The general partnership (SNC) is a form of partnership governed by arts. 552 to 593 of the Code of Obligations. It is characterised by the joint and several and unlimited liability of all its partners on their personal assets. While less common than the Sàrl or the SA, the general partnership presents advantages of simplicity and flexibility that make it relevant in certain situations, notably for liberal professions, small family businesses or cooperation between self-employed persons. PBM Avocats advises general partnership partners in Geneva and Lausanne on drafting the partnership agreement and managing relations between partners.
Definition and Essential Characteristics
The general partnership is a partnership without legal personality in the technical sense, but endowed with a certain legal capacity: it may be party to contracts, appear in court and own assets in its own name (art. 562 CO). Its distinctive characteristics are:
- Partners: minimum two, natural persons only (art. 552 para. 1 CO)
- Liability: joint and several and unlimited of all partners on their personal assets (art. 568 CO)
- Capital: no minimum statutory capital; contributions are freely determined
- Commercial register: mandatory registration before the start of operations (art. 552 para. 2 CO)
- Business name: must contain the name of at least one partner
- Taxation: transparent (profits are taxed directly at partner level)
Formation of the General Partnership
Formation of a general partnership does not require a notarial deed. The partnership agreement may be concluded verbally, by conclusive acts or in writing. However, a written and detailed agreement is indispensable in practice to organise relations between partners and avoid disputes. The agreement must address the following points:
- Identity of partners and amount of their respective contributions
- Corporate purpose and business name
- Registered office of the partnership
- Distribution of profits and losses
- Management and representation rules
- Modalities of withdrawal, exclusion and liquidation
- Any non-competition clause
Registration in the commercial register is mandatory before the start of operations. The registration file includes the request, a copy of the partnership agreement (if in writing) and the partners' identity documents. Registration fees are modest.
Management and Representation
In the absence of contrary contractual provision, art. 557 CO provides that each partner has the right and duty to manage the partnership's affairs. Each partner may alone carry out acts of ordinary management, but acts beyond the ordinary scope of business require the consent of all partners. External representation of the partnership — signing contracts in the name of the general partnership — also belongs to each partner (art. 563 CO), unless limitations are registered in the commercial register.
| Aspect | Default Statutory Rule | Contractual Possibility |
|---|---|---|
| Ordinary management | Each partner acts alone | Delegation to a partner or third-party manager |
| Extraordinary acts | Unanimity of partners | Qualified majority provided in the agreement |
| External representation | Each partner represents the partnership | Limitation to certain partners (enforceable against third parties if registered in CR) |
| Profit distribution | Equal shares (art. 557 CO) | Pro rata contributions or any other key |
Partners' Liability
The joint and several and unlimited liability of partners is the most important characteristic of the general partnership from a risk perspective. Each partner is personally liable for the totality of the partnership's debts, without limitation. Creditors may choose to proceed against any partner for the full amount of the claim. The partner who has paid beyond their share has a right of recourse against the other partners for their share (art. 568 para. 3 CO). This liability persists for 5 years after withdrawal from the partnership or its registration in the commercial register (art. 591 CO).
Dissolution and Liquidation of the General Partnership
The general partnership may be dissolved for various reasons (art. 574 CO): expiry of the agreed term, unanimous decision of partners, death, incapacity or bankruptcy of a partner (unless there is a continuation clause), withdrawal or exclusion of a partner, or court decision. Liquidation follows rules similar to those for capital companies, but without calling on creditors in the SOGC. Partners proceed with liquidation jointly, unless a liquidator is appointed. Removal from the commercial register marks the end of the partnership.
General Partnership vs Other Legal Forms
| Criterion | General Partnership | Sàrl | SA |
|---|---|---|---|
| Partners | Min. 2 natural persons | 1 to 100 (natural or legal persons) | From 1 (natural or legal persons) |
| Minimum capital | None | CHF 20,000 | CHF 100,000 |
| Liability | Unlimited and joint and several | Limited to capital | Limited to capital |
| Legal personality | No (limited capacity) | Yes | Yes |
| Fiscal transparency | Yes (taxed at partner level) | No | No |
| Notary required | No | Yes | Yes |
Frequently Asked Questions about General Partnerships in Switzerland
Are the partners of a general partnership liable on their personal assets?
Yes, in full and jointly and severally. Art. 568 para. 1 CO provides that each partner is jointly and severally and unlimitedly liable on all their assets for the obligations of the partnership that cannot be discharged from the partnership's assets. This means that creditors may proceed against any partner for the totality of the debt, without first having to exhaust the partnership's assets. This is the fundamental difference from the SA and Sàrl, whose shareholders only risk their contribution.
How are profits and losses distributed in a general partnership?
In the absence of contrary provision in the partnership agreement, art. 557 CO provides that each partner participates equally in profits and losses, regardless of the value of their contribution. However, the parties may freely agree on a different distribution in the partnership agreement. It is strongly recommended to contractually define the sharing modalities, taking into account each partner's capital and labour contributions. Interest on capital contributions may be deducted before sharing if the agreement so provides.
Can a partner leave a general partnership during its existence?
Yes, according to the modalities provided by the partnership agreement or, failing that, by giving 6 months' notice of termination before the end of a financial year (art. 576 CO). If the agreement is concluded for a fixed term, early withdrawal is only possible for good cause. A withdrawing partner remains liable to third parties for debts contracted while they were a partner, for 5 years from their registration in the commercial register or notification to their creditors (art. 591 CO). The liquidation of the withdrawing partner's share is regulated by the agreement or, failing that, according to the statutory rules.
Is a general partnership subject to corporate income tax?
No. The general partnership is fiscally transparent: it is not an autonomous tax subject. Its profits and losses are directly attributed to the partners and taxed at their level, in their personal tax return. Partners who are natural persons pay income tax on their share of profits. Partners who are legal persons incorporate their share in their taxable result. This fiscal transparency may be advantageous or disadvantageous depending on the partners' personal situation.
When must a general partnership register in the commercial register?
Art. 552 para. 2 CO requires registration of the general partnership in the commercial register before the start of operations. Registration is constitutive for acquiring the status of a general partnership; before registration, the partnership is treated as a simple partnership. The business name must contain the name of at least one partner with an indication of the existence of a partnership (for example 'Smith & Co.'). Failure to register does not exempt partners from their joint and several liability.