The general partnership is a type of partnership governed by the Swiss Code of Obligations (art. 552-593 CO). It is characterized by the active involvement of each partner in the management and administration of the business.
A general partnership is a category of partnership where a group of two or more individuals come together to manage a business under a common business name (art. 552 para. 1 CO).
Members of a general partnership are considered co-entrepreneurs and are responsible for contributing to the business by providing financial resources, skills, or any other means necessary to operate the business. These individuals are jointly and severally liable for the debts of the partnership.
The administration of the general partnership is carried out by all partners who have the power to make decisions concerning the business. However, the statutes may provide for the appointment of a manager responsible for managing the partnership.
Taxation of the general partnership
The general partnership is not considered a taxable entity in itself. Nevertheless, the partners are subject to direct taxation on their own remuneration, as well as their share of the profits, interest on equity, and their wealth.
Each member of the partnership is taxed based on their share of income and wealth in the business, as well as their own private income and assets. Tax planning can be considered to optimize these taxes. However, it is common for the owner of a general partnership to pay less tax if they have their business headquarters and personal residence in different locations.
The general partnership offers various advantages to entrepreneurs, such as the low cost and simplicity of creating such a company. Partners can draft the statutes themselves without having to adhere to particular formalities.
The general partnership has the advantage of leveraging the skills and resources of each of the partners. This can be particularly beneficial for small businesses that do not have all the means required for their expansion.
Partners in a general partnership have the opportunity to be involved in the management and decision-making for the business. This can promote more active participation from each of the partners in the growth of the business.
The general partnership is distinguished by its great flexibility in terms of business management. The statutes can be easily modified to allow the business to adapt to changes in its environment.
Despite its many advantages, the general partnership also has some disadvantages. One of the most significant is the unlimited liability of the partners, meaning that each of them is personally responsible for the debts and obligations of the business, regardless of their initial financial contribution.
Unlike capital companies, it is often complicated to transfer partnership shares in a general partnership. Partners have specific rights linked to their participation in the business, such as voting rights and the right to a share of the profits, which cannot be easily transferred.
Additionally, partners must be cautious when seeking investors, as they may demand a higher stake in the business or require guarantees from the partners to secure their investment.
The main steps in forming a general partnership are relatively simple, but it is important to comply with legal formalities. Firstly, partners must draft statutes defining the operating rules of the general partnership. These statutes must include essential information, such as the business name of the partnership, the amount of share capital, the names and contributions of the partners, the distribution of profits and losses, etc. Then, the statutes must be signed by all partners.
An announcement of formation must be published in the Swiss Official Gazette of Commerce (FOSC) to inform third parties about the creation of the general partnership. This notice must contain information such as the business name of the company, the identity of the partners, and the amount of share capital. Additionally, the partnership must be registered with the competent commercial register where it is based (art. 554 CO).
Dissolution and liquidation
The dissolution of a general partnership can be decided for various reasons (art. 545 et seq. CO) such as the expiration of the term fixed in the statutes, a unanimous decision of the partners, a serious fault of a partner, etc.
Then, the liquidation of the partnership takes place (art. 548 et seq. CO), which involves the realization of the partnership’s assets, the payment of debts, and the distribution of the balance among the partners.
The general partnership is a legal structure suitable for entrepreneurs who wish to carry out an activity in collaboration. It offers many advantages, such as ease of management, flexibility of statutes, and limited responsibility of the partners. However, it is important to carefully evaluate the disadvantages of this legal form.
It is recommended to consult with a lawyer specialized in corporate law to ensure compliance with all legal formalities and benefit from personalized support throughout the life of the company.