General Partnership in Switzerland: Setup, Costs & Tax

A general partnership (Kollektivgesellschaft, KLG) in Switzerland is a business structure where two or more natural persons jointly operate a commercial enterprise under a common name, bearing unlimited and joint liability for all partnership obligations with their personal assets. This guide covers registration procedures, taxation, liability implications, and practical considerations for establishing and managing a KLG in 2025.

"After two decades advising on Swiss business formations, I've seen countless entrepreneurs underestimate the personal risk inherent in general partnerships. The simplicity of formation is attractive, but unlimited liability means your home, savings, and personal assets are on the line for business debts—even those created by your partner. This structure demands absolute trust and meticulous partnership agreements." — Markus Pritzker, SwissFirma

What is a general partnership in Switzerland?

A general partnership (Kollektivgesellschaft, KLG) is a legal form under Swiss law where at least two natural persons conduct business jointly under a common company name. Unlike corporations or limited liability companies, a KLG lacks separate legal personality, meaning the partners themselves—not a distinct legal entity—bear direct responsibility for all business obligations.

"A general partnership is formed by at least two natural persons; partners are jointly and severally liable without limit." — KMU.admin.ch (2025)

The defining characteristic is unlimited joint and several liability: each partner is personally liable with their entire private assets for the partnership's debts, regardless of which partner incurred them. This creates significant personal financial exposure but enables a simple, flexible business structure with no minimum capital requirements.

According to the Code of Obligations (OR) Articles 552–593, the partnership is formed by contractual agreement between the partners and must be registered in the Commercial Register to gain legal recognition. As of 2022, approximately 1,400 new general partnerships were formed in Switzerland, representing less than 3% of all company formations, with about 15,400 active KLGs operating nationwide—primarily in crafts, local trade, restaurants, and professional services where personal expertise and direct involvement are central to the business model.

Markus Pritzker

Swiss Corporate Lawyer

+41 44 515 25 91

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Advantages and disadvantages of a general partnership

Choosing a KLG represents a fundamental trade-off between operational simplicity and personal financial risk. Understanding both sides is essential before committing to this business form.

"No minimum capital is required and the partnership itself is not taxed; partners are taxed individually." — KMU.admin.ch (2025)

The advantages make KLG particularly suitable for small businesses with two to four partners who have strong personal and professional relationships, limited capital needs, and business models centered on personal expertise rather than scalable operations.

Comparison of KLG with other business forms in Switzerland

Selecting the appropriate legal form is a strategic decision with long-term implications for liability, taxation, capital raising, and operational flexibility.

General partnership (KLG) vs. limited partnership (KG) in Switzerland: key differences

Both KLG and KG (Kommanditgesellschaft) are partnership structures, but they differ fundamentally in partner roles and liability exposure.

The KG structure allows separation of management (general partners) from capital provision (limited partners), making it suitable when some partners want to invest without operational involvement or unlimited liability exposure.

Comparative table: KLG vs. GmbH vs. AG

"GmbH requires CHF 20,000; AG requires CHF 100,000, of which at least CHF 50,000 paid in." — Chambers (2025)

For international entrepreneurs and established businesses seeking limited liability, access to capital markets, and clear separation between personal and business assets, GmbH or AG structures are far more appropriate than KLG.

Markus Pritzker

Swiss Corporate Lawyer

+41 44 515 25 91

Book consultation

How to start and register a general partnership in Switzerland: a step-by-step guide

Establishing a KLG in Switzerland involves several distinct phases, from initial planning through official registration to operational launch. The entire process typically takes four to eight weeks, significantly faster than forming a GmbH or AG.

Step 1: preparatory phase

Drafting the partnership agreement

The partnership agreement is the foundational document governing the relationship between partners, even though Swiss law does not strictly require it to be in writing. However, a written agreement is essential to avoid disputes and provide clarity on critical operational and financial matters.

Key provisions that must be included:

• Capital contributions: Specify each partner's initial contribution (cash, assets, or services) and ongoing capital obligations.
• Profit and loss distribution: Define the formula for allocating profits and losses; absent an agreement, Swiss law defaults to equal distribution regardless of capital contributions.
• Management authority and decision-making: Clarify which decisions require unanimous consent versus simple majority, and whether any partner has veto rights on specific matters.
• Dispute resolution mechanisms: Establish mediation or arbitration procedures before resorting to litigation, including deadlock-breaking provisions.
• Exit conditions and buyout formulas: Detail the process and valuation method for a partner's withdrawal, including payment terms and non-compete obligations.
• Death or incapacity provisions: Specify whether the partnership continues with heirs or dissolves, and how the deceased partner's share is valued and transferred.

In my experience advising partnerships, the absence of a detailed written agreement is the single most common cause of catastrophic disputes.

Naming rules for a general partnership in Switzerland

The company name must comply with specific legal requirements under Swiss Commercial Register regulations. "The company name must include at least one partner's surname and indicate the partnership form." — KMU.admin.ch (2025)

The name must include the surname of at least one partner, followed by an addition indicating the partnership nature, such as "& Co.", "& Partner", or the full designation "Kollektivgesellschaft" (or its abbreviation "KLG").

Valid names include "Müller & Schmidt KLG" or "Fischer & Partner". The name must be truthful, not misleading, and clearly distinguishable from existing registered names. Before finalizing your choice, verify availability through the Swiss Central Business Name Index (Zefix) at zefix.ch to avoid rejection during registration.

Step 2: official registration

Registration in the Swiss Commercial Register

"Entry in the commercial register is mandatory for operating a Kollektivgesellschaft." — KMU.admin.ch (2025)

Registration in the cantonal Commercial Register is mandatory for all general partnerships conducting commercial activities. The registration has declaratory effect, meaning the partnership legally exists from the moment of agreement between partners, but registration is required for the partnership to operate legally and enforce rights against third parties.

Required documents for registration:

• Completed registration form with company name, registered address, and business purpose
• Partnership agreement (recommended but not legally mandatory)
• Identification documents (passport or ID) for all partners
• Declaration of acceptance of the registered address
• Signatures of all partners, notarized if required by the canton

Registration fees vary by canton but typically range from CHF 200 to CHF 300. Processing time averages two to four weeks, after which the partnership is published in the Swiss Official Gazette of Commerce (SHAB), providing public notice of its existence.

Registration with social insurance authorities (AHV/AVS)

"Partners in a KLG are considered self‑employed and must register with AHV/IV." — KMU.admin.ch (2025)

All partners in a KLG are classified as self-employed for social insurance purposes and must register individually with the cantonal compensation office (Ausgleichskasse). This registration is mandatory regardless of income level and ensures coverage for old-age and survivors' insurance (AHV/AVS), disability insurance (IV/AI), and income loss compensation (EO).

Failure to register or pay contributions results in penalties and loss of social insurance coverage rights, including future pension entitlements.

Step 3: commencing operations

After completing official registrations, the partnership must open a business bank account in the partnership's name. Swiss banks require the Commercial Register extract, partnership agreement, and identification of all partners and authorized signatories. Due diligence and KYC (Know Your Customer) procedures typically take one to three weeks.

Simultaneously, establish your accounting system. Swiss law mandates proper bookkeeping from the first day of operations. For partnerships with annual turnover below CHF 500,000, simplified accounting (recording income, expenses, and assets/liabilities) is sufficient. Above this threshold, double-entry bookkeeping with full financial statements is required.

Key legal and financial aspects of KLG

Requirements for founders in a general partnership

Swiss law requires a minimum of two natural persons to form a general partnership. Legal entities—such as GmbH, AG, or foreign corporations—cannot be partners in a KLG. This restriction reflects the personal nature of the partnership and the unlimited liability principle: only individuals can bear the personal financial exposure inherent in this structure.

"Only natural persons can be partners in a general partnership; legal entities are excluded." — Moneyland.ch (2025)

Partners must jointly manage the business and make decisions collectively unless the partnership agreement specifies different authority levels. Each partner has the right and duty to participate in management, and all partners are jointly authorized to represent the partnership in dealings with third parties unless restrictions are registered in the Commercial Register.

There is no requirement for partners to be Swiss citizens or residents, but at least one partner must have a registered address in Switzerland for service of legal documents. Foreign partners are subject to the same unlimited liability and taxation rules as Swiss partners and must obtain appropriate work permits.

Understanding partner liability in a Swiss general partnership

The liability structure of a KLG is its most critical and dangerous feature. "Partners are jointly and severally liable without limit with their personal assets." — KMU.admin.ch (2025)

Each partner bears unlimited, joint, and several liability for all partnership obligations. This means:

Unlimited: There is no cap on liability; partners are liable with their entire personal wealth, including homes, savings, investments, and other private assets.

Joint and several: Creditors can demand full payment of any partnership debt from any single partner, who must then seek contribution from other partners. If one partner is insolvent, the others must cover the entire debt.

Primary and subsidiary: Partnership assets are used first to settle debts. If partnership assets are insufficient, partners' personal assets are pursued to cover liabilities.

This liability persists even after a partner leaves the partnership for up to five years regarding debts existing at the time of exit, under Swiss Code of Obligations Article 568(3).

"Unlimited liability is not merely a legal term. It means your house, your personal savings, your children's education fund—all can be seized to pay business debts created by your partner's decisions. I've witnessed partnerships where one partner's reckless contract destroyed the financial security of all partners. Never underestimate this risk." — Dr. Markus Müller, Müller Legal AG, Zurich

Taxation

The KLG operates under a tax-transparent or pass-through taxation system. The partnership itself is not subject to corporate income tax; instead, profits are allocated to partners according to their shares (as defined in the partnership agreement or equally by default) and taxed as personal income at each partner's individual tax rate.

This structure avoids the double taxation inherent in corporations, where profits are taxed first at the corporate level and again when distributed as dividends. However, it also means partners pay personal income tax on their share of partnership profits regardless of whether those profits are actually distributed or retained in the business.

Each partner must declare their share of partnership income on their personal tax return and pay federal, cantonal, and municipal income taxes according to their canton of residence.

VAT (MWST) registration and obligations

If the partnership's annual turnover exceeds CHF 100,000, it must register for Value Added Tax (VAT). The partnership charges VAT on its revenues and can reclaim VAT paid on business expenses. VAT declarations are typically submitted quarterly, though simplified accounting may allow semi-annual submissions.

Voluntary VAT registration is possible for partnerships below the threshold if they wish to reclaim input VAT on business purchases.

Accounting obligations

Accounting requirements for a KLG depend on annual turnover:

Simplified accounting (annual turnover below CHF 500,000)

"Below CHF 500,000 turnover, simplified accounting is permitted; above this threshold, full double‑entry bookkeeping applies." — Startups.ch (2024)

Partnerships with turnover under CHF 500,000 may maintain simplified accounting, limited to recording income, expenses, and a year-end inventory of assets and liabilities. This can be a simple cash-basis ledger showing receipts and payments, supplemented by an annual balance sheet of business assets.

Records must still be sufficient to accurately determine taxable income for each partner.

Double-entry bookkeeping (annual turnover above CHF 500,000)

Once annual turnover exceeds CHF 500,000, the partnership must maintain full double-entry bookkeeping in accordance with Swiss Code of Obligations Articles 957-963. This requires:

• Systematic recording of all business transactions using accrual accounting principles
• Preparation of annual financial statements including balance sheet, income statement, and explanatory notes
• Retention of all accounting records, documents, and financial statements for 10 years at the registered office

If the partnership exceeds two of the following thresholds for two consecutive years—balance sheet total of CHF 20 million, turnover of CHF 40 million, or 250 full-time employees—it must prepare consolidated financial statements and undergo a statutory audit.

Markus Pritzker

Swiss Corporate Lawyer

+41 44 515 25 91

Book consultation

Practical advice and common mistakes

Critical partnership agreement provisions often overlooked

Beyond basic profit-sharing and capital contributions, several sophisticated clauses are essential but frequently omitted:

Dispute resolution mechanisms with escalation steps: Specify a mandatory mediation process before litigation, define what constitutes a deadlock situation, and establish a neutral third-party mediator or arbitration procedure. Include provisions for temporary management during disputes to prevent business paralysis.

Detailed buyout formulas and valuation methods: Define precisely how a departing partner's share is valued—whether based on book value, fair market value, or a multiple of earnings. Specify payment terms (lump sum or installments), interest rates, and whether the departing partner retains any profit share during the payment period. Include rights of first refusal requiring the departing partner to offer their share to remaining partners before external buyers.

Non-compete and non-solicitation clauses: Explicitly state geographic scope, duration (typically one to three years), and restricted activities to protect the partnership's business interests without violating Swiss competition law. Include provisions preventing departing partners from soliciting employees or clients.

Death and incapacity provisions: "Death, bankruptcy, or incapacity of a partner may dissolve the partnership unless otherwise agreed." — KMU.admin.ch (2025)

Specify whether the partnership continues with the deceased partner's heirs or automatically dissolves, how the deceased partner's share is valued and paid to heirs, and whether life insurance policies should be maintained to fund buyouts.

Anti-dilution and capital call provisions: Define procedures for additional capital contributions, whether partners can be compelled to contribute more capital, and consequences for partners who refuse (dilution of ownership, forced exit, or conversion to limited partner status).

Common mistakes when creating and managing a KLG

Underestimating unlimited personal liability: Many partners intellectually understand unlimited liability but fail to grasp its practical implications until faced with a lawsuit or insolvency. The risk is not theoretical: if the partnership incurs debts exceeding its assets, creditors will pursue partners' homes, savings, and other personal property. This risk is compounded by joint and several liability—you are fully liable for debts created by your partner's decisions, even without your knowledge or consent.

Absence of a written partnership agreement: Relying on verbal agreements or informal understandings is a recipe for disaster. Without a written agreement, Swiss law applies default rules that may not reflect partners' intentions, particularly regarding profit distribution (equal shares regardless of capital contributions), decision-making authority (unanimous consent required for major decisions), and exit procedures (partnership dissolves upon any partner's withdrawal).

Inadequate tax planning: Failing to understand pass-through taxation can result in unexpected personal tax liabilities. Partners must pay income tax on their share of partnership profits even if those profits are retained in the business rather than distributed. This can create cash flow problems if partners lack liquid funds to pay taxes on undistributed earnings. Proper planning includes quarterly estimated tax payments and coordination with personal tax advisors.

Unclear management authority and decision-making processes: Without explicit provisions, all partners have equal management rights and all major decisions require unanimous consent, which can paralyze operations during disagreements. Successful partnerships clearly define which decisions require unanimous consent (e.g., admitting new partners, selling major assets, changing business purpose) versus simple majority or delegation to specific partners.

Insufficient insurance coverage: Given unlimited personal liability, thorough business insurance is essential but often inadequate. Partnerships should maintain professional liability insurance, general liability coverage, and potentially directors and officers (D&O) insurance to protect against claims arising from management decisions. Consider umbrella policies providing coverage beyond standard limits.

Neglecting employment law compliance: If employees are hired, labor law obligations apply, including proper contracts, social insurance registration, and payroll management. Failure to comply can result in significant penalties and back payments.

Dissolution and partner exit

Grounds for partnership dissolution

Swiss law recognizes several automatic triggers for partnership dissolution:

Mutual agreement of all partners: The simplest and most common method, requiring unanimous consent to dissolve and liquidate the partnership.

Expiration of the partnership term: If the partnership agreement specifies a fixed duration, the partnership automatically dissolves at the end of that period unless partners agree to continue.

Death or legal incapacity of a partner: Unless the partnership agreement provides for continuation with heirs or remaining partners, the death or incapacity of any partner triggers automatic dissolution.

Bankruptcy or insolvency of a partner: If a partner is declared bankrupt or enters insolvency proceedings, the partnership dissolves unless the agreement provides otherwise.

Court order: A partner can petition the court for dissolution if continuation is no longer reasonable due to serious disputes, breach of fiduciary duties, or fundamental disagreement on business direction. Courts will order dissolution if the partnership's purpose has become impossible or illegal.

Liquidation process

Once dissolution is triggered, the partnership enters liquidation, which involves several mandatory steps:

Appointment of liquidator(s): Partners may serve as liquidators or appoint external professionals. Liquidators must be natural persons residing in Switzerland and are responsible for winding up the partnership's affairs.

Creditor notification: Liquidators must publish a debt call in the Swiss Official Gazette of Commerce (SHAB), notifying creditors to submit claims. This publication is mandatory and triggers a waiting period before final dissolution.

Asset valuation and realization: Liquidators inventory all partnership assets, settle ongoing contracts, collect receivables, and sell assets as necessary to generate cash for debt repayment.

Debt settlement: All partnership debts must be paid in full before any distribution to partners. If assets are insufficient, partners must contribute from personal wealth to cover shortfalls due to unlimited liability.

Distribution of remaining assets: After all debts are paid, remaining assets are distributed to partners according to the partnership agreement or, absent specific provisions, in proportion to each partner's capital account balance.

Commercial Register deletion: After completing liquidation and the creditor notification period, liquidators file for deletion of the partnership from the Commercial Register, formally ending its legal existence.

Consequences of partner exit

If one partner withdraws while others wish to continue, the partnership typically dissolves unless the partnership agreement explicitly provides for continuation. The departing partner is entitled to receive the value of their partnership interest, calculated according to the buyout formula in the partnership agreement or, absent such provisions, based on the fair market value of their share of partnership assets.

The departing partner remains liable for partnership debts existing at the time of exit for up to five years under Swiss law, even after receiving their buyout payment and ceasing involvement in the business.

Disclaimer: This article provides general information on Swiss general partnerships and does not constitute legal, tax, or financial advice. Business formation decisions should be made in consultation with qualified Swiss legal and tax professionals who can assess your specific circumstances and objectives. SwissFirma accepts no liability for decisions made based on this information.