Simple partnership

The simple partnership in Switzerland is considered to be the simplest form of partnership, and is governed by the Swiss Code of Obligations (art. 530-551 CO).
It is created by a contract between two or more people who wish to combine their resources and skills to achieve a common goal (art. 530 para. 1 CO).
Unlike other forms of company, the simple partnership is considered a contract rather than a company, even though it is the origin of all other forms of company.
However, a company can only be classified as a simple partnership if it does not meet the criteria for another form of company (art. 530 para. 2 CO).

Advantages of a simple partnership

The simple partnership offers a number of advantages, including great flexibility for partners in defining the terms of their collaboration and the sharing of profits and losses.
Unlike other forms of company, it is simple and inexpensive to set up.
What’s more, it does not need to be published in the Commercial Register, which preserves the confidentiality of the partners.

Disadvantages of a simple partnership

The simple partnership also has significant disadvantages.
Firstly, the partners are jointly and severally liable without limitation for the debts of the partnership, which means that each partner can be held responsible for the totality of the partnership’s debt, and creditors can demand payment from one or more partners.
In addition, the simple partnership has no legal personality, which means that the partners are considered to be the partnership itself.
This can lead to difficulties in terms of succession or transfer of shares.
Finally, the société simple may encounter difficulties in obtaining major financing, as it cannot issue equity securities.

Incorporation and management of a simple partnership

Simple partnerships are often set up for a limited period, as in the case of construction consortia which dissolve once the project is completed.
They are regarded as communities of economic interests and have no legal personality or official name, which can lead to companies being set up without the participants being aware of it – a so-called “de facto company”.

In Switzerland, the formation of a simple partnership does not require any particular form, which means that it is not possible to register it with the Commercial Register.
However, it is advisable to draw up a partnership agreement signed by all partners.
This contract can include information such as the company’s management rules, division of tasks, powers, etc.

Each partner must make a contribution to the simple partnership, which may be in the form of money, receivables or property (art. 531 para. 1 CO).
In the absence of provisions to the contrary in the partnership agreement, profits and losses are divided equally between the partners, irrespective of the nature and value of their contribution (art. 533 para. 1 CO).

In a simple partnership, management is generally the responsibility of the partners.
Indeed, important decisions are taken with the unanimous agreement of all partners (art. 534 para. 1 CO).
Nevertheless, the partners may appoint one or more managing partners to manage the company on their behalf.
The managing partners, whether associates or third parties, are appointed and dismissed by the associates, and are responsible for the day-to-day management of the société simple, while complying with the applicable legal provisions and keeping the associates informed of the company’s financial situation.
Art.
536 of the Swiss Code of Obligations prohibits all associates from engaging in activities that are contrary or detrimental to the company’s purpose, for their own personal ends.

Taxation

Ordinary partnerships in Switzerland are subject to the same taxes as other types of company, such as income tax and capital tax.
Unlike other types of company, the simple partnership has no legal personality separate from that of its partners.
As a result, profits generated by the partnership are taxed directly at the level of the partners, according to their respective shares in the company’s profits.
In addition, partners are also subject to wealth tax, which is calculated on the basis of their total assets, including their share in the société simple.

Use a lawyer to ensure that all legal rules are respected

Although the simple partnership is easy to set up and offers tax advantages, it also entails risks of liability and conflicts between partners.
So it’s crucial that potential partners are well informed about the advantages and disadvantages of the simple partnership.
It is advisable to consult a lawyer to ensure that all legal rules are respected when setting up a simple partnership.