Key differences between a branch and a Swiss subsidiary: Understanding distinct business structures
A branch and a Swiss subsidiary are two distinct types of business entity, each with its own characteristics and legal implications. Understanding the differences between these two structures can be essential to making informed business decisions for your location in Switzerland. Here’s a basic explanation of the differences between a branch and a subsidiary:
A branch is a division or extension of an existing company, located in another geographic region or country. It is considered an integral part of the parent company and operates under its direct authority. As such, the branch has no separate legal personality from the parent company. This means that all branch activities are linked to the legal and financial responsibility of the parent company. Branches are often set up to facilitate geographic expansion and offer local services.
On the other hand, a Swiss subsidiary is a distinct business entity, legally separate from the parent company. It is created when the parent company has a majority or total shareholding in another company. In general, a subsidiary is registered as an independent company and has its own legal personality. This means that the subsidiary can have its own assets, debts and liabilities. The parent company generally has control over the subsidiary’s operations and strategic decisions, but must comply with the regulations and legal requirements of the country in which the subsidiary is established.
The key differences between a branch and a subsidiary therefore lie in their legal structure, their degree of autonomy and their relationship with the parent company. A branch is a direct extension of the parent company, with no separate legal personality, whereas a subsidiary is an independent entity with its own legal personality. As a result, responsibilities and legal obligations may vary between the two.
It should also be noted that tax implications and business regulations may differ for branches and subsidiaries. Branches are generally subject to the tax laws and regulations of the country in which they operate, as well as those of the parent company. Subsidiaries, on the other hand, are often considered as separate tax entities, which may entail specific tax benefits or obligations in the country where they are registered.
A branch is therefore a direct extension of the parent company with no separate legal personality, while a subsidiary is a separate business entity with its own legal personality. Branches operate under the direct control of the parent company, while subsidiaries have greater autonomy while still being controlled by the parent company. The structure chosen will depend on the specific business objectives and regulations of the country in which the company wishes to operate.
How do I choose between a branch and a subsidiary when setting up in Switzerland?
The choice between a branch or a subsidiary for setting up in Switzerland depends on a number of factors. Here are a few points to consider in order to make an informed decision:
Legal structure: A branch in Switzerland would be considered a direct extension of the parent company, with no separate legal personality. A subsidiary, on the other hand, would be an independent business entity with its own legal personality. If you wish to have a separate entity, with assets and liabilities distinct from the parent company, then setting up a subsidiary would be preferable.
Responsibilities and liabilities: A branch is generally considered to be under the direct responsibility of the parent company. This means that the parent company is responsible for the debts and legal obligations of the branch. On the other hand, a subsidiary would have its own legal and financial responsibility, which can offer additional protection to the parent company in the event of problems.
Tax and regulatory advantages: Tax and business regulations may vary between branches and subsidiaries in Switzerland. It is important to consult a tax expert such as My Swiss Company – Fiduciary in Switzerland to assess the specific tax implications and advantages offered by each structure. Subsidiaries may benefit from specific tax advantages as independent entities, but they may also be subject to stricter regulations.
Brand image and perception: Setting up a subsidiary in Switzerland can convey an image of stability and local presence, which can be beneficial for building relationships with Swiss customers and partners. A branch, on the other hand, can be perceived as a direct extension of the parent company, with a closer link.
It’s essential to consult local experts, such as lawyers, and experts like My Swiss Company – Fiduciary in Switzerland, who can provide specific advice based on your situation and business objectives. They can guide you in the choice between a branch and a subsidiary, taking into account the legal, tax and regulatory aspects in Switzerland.
Contact us to start your initial consultation today. We’d be delighted to get to know you and work with you to define the next steps in setting up your branch or subsidiary in Switzerland.
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