Which legal form is better suited for young entrepreneurs? GmbH and AG
When speaking of a public limited company (AG), one is principally referring to a corporate entity. In contrast to a limited liability company(GmbH), the relationship to the owners is less relevant.
Yet both forms of companies are suitable vehicles for running a for-profit enterprise. Both have the advantage of being legal entities and thus limiting liability to the assets of the company. Also by the creation of the company name, with the exception of the suffix GmbH and AG, differences in restrictions are not present. Young entrepreneurs should therefore consider the following factors in weighing their decision on which type of entity best suits their business’s interests.
Minimum capitalization
GmbH: CHF 20,000 (fully paid in); issued in equity shares with a face value of no less than CHF 100.
AG: CHF 100,000 (CHF 50,000 paid in); issued in shares with a face value of no less than CHF 0.01.
The equity shares of the GmbH, in contrast to the AG shares, are not tradable on the market.
Position of the Partners
GmbH: The partners are obliged to pay their equity share in full. Moreover, they must act loyally in refraining from anything that may run counter to the interest of the company. By statute in the articles of associations, this can by codified into a non-competition clause, which prohibits taking part in competing activities. Additionally, each shareholder is entitled to management of the company.
AG: The shareholder is only liable for the value of his or her share. Other duties fall upon the board of directors and persons entrusted by the management.
Transfer of shares
GmbH: The transfer of equity shares is subject to approval of the general assembly of the company, which may prohibit such a transfer without explanation. The statutes in the articles of association may even prohibit the transfers of shares outright.
AG: Shares are freely transferable. By statute, registered shares may be subject to transfer restrictions, i.e. their transferability is limited.
These are only the most substantive of the differences between these two forms of business entities. Most commonly the GmbH will be the most appropriate vehicle for a young entrepreneur to launch their company, though there are numerous exceptions.
