You already own the machines, vehicle or software your business needs, but you may prefer not to pay all of your future company’s capital in cash. A contribution in kind allows you, subject to certain conditions, to use assets you own to pay in that capital.
The idea is simple. Putting it into practice takes more care: a useful asset is not automatically eligible, and its value does not turn into money in the bank. Here is how to prepare the transaction and avoid the most common misunderstandings.
At a glance
- A contribution in kind is an asset transferred to a company in exchange for membership interests or shares.
- The asset must be recognisable on the balance sheet, transferable, freely available to the company and capable of being sold to a third party.
- A Swiss LLC (Sàrl/GmbH) requires at least CHF 20,000, fully paid in. A company limited by shares (SA/AG) requires at least CHF 100,000 in share capital; at incorporation, at least 20% of each share and CHF 50,000 in total must be paid in.
- The documentation includes a contribution agreement, an incorporation report and written confirmation from a licensed auditor.
- Equipment on the balance sheet does not pay the bills: you also need cash to get the business running.
Understanding contributions in kind
Instead of paying only cash into a capital payment account, you transfer an asset to the company. In return, you receive membership interests in an LLC or shares in an SA. This can happen at incorporation or as part of a capital increase.
The asset becomes the company’s property. You can no longer sell it in your own name or simply take it back because you previously owned it. Your ownership interest in the company and the asset you contributed are now separate things.
A delivery vehicle, professional printers or rights to software can therefore help fund the company’s share capital. Work you promise to perform over the coming months cannot.
Example: equipment does not create cash
In this illustrative example, you incorporate an LLC using 3D printers with an accepted contribution value of CHF 20,000. They cover the CHF 20,000 share capital. The company owns the machines, but it has received no cash to pay rent or buy raw materials.
If you also pay in CHF 10,000 in cash, that is additional funding. Its nature must be agreed and documented: an increase in share capital, another equity contribution or a loan from the member. It does not appear automatically because the machines originally cost more to buy.
The opening balance sheet
Take the CHF 20,000 of machines and assume the member then lends CHF 10,000 to the LLC. Before incorporation costs and other transactions, the simplified balance sheet looks like this:
| What the company owns | CHF | How it is financed | CHF |
|---|---|---|---|
| Contributed machines | 20,000 | Share capital | 20,000 |
| Bank balance | 10,000 | Loan from the member | 10,000 |
| Total | 30,000 | Total | 30,000 |
The company has CHF 10,000 available for payments, not CHF 30,000. It also owes the member CHF 10,000. Share capital appears on the equity and liabilities side as a source of funding; it is not a second cash reserve that can be spent.
This distinction becomes crucial when customers pay later. A machine may start producing tomorrow while your first customer pays only two months from now. Your budget must cover that gap: raw materials, rent, insurance, salaries and social security contributions.
Compare the full cost of both options
Compare two complete scenarios. In the first, the assets are used to pay in the capital. In the second, the capital is paid in cash and a separate purchase of the assets by the company is considered. Compare preparation, audit and notarial fees, tax consequences and the cash left over. An arrangement requiring less cash at the outset is not necessarily cheaper overall.
A contribution in kind makes particular sense when the company genuinely needs the assets and their value is easy to substantiate. It becomes more difficult if most of the capital rests on poorly documented software, slow-moving inventory or a receivable whose payment is uncertain.
Which assets can you contribute?
A wide range of assets may qualify. What matters is less the asset category than the rights actually being transferred and the reliability of the valuation.
| Proposed asset | What to check |
|---|---|
| Machines, vehicles and computers | Ownership, condition, current value and any third-party rights |
| Furniture and inventory | Detailed inventory, quantity, condition and resale prospects |
| Software, patents and trademarks | Ownership of the rights, transferability and a defensible value |
| Shares or other securities | Ownership, transfer restrictions and the proposed value |
| A receivable from a third party | Existence, assignability and prospects of collection |
| Land or buildings | Valuation, encumbrances, financing and land register formalities |
For software, paying the developer does not always prove that you own all the necessary rights. Review the contracts, licences and components used. Similarly, a leased vehicle is generally not an asset whose ownership you can freely transfer.
A receivable from a customer must be distinguished from a claim you hold against the company itself. The latter may involve payment of capital by set-off, which has its own mechanism and documentation requirements.
If you contribute a business already operated as a sole proprietorship, the issues extend beyond transferring an individual asset: debts, contracts and tax consequences also need review. Our article on converting a sole proprietorship into an LLC (in French) covers that situation.
Prepare a record for each asset
Create a table with the exact description, owner, purchase date, proposed value, supporting documents and any encumbrances. For a machine, add its serial number and condition. For software, attach the agreements assigning the rights. For inventory, distinguish saleable items from obsolete stock.
| What to document | Illustrative example: a machine |
|---|---|
| Identification and ownership | Model, serial number, purchase invoice and owner’s identity. |
| Current condition | Date first used, maintenance, photos and known defects. |
| Proposed value | Comparable second-hand prices or an expert valuation; explain any difference from the purchase price. |
| Third-party rights | Leasing, retention of title or security interests: specify the restrictions and obtain the necessary consents. |
This preparation avoids a common obstacle: discussing the price before ownership or transferability has been established. It also makes agreement between founders easier, because everyone can see exactly what the company receives in exchange for their ownership interests.
Legal requirements
Article 634 of the Swiss Code of Obligations (in French) sets four cumulative requirements. The asset must be eligible for recognition on the balance sheet, transferable into the company’s assets, freely available to it from registration in the commercial register and realisable by transfer to a third party. For real estate, the company must have an unconditional right to request registration in the land register.
In practice, prepare purchase invoices, inventories, contracts, proof of ownership and valuation evidence. An old invoice helps prove the purchase; it does not prove that the asset is still worth that amount today.
Who values the assets and who verifies the report?
The founders describe the nature and condition of the contributions and explain why their valuation is appropriate in the incorporation report. A licensed auditor reviews that report and confirms in writing that it is complete and accurate, under Articles 635 and 635a CO (in French). A specialist valuation may be needed to support the value of real estate or an intangible asset.
This incorporation review remains necessary even if the company will later qualify to opt out of a limited audit of its annual accounts. These are two separate engagements.
Overvaluation can harm the company and its creditors. It can also distort the allocation of ownership between founders. Agree on the valuation method and evidence before discussing each person’s percentage.
What must the articles of association state?
The articles of association must specify, among other things, the asset and its value, the contributor’s identity, the interests or shares issued in exchange and any other consideration provided by the company. These rules also apply to an LLC through Article 777c CO. The contribution must be documented in the file submitted to the commercial register.
Capital requirements for an LLC and an SA
The principle of contributing assets and the verification process are similar for both legal forms. The main differences concern capital requirements and company organisation.
| Requirement | LLC (Sàrl/GmbH) | SA/AG |
|---|---|---|
| Minimum capital in Swiss francs | CHF 20,000 | CHF 100,000 |
| Payment at incorporation | Paid in full | At least 20% of each share and CHF 50,000 in total |
| What the contributor receives | Membership interests | Shares |
| Contributions in kind permitted | Yes | Yes |
Saying that an SA must always pay in “50% of its capital” is imprecise. For an SA with CHF 100,000 in capital, the CHF 50,000 minimum does amount to half. With higher capital, the calculation must also satisfy the minimum of 20% per share.
You can combine contributions in kind and cash. The choice of legal form then depends on the business, its owners and the funding sought. Our articles on the Swiss LLC and the Swiss company limited by shares explain the differences.
Contributing land or buildings
For a real estate contribution, involve the notary, auditor and, if the property is financed, the bank early enough. Check the property’s value, any debts to be assumed, security interests and loan terms. The property’s gross value is not necessarily the net value available to cover the capital.
A real estate transfer requires a public deed and land register formalities. Article 634 CO allows a single public deed drawn up by a public official at the company’s registered office when the contribution includes properties in several cantons.
Pre-emption rights, co-ownership, protection of the family home or restrictions on property acquisition may apply, depending on the property and the parties. Being married does not automatically mean every real estate contribution requires spousal consent: the notary must examine the specific circumstances.
Tax and construction financing
Land register fees, property transfer duties and any taxes depend on the canton and the transaction. Contributing a property to a company you own does not guarantee tax neutrality. Have the cost of the transfer calculated before signing.
If the land is intended to support a construction loan, the bank must approve the change of ownership and proposed security. Do not assume that financing granted to you personally will transfer unchanged to the new company.
Incorporation steps
- Prepare an inventory. Identify each asset, its owner, any encumbrances and the rights to be transferred.
- Establish a defensible value. Gather supporting documents and obtain any necessary expert valuations.
- Arrange the review. Involve the auditor early so that a problem does not emerge the day before your appointment with the notary.
- Prepare the documents. The contribution agreement, incorporation report, auditor’s confirmation and articles of association must be consistent.
- Deposit the cash portion if part of the capital is paid in cash.
- Execute the incorporation deed and submit the file to the commercial register, with the required documents and application.
- Complete the transfer and accounting. Check any specific registrations, the availability of the assets and their treatment in the opening balance sheet.
Reconcile the inventory, agreement, articles and opening balance sheet: the same asset should be described at the same value throughout the file. At the same time, prepare a cash flow budget for the first few months.
Conclusion
A successful contribution in kind combines three things: assets the business really needs, a defensible valuation and enough cash to start operating. Begin with the inventory and budget, then coordinate the legal documents and verification. This will show you what the company will own, what it will owe and what it can actually afford to pay.
Frequently asked questions
Can you set up a Swiss LLC using equipment alone?
Yes, if the eligible contributions fully cover the CHF 20,000 capital and the incorporation documentation meets the requirements. You must still fund expenses that require available cash.
Can you contribute your work or an idea?
A promise to work or an idea alone does not meet the requirements for a contribution in kind. An existing intellectual property right may be considered if it is transferable, realisable and sufficiently documented.
Is an auditor needed for a small contribution?
The small size of a contribution does not, by itself, exempt you from the incorporation report and its verification. Exemptions described in articles about other countries should not be applied to Swiss law.
Can you contribute an asset worth more than the capital?
Yes, but the treatment of the excess and any other consideration must be defined. The surplus does not create cash. The legal documents and opening balance sheet must accurately reflect the agreed transaction.
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Romain Prieur is a Swiss certified public accountant and the founder of Entreprendre.ch. With more than ten years of experience in auditing and supporting businesses in Switzerland, he advises entrepreneurs on company formation, accounting and taxation.
