Transformation of legal form
You are already active in your own business and you have incorporated it as a sole proprietorship, general partnership or limited liability company. Now you want to transform the legal form. Companies and sole proprietorship may change their legal form in accordance with the Swiss Merger Act (Merger Act). The most common changes are as follows:Transformation of a partnership registered in the commercial register1 into a corporation:
- Sole proprietorship to LLC (the most frequent transformation with IFJ)
- General partnership to LLC
- LLC to a Ltd.
Transformation of a sole proprietorship by a limited liability company
When an sole proprietorship is taken over by a limited liability company2, a new legal entity is formed. This legal entity (LLC) takes over part of your individual reason. A company name cannot be transformed directly into an LLC, but must be transferred with the assets and liabilities to a new company to be created and then liquidated. Generally, the single name goes bankrupt and is dissolved after the conversion. If the company was previously registered in the Commercial Register, it must be dissolved.
The transformation of a sole proprietorship to a LLC constitutes a so-called qualified foundation. In the case of a qualified formation, the legal requirements are higher than in the case of a pure cash formation, which also leads to higher costs.
Transformation with contribution in kind (so-called asset transfer) in accordance with Art. 69 FusG
The new company can directly take over all the assets and liabilities of your sole proprietorship within the framework of the foundation. This is called a takeover in kind. However, this is only possible if the sole proprietorship is entered in the Commercial Register. The assets and liabilities contributed are not used only or only partly for the financing of the shares - often a part is also left as a loan claim of the founders regarding the new company. Various documents must be available in order to establish a takeover in kind. For example, you must have kept double-entry bookkeeping for your individual reason and prepared annual accounts. The annual accounts must not be older than 6 months. If this is the case, an interim balance sheet must be drawn up. The annual accounts or the interim balance sheet must have been audited by a certified auditor. It should be noted that the unlimited and private liability continues to apply to the contributed claims for three years (if the assets of the company are not sufficient to cover the claim).
If all parts of your sole proprietorship are transferred to the LLC, your sole proprietorship will be lost. If only part of your sole proprietorship is transferred, your sole proprietorship can continue to exist. It is therefore up to you to decide whether your sole proprietorship should continue to exist or not.
Transformation by contribution in kind according to art. 181 CO
The transformation can also be carried out through a contribution in kind. In this case, one or more tangible assets (high-value items) such as machines, vehicles, etc. of the sole proprietorship are used to pay for the newly created shares. In concrete terms, this means that instead of cash, an object or its value is contributed into the company in order to meet the capital requirements (CHF 20,000 for the LLC and at least CHF 50,000 for the Ltd.). When the company is incorporated, a certified auditor must check whether the assets contributed also have the declared value, which involves additional costs.
Here too, the auditor needs various documents to determine the value of the assets (e.g. inventory of assets, purchase contracts, receipts, photos, vehicle registration documents, Eurotax valuation, etc.).
Transformation from a General partnership to a LLC
The legal provisions are similar to the transfer of a sole proprietorship to a LLC.
Transformation from a LLC to a Ltd.
The transformation of a LLC into a limited company is possible, but it can be very complex and expensive. The legal provisions are set out in Article 54 et seq. LFus. In particular, the provisions related to the protection of shareholders under Art. 56 FusG must also be complied with. The reasons for such a transformation can be very different. Often, the growth or integration of additional persons and investors into the company is decisive. The Merger Act allows the transformation of a LLC into a corporation without having to liquidate, which is disadvantageous from a tax law point of view. The procedure is essentially the same as for mergers and demergers.
The following points are necessary for the transformation of a limited liability company into a public limited company:
- Preparation of a written transformation plan and report
- Examination of the transformation conditions and the transformation report by a certified audit expert
- Adoption of the transformation resolution by the general meeting or shareholders' meeting
- Public authentication of the decision
- Entry in the commercial register
It should also be noted that in the event of a transformation from one legal entity to another, the capital must at most be increased accordingly.
The IFJ founding team will be happy to discuss your plans and possibilities with you.
1For partnerships not entered in the Commercial Register, a new foundation is created.
2The following explanations also apply to the transfer of a sole proprietorship to a public limited company.
2The following explanations also apply to the transfer of a sole proprietorship to a public limited company.
Christian Brändli,
Insightness AG
«The IFJ offered us the perfect starter package to start with an LLC quickly and at low cost and to convert it later into an Ltd. But next time I would start directly with the Ltd.»
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