Setting up a company: Switzerland vs. Germany – What you should know

Choosing the right location is crucial when it comes to starting a business. In this blog post, we present a detailed comparison between Switzerland and Germany to help you make the right decision, discover the respective framework conditions, and learn what advantages and challenges both countries have for start-ups.

The Swiss business environment

Tax advantages in Switzerland

Many entrepreneurs choose to set up their companies in Switzerland due to the attractive tax system. Tax rates for companies in Switzerland are generally lower than in Germany. Additionally, some cantons offer further tax breaks to attract companies and strengthen the business environment.

Stability and reputation

Switzerland has an excellent reputation as a stable and secure business location. The political system is stable, and the country has a strong currency, the Swiss franc. These factors create a reliable environment for companies and make planning and executing business strategies easier.

Quick and easy incorporation process

Setting up a company in Switzerland is generally quicker and easier than in Germany. At Nexova, we support you as trustees throughout the entire process, from choosing a legal form to registration and accounting.

We ensure that you take all the necessary steps and meet all the legal requirements so that you can focus on growing your business.

The German business environment

Large domestic market

A key advantage of setting up a company in Germany is its large domestic market with over 83 million potential customers. For a company that wants to offer its products or services primarily in Germany, it makes sense to be based there.

Strong infrastructure

Germany has an excellent infrastructure that facilitates the trade and transport of goods. This can be a decisive factor for companies that rely on efficient logistics.

Support system

In Germany, there are numerous programs offering entrepreneurs financing assistance and support. Companies can apply for these at both federal and state levels and are particularly interesting for start-ups and innovative companies.

Legal differences when setting up a company: Switzerland vs. Germany

Choosing the right location for your company is an important decision that will affect your business, its success and long-term development. In this section, we will focus on the legal differences between Switzerland and Germany while setting up a company to give you a better understanding of the legal requirements in both countries.

Legal forms: An overview

Swiss legal forms

Switzerland has various legal forms for setting up a company. The most common ones are:

• Sole proprietorship: For individuals running an independent business. There is no separation between the entrepreneur’s private and business assets.
• Limited liability company (Gesellschaft mit beschränkter Haftung, or GmbH): A legal entity with limited liability where partners are only liable for the company’s debts up to the amount of their contributions.
• Stock corporation (Aktiengesellschaft, or AG): Another legal entity with limited liability whose capital is divided into shares. The AG is particularly suitable for larger companies.

German legal forms

Various legal forms are available in Germany too:

• Sole proprietorship: Like in Switzerland, this legal form is for individuals running an independent business. There is no separation between the entrepreneur’s private and business assets.
• Limited liability company (GmbH): A legal entity in which the liability of the partners is limited to their contributions.
• Public limited company (AG): Another legal entity with limited liability whose capital is divided into shares. Suitable for larger companies.
• Entrepreneurial company with limited liability (Unternehmergesellschaft, or UG): A special form of the GmbH, characterised by a lower minimum share capital and particularly suitable for start-ups.

Formation process and formalities

Formation in Switzerland

The incorporation process for a company in Switzerland varies depending on the legal form chosen. For GmbHs and AGs, the most important steps are:

• Drawing up a memorandum of association or articles of association
• Public notarisation of the articles of incorporation
• Payment of the share capital into a blocked account
• Entry into the commercial register

Formation in Germany

The formation process in Germany depends on the legal form chosen. For GmbHs, UGs and AGs, the most important steps are:

• Drawing up a memorandum of association or articles of association
• Notarisation of the memorandum and articles of association
• Payment of the share capital into a business account
• Registration with the commercial register

It is important to note that the formation process in Germany for UGs and GmbHs usually takes longer than in Switzerland, as there are more bureaucratic hurdles to overcome.

Taxes and social security contributions

Tax system in Switzerland

Switzerland has a three-tier tax system consisting of federal, cantonal, and municipal taxes. Tax rates vary by canton and municipality, leading to some competition between cantons. Therefore, companies can benefit from attractive tax rates and tax relief.

Tip: In our blog post “Tax comparison for companies 2022”, you will find a detailed overview of the tax rates for Swiss cantons.

Tax system in Germany

In Germany, companies also have to pay various taxes, including corporate income, trade, and turnover taxes. Tax rates are generally higher than in Switzerland and there are fewer opportunities for tax optimisation.

Social security contributions

In both countries, employers are obliged to pay social security contributions for their employees. However, the social security systems differ in their benefits and contribution rates. In Switzerland, social security contributions are generally lower than in Germany, which reduces labour costs for companies.

Employee rights and labour law

Labour law in Switzerland

Swiss labour law is generally less strictly regulated than German labour law. Working hours are more flexible and there are fewer regulations regarding notice periods and occupational health and safety. This can be advantageous for companies as they have more flexibility in personnel management.

Labour law in Germany

German labour law is more comprehensive and protects workers better than Swiss labour law. There are stricter regulations regarding working hours, workers’ co-determination rights, and protection against dismissal. These regulations can be challenging for companies, especially if they are familiar with different legal systems.

Financing options for start-ups in Switzerland and Germany

Financing is a crucial factor for the success of a start-up. The following section provides an overview of the different financing options and investor landscapes in Switzerland and Germany.

We cover government funding programmes, venture capital, and crowdfunding platforms to give you an insight into the different options for funding your start-up.

Government funding programmes

Funding in Switzerland

The Swiss government offers various funding programmes to support start-ups and innovative companies. These include:

• Innosuisse: A government agency that supports start-ups and SMEs in developing and marketing innovative products and services. Innosuisse offers coaching, financial support, and access to expert knowledge.
• KTI-Start-up-Förderung: A start-up promotion program that helps entrepreneurs turn their ideas into marketable products or services by providing financial support, coaching, and access to a network of experts.
• Canton-specific funding programs: Some cantons offer additional support programs for start-ups to strengthen the regional economy.

Funding in Germany

Germany also offers a variety of government funding programmes for start-ups and innovative companies:

• EXIST-Gründerstipendium: a programme that offers financial support to students, graduates, and scientists to turn their innovative business idea into a start-up.
• High-Tech Gründerfonds (HTGF): A government-backed fund that finances early-stage start-ups and supports them in developing their products and services.
• Federal and state funding programmes: In addition to federal funding, many federal states offer their own funding programmes for start-ups to stimulate the regional economy.

Venture Capital

Venture Capital in Switzerland

The Swiss venture capital scene is small, yet very active compared to other European countries. Several venture capital firms focus on financing start-ups in different industries. Some of the best-known Swiss venture capital firms are Redalpine, investiere.ch, and Swisscom Ventures.

Venture Capital in Deutschland

Germany has a dynamic and growing venture capital landscape. Many German and international venture capital firms invest in German start-ups and support them in scaling their business models. The best-known German venture capital firms include Earlybird, HV Capital, and High-Tech Gründerfonds.

Crowdfunding platforms

Crowdfunding in Switzerland

In Switzerland, several crowdfunding platforms enable start-ups and projects to receive financial support from a broad public. The best-known Swiss crowdfunding platforms are Wemakeit, Funders, and Crowdify.

Crowdfunding in Germany

Germany also has several crowdfunding platforms that support start-ups in financing their projects. Some of the best-known German crowdfunding platforms are Startnext, Seedmatch, and Companisto.

Business angels and networks

Business angels in Switzerland

Business angels are private investors who support start-ups financially and contribute their expertise, experience, and network. In Switzerland, several business angel networks help start-ups find suitable investors. These include Business Angels Switzerland (BAS) and SICTIC.

Business Angels in Germany

Germany also has an active business angel scene that supports start-ups in financing and scaling. The country’s most important business angel networks include Business Angels Netzwerk Deutschland (BAND), Business Angels Club Berlin-Brandenburg, and German Start-ups Association.

Switzerland or Germany to set up a company?

In Switzerland, companies benefit from attractive tax conditions, political stability, and a simplified start-up process. The German economy offers a larger domestic market, an excellent infrastructure, and extensive funding opportunities.

Legal differences exist mainly in the foundation processes and available legal forms. From a fiscal point of view, corporate taxes in Switzerland are usually lower than in Germany. In terms of social security contributions and labour law, Switzerland is more flexible, while Germany offers stronger employee protection.

Financing options for start-ups vary in both countries, with both offering government funding programmes, a venture capital scene, crowdfunding opportunities, and business angel networks. Depending on individual needs and goals, the choice of location should be carefully considered in order to create the best possible foundation for the success of your business.