General partnership

The general partnership is a form of partnership regulated by the Swiss Code of Obligations (art. 552-593 CO). It is characterized by the active participation of all partners in the management and administration of the company. A general partnership is a form of partnership in which two or more individuals join together to run a business under a common name (art. 552 para. 1 CO). The partners of a general partnership are considered to be co-entrepreneurs, and are required to contribute to the business by providing financial resources, skills or other means necessary for the operation of the business. They are jointly and severally liable for the company’s debts. A general partnership is managed by all the partners, all of whom have the power to make decisions for the company. However, the articles of association may provide for the appointment of a managing partner to manage the business.

Taxation

Although a general partnership is not taxable as such, its partners are subject to direct taxation on their remuneration, their share of profits, interest on equity capital and their assets. Each member of the partnership is taxed on the basis of his or her share of the company’s income and assets, as well as private income and assets. Tax planning is an option. However, the owner of a general partnership will generally pay less tax if the registered office and private domicile are not in the same place.

Advantages of a general partnership

General partnerships offer many advantages for entrepreneurs. Here are just a few of them: Setting up a general partnership is relatively straightforward and inexpensive. The articles of association can be drawn up freely by the partners, without any special formalities. A general partnership enables you to benefit from the skills and resources of all the partners. This can be a considerable advantage for small businesses that don’t have all the resources they need to grow. Company partners can be involved in management and decision-making for the business. This can lead to greater involvement of each partner in the company’s development. The general partnership offers great flexibility in terms of business management. The articles of association can be easily modified to adapt the company to its changing environment.

Disadvantages of a general partnership

Although the general partnership has many advantages, it also has some disadvantages. One of the most significant disadvantages of a general partnership is the unlimited liability of the partners. Each partner is personally liable for the company’s debts and obligations, regardless of his or her initial financial contribution. Unlike corporations, it is often difficult to transfer shares in a general partnership. Partners have specific rights linked to their involvement in the business, such as voting rights and the right to a share in profits, which cannot easily be transferred. In addition, partners need to be cautious when looking for investors, as they may demand a larger stake in the business, or require guarantees from partners to cover their investments.

Incorporation of a general partnership

Setting up a general partnership is relatively straightforward. It does, however, require compliance with certain legal formalities. Here are the main steps involved in setting up a general partnership: The Articles of Association must define the operating rules of the general partnership. In particular, they must specify the name of the partnership, the amount of share capital, the names and contributions of the partners, the distribution of profits and losses, and so on. The articles of association must be signed by all partners. A notice of incorporation must be published in the Swiss Official Gazette of Commerce (SOGC) to inform third parties of the company’s creation. In particular, the notice must state the company’s name, the identity of the shareholders and the amount of share capital. Finally, the company must be entered in the commercial register of the place where it has its registered office (art. 554 CO).

Dissolution and liquidation

A general partnership may be dissolved for a variety of reasons (art. 545 ff CO): the term stipulated in the Articles of Association has been reached, a unanimous decision by the partners, serious misconduct by a partner, etc. The dissolution of a general partnership is a matter for the partners to decide. The company is then liquidated (art. 548 ff CO). This consists of realizing the company’s assets, paying its debts and distributing the balance among the partners. The general partnership is a legal form suited to entrepreneurs who want to run a business with several partners. It offers many advantages, such as simplicity of management, flexibility of bylaws and limited liability of partners. However, the disadvantages of this legal form, notably the unlimited liability of the partners, should be carefully weighed up before embarking on its creation. It is advisable to seek the advice of a lawyer specialized in corporate law, to ensure that all legal formalities are complied with, and to benefit from personalized support throughout the life of the company.