our limited partnership guide.

How Are Partnerships and Sole Proprietorships Taxed?

All three non-capital forms share a common tax characteristic: fiscal transparency. The business itself does not pay income tax. Instead, profits flow through to the individuals behind the business and are taxed at the personal level.

How It Works

For a sole proprietorship, the calculation is straightforward: net business income (revenue minus deductible expenses) is added to the owner’s other personal income and taxed at progressive federal and cantonal/municipal rates.

For partnerships, each partner’s share of profit – as determined by the partnership agreement or, in the absence of an agreement, in equal shares – is added to that partner’s personal income. Each partner files their own tax return and pays tax on their share at their individual rate.

Comparison with Corporate Taxation

This pass-through treatment can be advantageous or disadvantageous depending on the income level:

• At lower income levels (roughly below CHF 100,000-150,000 in net profit), the personal income tax rate is often lower than the combined effect of corporate tax on profits plus personal tax on dividend distributions that applies to GmbH and AG structures.
• At higher income levels, the progressive personal income tax rate can exceed the flat corporate rate. A GmbH or AG owner who retains profits in the company pays corporate tax at effective rates of 12-14 per cent (depending on the canton), with additional personal tax only when dividends are actually distributed.

The break-even point varies significantly by canton, family situation, and the proportion of profits that the owner needs to extract as personal income. A tax adviser familiar with the relevant cantonal rates should model both scenarios before a decision is made.

Social Security

Partners and sole proprietors are classified as self-employed for social security purposes. They pay AHV/IV/EO contributions on their net business income at a rate of approximately 10.0 per cent. They are not automatically covered by the second pillar (BVG) but may join voluntarily. Accident insurance (UVG) is voluntary for self-employed persons but mandatory for any employees they hire.

When Should You Choose a Partnership over a GmbH?

The decision to use a non-capital form rather than a GmbH or AG comes down to a few practical questions:

Choose a sole proprietorship when:

• You are a single founder testing a business concept or freelancing
• Your liability risk is low (no inventory, no significant contracts, no employees)
• You want to start immediately with minimal cost and paperwork
• Your expected annual profit is below the level where corporate tax treatment becomes advantageous

Choose a general partnership when:

• Two or more professionals want to practise together under a shared name
• All partners are actively involved in the business and comfortable with joint liability
• The professional context (law, medicine, consulting) already involves personal liability
• Pass-through taxation is more efficient than corporate taxation at the expected income level

Choose a limited partnership when:

• You need to combine active management with passive investment
• Some participants want liability limited to their capital contribution
• The structure supports a family business or investment arrangement where roles are clearly divided

Choose a GmbH or AG instead when:

• Limited liability is important and the business carries meaningful risk
• You plan to hire employees and take on significant contractual obligations
• External investors are involved or anticipated
• The business will grow beyond the point where personal liability is acceptable

For businesses that involve special structures such as holding arrangements, foundations, or branch offices, different considerations apply.

Can You Convert a Partnership to a GmbH or AG?

Many businesses begin as a sole proprietorship or partnership and later convert to a GmbH or AG as they grow. Swiss law facilitates this transition through the Federal Merger Act (Fusionsgesetz, FusG).

Sole Proprietorship to GmbH

The most common conversion path. The sole proprietor incorporates a GmbH and transfers the business assets to it. This can be done as a contribution in kind (Sacheinlage), where the going business – including its client relationships, equipment, and goodwill – is contributed to the new GmbH in exchange for shares. The key steps are:

1. Valuation: The business assets must be independently valued to confirm they meet or exceed the GmbH’s minimum share capital of CHF 20,000.
2. Incorporation: Standard GmbH formation procedure, with the articles of association specifying the contribution in kind.
3. Asset transfer: Contracts, leases, bank accounts, and other assets are formally transferred to the GmbH. Some contracts may require counterparty consent for assignment.
4. Registration: The GmbH is registered in the commercial register. The sole proprietorship is typically deleted simultaneously.
5. Tax continuity: If the transfer qualifies as a tax-neutral restructuring under federal and cantonal tax law, no capital gains tax is triggered. Conditions include maintaining the book values and continuing the business activity in the GmbH.

The process typically takes four to eight weeks and costs CHF 3,000-6,000, including notarial, legal, and registration fees.

Partnership to GmbH or AG

A general or limited partnership can similarly convert to a capital company. The FusG provides a formal change-of-form procedure. All partners must consent to the conversion. The partnership’s assets and liabilities transfer to the new company by universal succession, preserving contracts and business relationships.

The transition from unlimited to limited liability does not apply retroactively. Partners remain personally liable for obligations incurred before the conversion for a period of three years after registration of the change.

If you are considering a conversion, an expert can help you structure the transition to minimise tax consequences and administrative disruption.

Frequently Asked Questions

What is the difference between a sole proprietorship and a GmbH in Switzerland?

The fundamental difference is legal separation and liability. A sole proprietorship (Einzelfirma) has no separate legal personality – the owner and the business are one and the same, and the owner bears unlimited personal liability for all business debts. A GmbH is a separate legal entity with its own rights and obligations; shareholder liability is limited to the CHF 20,000 minimum share capital. The sole proprietorship is taxed entirely through the owner's personal income tax return, while the GmbH files a separate corporate tax return and dividends are taxed again at the shareholder level. Formation costs for a sole proprietorship are CHF 200-600 compared to CHF 3,000-5,000 for a GmbH.

Do I need to register a sole proprietorship in Switzerland?

Registration in the commercial register is mandatory only if your annual revenue exceeds CHF 100,000. Below that threshold, registration is voluntary. However, voluntary registration is often advisable because it secures your business name, provides a public record of your enterprise, and is sometimes required by banks or business partners before they will open accounts or enter contracts. The registration fee is modest – typically CHF 120 to CHF 200 depending on the canton – and the process is straightforward.

Can a foreigner establish a partnership in Switzerland?

A foreigner can be a partner in a general partnership (Kollektivgesellschaft) or a limited partnership (Kommanditgesellschaft), but at least one partner with signing authority must be resident in Switzerland. For a sole proprietorship, the owner must be a natural person with the legal right to conduct business in Switzerland, which typically requires a valid residence and work permit. EU/EFTA nationals benefit from the Agreement on the Free Movement of Persons, while third-country nationals need a cantonal work permit (usually a B permit) before they can register a sole proprietorship.

How are Swiss partnerships taxed?

Swiss partnerships are fiscally transparent, meaning the partnership itself does not pay income tax. Instead, profits are allocated to the individual partners according to the partnership agreement and taxed as personal income on each partner's tax return. This applies to both general partnerships and limited partnerships. Social security contributions (AHV/IV/EO) are also calculated on each partner's share of the profit. The partners must declare their share of partnership assets as personal wealth for wealth tax purposes. There is no corporate profit tax and no withholding tax on profit distributions, which can be advantageous at lower income levels compared to the double taxation that affects GmbH and AG dividends.

What happens to a general partnership if one partner dies or leaves?

Under Swiss law (OR Art. 574-576), a general partnership is dissolved upon the death, bankruptcy, or withdrawal of a partner unless the partnership agreement provides otherwise. In practice, well-drafted partnership agreements include continuation clauses that allow the remaining partners to carry on the business. The departing partner or their heirs are entitled to a settlement based on the value of their partnership share. If no continuation clause exists, the partnership enters liquidation, assets are sold, creditors are paid, and any surplus is distributed among the partners. This inherent fragility is one reason many professional firms eventually convert to a GmbH or AG.

Are partnership profits subject to social insurance contributions in Switzerland?

Yes. Partners in general and limited partnerships are classified as self-employed for social insurance purposes. They pay AHV/IV/EO contributions at a combined rate of 10.0 per cent of their net share of partnership income (for income above CHF 58,800 per year in 2026). Unlike employees, they pay the full contribution themselves rather than splitting it with an employer. Second-pillar (BVG) occupational pension participation is voluntary for self-employed partners. The minimum annual AHV contribution is approximately CHF 514 regardless of income level.

What is the difference between a partnership and a simple partnership (einfache Gesellschaft) in Switzerland?

A general partnership (Kollektivgesellschaft) and a limited partnership (Kommanditgesellschaft) are commercial partnerships that must be registered in the commercial register. They have a firm name, operate under that name, and partners have defined liability roles. A simple partnership (einfache Gesellschaft, OR Art. 530-551) is an unregistered, informal arrangement between two or more persons pursuing a common goal. It has no firm name, no commercial register entry, and cannot act in the same way as a registered partnership. Simple partnerships are common for joint ventures, co-ownership arrangements, and temporary collaborations where formal registration is not warranted.

Can a non-Swiss resident be a partner in a Swiss partnership?

Yes, with a residency requirement for at least one partner. Foreign nationals can be partners in a Swiss general or limited partnership. For a general partnership, at least one partner with signing authority must be resident in Switzerland. For a limited partnership, the general partner must be resident in Switzerland. Limited partners may be foreign residents or foreign companies. There are no nationality restrictions on partners, and EU/EFTA nationals benefit from the Agreement on the Free Movement of Persons regarding residency rights.

What written agreements should a partnership have?

Swiss law does not require a written partnership agreement, but operating without one creates significant risk. A well-drafted agreement should address each partner's capital contribution (cash, assets, or labour), the profit and loss allocation formula, management authority and decision-making rules, non-competition obligations, procedures for admitting new partners or handling departures, continuation clauses on death or bankruptcy, settlement valuation methods, and dispute resolution mechanisms. Legal fees for a standard agreement range from CHF 1,000 to CHF 3,000. The cost is modest compared to the disputes an absent or poorly drafted agreement can generate.