Starting a Company in Switzerland – will I Jeopardize My Residence Permit?

23 September 2024

What is a Third-Country National?

The residence status and, therefore, the legal possibilities and risks differ in Switzerland between nationals from EU-EFTA countries and nationals from third countries. A third-country national is someone who is not a citizen of Switzerland or an EU/EFTA country. Some third-country nationals who are already employed in Switzerland consider using their expertise to start their own company in Switzerland. They wonder if they would thus jeopardize their right to reside in Switzerland. This blog post provides a brief overview of what third-country nationals should consider when starting a business.

Starting a Company in Switzerland

The most important question entrepreneurs ask themselves is whether to establish a sole proprietorship or a corporation. For questions regarding sole proprietorships, we generally refer to this post. This post is directed at third-country nationals who wish to establish a corporation directly.

Is Residency in Switzerland a Mandatory Requirement?

In principle, anyone can establish a corporation in Switzerland. This can be done either from within Switzerland or from abroad. However, the company must have at least one person with a residence in Switzerland who is authorized to represent it. This person does not necessarily have to be a founder. If all shareholders reside abroad, lawyers often take on the task of appearing in the commercial register as authorized representatives. Especially if only third-country nationals are involved in the company, there is a risk of an organizational deficiency if all third-country nationals leave Switzerland. Therefore, it may be advisable to also list someone as an authorized representative who will definitely remain in Switzerland.

Starting a Company – Will I Jeopardize My Residence Permit in Switzerland?

As mentioned, third-country nationals can also start companies in Switzerland. If the third-country national already has a residence permit in Switzerland, dealing with the authorities is generally a bit less burdensome than if the third-country national is new to Switzerland. When applying for a residence permit, documents related to the new company must be submitted to the authorities. Specifically, the cantons require a business plan for the first three or five years (depending on the canton). In particular, the business plan should include the expected revenue, the expected profit, and the development of personnel.

Swiss authorities focus on whether the company will have a sustainably positive impact on the Swiss labor market when founded by third-country nationals. This could be indicated by (but not limited to):

• The company diversifies the Swiss economy.
• The company makes investments.
• The company creates jobs.
• The company generates new business at the Swiss economic hub.
• The founders can demonstrate existing business relationships with other Swiss companies.
• Etc.

These features help the authorities assess whether an authorization under Article 23, Paragraph 3 of the Foreign Nationals and Integration Act (AIG) should be granted. The authorities particularly emphasize that, for startups, overall economic interest, the country's innovative capacity, and the implementation of academic findings from research are also taken into account. The authorities repeatedly stress that each case is considered individually.

Suddenly an Employer

Founders often forget that their own company is now an employer. The founders can (or must) hire themselves as employees of the company. This requires, among other things, affiliation with an compensation office (Ausgleichskasse) and a pension fund (Pensionskasse, Vorsorgestiftung). Accident insurance (Unfallversicherung) is also necessary. Furthermore, the founders are not insured against unemployment. If other people are to be employed, the company must comply with the regulations regarding the preference for employees from Switzerland or EU-EFTA countries. The company must also be aware of which of its employees are subject to source tax (Quellensteuer). It's the company's duty to report and settle any source tax matters.

If a third-country national wants to bring acquaintances from their home country to Switzerland and involve them in their own company, they should seek advice beforehand. Otherwise, unpleasant surprises may result. As a rule of thumb: the fewer specialists available in a sector from Switzerland or the EU-EFTA, the more likely it is that the authorities will grant a third-country national a residence permit. The ratio in practice is 3:1 or 5:1. According to the Staatssekretariat für Migration, sought-after professions include executives (management positions), specialists in business administration in management or organizational analysis, engineering professions, specialists in healthcare, and university and college teachers. STEM professions (science, technology, engineering, and mathematics) are also among the most sought-after workers. The list is not exhaustive.

Do not make the mistake of employing a third-country national for an obviously low salary. In such a case, the authorities will not grant a residence permit (Article 22 AIG). Even if the application is resubmitted with a corrected higher wage, the employer has already unnecessarily lost trust. The founders themselves have a bit more flexibility. The amount of salary they pay themselves falls under entrepreneurial freedom. In any case, however, the founder must have sufficient financial resources left to cover living expenses. If you intend to raise funds for your company, we recommend that you read this article with 8 FAQ's from our Startup Desk.

Summary

As outlined, it is possible and worthwhile for third-country nationals to start a business in Switzerland. However, there are a number of special regulations that must be observed. As a rule of thumb: seek advice first and formally complete the establishment—only then resign from your job. Because losing your job can endanger your residence permit in Switzerland.

For questions regarding work and residence in Switzerland, our immigration team is happy to assist.

Authors: Urs Haegi, Lionel Battegay