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Starting a new Business in Geneva – An Interview with Daniel Loeffler
In the canton of Geneva, over 3,000 new businesses typically register each year to take advantage of the favourable business environment, limited red tape and often manageable barriers to entry that entrepreneurs need to overcome for their business to successfully start. The Department of Economic Development in Geneva Service de la Promotion Economique de Genève – SPEG – provide free of charge advice for helping you to create and build your business. Through an extensive network of expertise, SPEG are able to provide customized services regardless of the stage of development of your project.
Daniel Loeffler, Director for the SPEG, shares with us some of his thoughts around the business setup process in Geneva and the key issues entrepreneurs typically face in getting their businesses up and running.
How many businesses are started in Geneva each year on average ?
In the canton of Geneva we see on average 3,000 – 4,000 new companies set up each year, with the number of new company registrations dropping in the summer months of July and August. In 2012, we actually had 3,106 new companies that registered. This number includes companies both with and without employees. Of the 3,106 new companies in 2012, 1,600 companies had employees and the remainder (almost 50%) did not have employees. Here, having employees is defined as ‘a company with 1 or more members of staff’.
What are the key issues faced by a new foreign person in Geneva, perhaps with limited French language skills, who wishes to start a new business ?
The key issue, in my view, is that the new company has a clear view of the business they want to start, and its viability. In addition to this, it is critical to have a good understanding of your market, how to finance your business and be clear who your customers are and where to find them. There is also a cultural way of doing business in Geneva that may also differ from other countries and that is important.
To set up a business, you do need a valid working permit and to choose the legal status of the company. However, in terms of the administrative steps and processes to start a business, it is actually quite simple in Geneva. You need to understand the steps to starting a business, even if it is quite easy to do so in Switzerland. English papers are also available to help explain the process to Entrepreneurs.
In addition, there are 3 broad business types from a legal standpoint; a) Self-employed, b) LLC (Limited Liability Company) and c) Corporate. You need to understand the differences between these.
Other key issues I would say are a) the Social Security System, b) Taxation and c) the Physical registry of the business in the ‘Registre du Commerce’ http://rc.ge.ch/ecohrcmatic/ (trade register)
What advice would you give a new start up in Geneva today if someone came into the office seeking your services ?
Focus on the project itself and not on the administrative process. Always be sure that you have actual customers and can sell to them. Without customers, there will be no business.
Another area that is crucial is clearly understanding the Work Permit situation. For example, there are strict quotas for Non-Europeans to enter Switzerland and Work Permits are a lot harder to get than for Europeans. To be granted a work permit, you need to prove your business is viable and can bring some Economic Value, to Geneva. If you are from outside Europe, you will also normally need to demonstrate a good business plan. For Europeans, there really are no serious issues at all.
In addition, it is important to know that some activities in each canton are regulated and controlled. For example, banking and brokerage functions, headhunting, legal and notary work, and opening a restaurant (where certificates are needed) are regulated functions. At the same time, there are also cantonal differences in what is regulated. For example, a restaurant business in Zurich is not classed as a regulated activity, whilst opening a restaurant in Geneva is. However, compared with some countries, the barriers to starting most new businesses are quite low. A full list of activities that are regulated in Geneva can also be found at www.ge.ch/ecoguichetpmepmi.
Can you give me two or three dos and don’ts for a new business setup ?
I would say, firstly, do make sure you have experience in your field of activity and don`t start without it.
Secondly, do understand your business. For example, we see a lot of people opening restaurants, but they often fail to grasp the fact that they need an overview of all business aspects. For example, there are rules with regard to food, entrepreneurs need to do some accounting, deal with staff, have a certain ability to `sell` to people, etc. You really must appreciate that the business actually requires multiple areas of expertise. Don`t fail to appreciate all these aspects and remember that a salaried job, by comparison, is much more defined in its scope and has a clearer framework for the day`s activities.
Finally, do have a business plan and understand the key figures. Be sequential, plan well and don`t underestimate planning. This also means developing key financials (Revenue and Cost models), Critical Success Factors, administrative planning and ultimately be ready to invest your time. Know where the business is going.
Can you give an idea as to the costs involved in a business setup ? Is it possible to get state aid ?
Administrative costs are quite low. To register a Limited Liability Company (LLC or Sarl) typically costs CHF 5,000. To register a Corporate company (SA), is CHF 8,000. The costs are primarily due to fact that you have pay a notary (around CHF 2500).
For corporate start-ups, there are other costs as you have to invest your equity into the business as part of the start-up process. For a Sarl (a Limited Liability Company) this is CHF 20 000. For a Corporate SA (a Public company), CHF 100,000 is required, of which CHF 50,000 must be fully paid up at formation. This money is typically locked in for a period and in effect belongs to the company, but can still be withdrawn, e.g. to pay salaries. For corporate entities, the company must be registered, including for social security.
Ultimately, this question really depends on the type of business and so there is quite a range as you might expect. For example, a restaurant business will typically cost CHF 200–300,000 to set up, with 50% provided by the business owner (and friends and family) and the other 50% provided by banks or support agencies, including the International Enterprise Foundation of Geneva (IEFG).
Some tech start-ups will typically cost CHF 500,000 – CHF 1 million. Biotech companies can cost much more and it can take 10 years of research to bring a new product to market, at a cost of up CHF 1 billion due to extensive medical / clinical trials, etc. Equally, for a business consultant or someone in a specific service industry, the investment is not so high as you may only require a desk and PC at home and so costs to start the business can be very low. Once again, having customers is the key!
There is a new business support system in place in terms of aid which consists of three pillars.
a) Economic Development office of Geneva: Information is available directly with regards to funding and setup. This is a good starting point for orienting potential Entrepreneurs.
b) Innovation Incubator. This is available for specific businesses. The aim is to support specific high barrier to entry businesses that include; Biotech, life sciences, IT, some mechanical industries, and new Entrepreneurial activity.
c) Financing. This is complementary to bank financing (which is not normally available for start-ups). If a bank refuses funding (they may ask for 3 years track record, cash flow statements, etc), then you can go to the FAE (Fondation d’Aide aux Entreprises) for guarantees and support.
Is there any requirement or specific process to register a new business ? Must the business be registered before trading starts ?
Whatever the specifics of the business, it is also always important to understand that the key things are:
a) Have a valid work permit,
b) Have the status (legal structure) of the company decided upon,
c) If the business conducts a regulated function, then it must be registered
d) If you start as self-employed, you are also reliant on yourself, which entails two possible disadvantages. 1) You are liable and can lose your assets in extreme situations. 2) Also, since you do not pay unemployment insurance, if the business does not work, you will not receive unemployment benefits.
For those registering as self-employed, you initially must have 3 different customers and register for social insurances (AVS) and must register your company (but not with a notary). This is the first thing. This can be done at the Caisse Cantonale de Compensation, Fédération des Entreprises Romandes or a number of other venues (as Social Insurance registration is decentralised), although you cannot register for Social Security (AVS) online yet.
After that, if self-employed, then the company should be entered into the Trade Registry once turnover is CHF 100,000 per year.. Company registration costs for the Trade Register are low for self-employed (CHF 140 if done online and CHF 190 if completed in the office).
In summary, if you are self-employed, the most important things to register for are;
a) Social Security Insurance (AVS)
b) Tax (with the Administration Fiscale Cantonale). Taxes can be paid at year end or on a monthly basis for projected earnings at start-up. It should be remembered that for small companies, a lot of items can be offset against tax liabilities.
c) VAT. This is also important, but you can wait until turnover for the year is CHF 75,000 or more.
The business does not have to be registered before trading starts, unless the business is engaged in a regulated function.
Is there any new legislation or regulation (s) in particular in the last year that has affected your business and how it is run ?
Not recently. The last main regulatory changes took place in 2008, when new laws came in. Essentially, for Limited Liability Companies (LLC) and Corporates (e.g. SA entities), the law was made more flexible and barriers to entry reduced to encourage new business.
You need one Director domiciled in Switzerland who does not need to be Swiss. In short, regulations have been relaxed to make things easier.
Some technical changes have also taken place. These concern accounting structures and changes to VAT (now 8%). It is also the case that when selling into other countries (e.g. France) from Switzerland, then VAT can be complex.
With regard to VAT, as long as your business is in Switzerland, you also have to register for VAT, although technically you do not now need to do this until the business turnover is CHF 75,000 per year. You also get your VAT number 2 days after registering.
Do you know of any other new issues / legislation due to be implemented that may affect a new business start up ?
The last major change was in 2008. I am not aware of any other specific new legislation coming in that may affect a business start up.
In addition to your services, would you recommend any state or public (Canton de Geneva) website that a new business start-up should look at before starting ?
Yes. There are a couple of other useful websites.
At the federal level, http://www.kmu.admin.ch is a good website to refer to if you are an SME (Small / Medium Enterprise).
At the cantonal level, http://www.ge.ch/entreprise offers a lot of useful information for Businesses (Enterprises).
Are there any rules concerning having an ‘online’ presence, e.g. having a website / online sales for a new business ?
There is no specific legislation / regulation relating to having an online presence. Normal data protection laws are in place in Switzerland and other countries as you might expect. You also do need to have an agreement in place to send emails to people accordingly.
Finally, is there any one business area that you see growing at present faster than others ? Is this good news for Geneva ?
Geneva’s key strength is its diversified economy. There are numerous Headquarters of Multinationals here. One industry that is currently strong and is growing is the watch industry. The Biotech sector is also currently doing well, although there have been some high profile companies restructuring, e.g. Merck KGaA, that closed some operations here last year. Other businesses, e.g. banking and finance have been historically strong even if they are currently also in transition.
Additionally, EPFL and some universities are investing, but these businesses need a strong economy to thrive.
Overall, I would say that all business areas are experiencing moderate growth.