The simple partnership is considered the most basic form of partnership in Switzerland. It is governed by the Swiss Code of Obligations (art. 530-551 CO) and results from a contract between two or more people who wish to pool their resources and skills to achieve a common goal. Unlike other forms of companies, the simple partnership is considered a contract rather than a company, although it is the origin of all other forms of companies. It is important to note that to be qualified as a simple partnership, a company must not meet the conditions required for another form of company (art. 530 para. 2 CO).

Advantages of the simple partnership

The simple partnership offers several advantages for the partners. It provides them with great freedom to determine the terms of their collaboration and to distribute profits and losses. In addition, the formation of such a company is simple and inexpensive, unlike other forms of companies. Moreover, the simple partnership does not need to be published in the commercial register, allowing partners to maintain their confidentiality.

Disadvantages of the simple partnership

The simple partnership also has some disadvantages. The partners of this company are jointly and severally liable for the debts of the company, meaning that each partner is responsible for the entire debt of the company and that creditors can demand payment from one or more partners. Additionally, the simple partnership does not have a legal personality, meaning that the partners are themselves considered to be the company. This can lead to complications in matters of succession or transfer of partnership shares. Finally, the simple partnership may face difficulties in obtaining significant financing, as it is not authorized to issue participation securities.

Formation and management

Simple partnerships typically have a limited lifespan, like construction consortiums that dissolve once the building is completed. They are perceived externally as economic interest communities and do not have a legal personality or official name. Thus, it is common for them to be formed without the participants being aware, in which case they are referred to as “de facto partnerships”.

In Switzerland, the formation of a simple partnership does not require a specific form. Therefore, it is not possible to register it with the commercial register. However, it is recommended to draft a partnership agreement signed by all the partners. This agreement can include information such as the rules for managing the partnership, the allocation of tasks and competencies.

Each member of a simple partnership is required to contribute to the partnership, which can take various forms, such as a sum of money, a claim, or a property (art. 531 para. 1 CO). In the absence of a contrary clause in the partnership agreement, profits are distributed equally among the members, as are losses, regardless of the nature and value of their contribution (art. 533 para. 1 CO).

The management of the simple partnership is entrusted to the members themselves, who must make all decisions jointly (art. 534 para. 1 CO). However, they can appoint one or more managers to act on their behalf. Managers can be members of the partnership or third parties, and their appointment and dismissal must be decided by the members. They are responsible for the day-to-day management of the partnership and must respect the laws in force as well as the interests of the partnership and the members. Managers are required to inform the members about the financial situation of the partnership.

In addition, members are not allowed to carry out activities that could harm the objectives of the partnership for their own account (art. 536 CO).

Taxation of the simple partnership

Simple partnerships in Switzerland are subject to the same tax regulations as other types of companies. Unlike companies that have a legal personality separate from their shareholders, the profits made by a simple partnership are directly taxed at the level of the partners, based on their respective share in the profits. In addition, the partners are also subject to wealth tax, which takes into account their total assets, including their share in the simple partnership.

A company form easy to establish and tax efficient

In summary, although the simple partnership is a form of company easy to establish and tax-efficient, it also carries risks such as the joint liability of the partners and the possible absence of a distinct legal personality. Therefore, it is important that future partners are aware of the advantages and disadvantages of this type of company. To ensure compliance with legal requirements, it is highly recommended to consult a lawyer.