Accounting for a simple partnership: contributions, sharing and taxes

Two self-employed people sharing an office, a consortium of companies on a building site, partners buying land to build on and resell: many form a simple partnership without knowing it. It is the lightest form in Swiss law — a contract, with no registration and no minimum capital. Its accounting has a few particularities that are worth knowing before you start.

A partnership without legal personality

A simple partnership is a contract by which two or more persons join together to achieve a common purpose; it is the form that applies when no other form fits (Art. 530 of the Code of Obligations, CO). It has no legal personality and cannot be entered in the commercial register: it is the partners, together, who are the owners, creditors and debtors. No formality is required — a simple partnership can come into being without its partners realising it — and it may appear to third parties under a common name.

A few rules that directly affect the accounts:

• each partner makes a contribution — money, assets, work — equal to that of the others unless otherwise agreed (Art. 531 CO);
• the partnership's assets are owned jointly by the partners (Art. 544 para. 1 CO);
• unless otherwise agreed, profits and losses are shared equally, whatever the value of each partner's contribution (Art. 533 CO) — hence the value of a written contract;
• towards third parties, the partners are jointly and severally liable for obligations entered into together (Art. 544 para. 3 CO).

What accounts must be kept?

The law does not settle the question expressly. The duty to keep accounts covers sole proprietorships and partnerships: accounts of income, expenditure and assets below CHF 500,000 of turnover, full accounts from that amount (Art. 957 CO). Before 2013, the Federal Supreme Court held that a simple partnership, since it cannot be registered, was not subject to that duty; since the revision of accounting law, cantonal authorities have taken different views — some apply it, others do not, while considering that the partners' own duty extends to the joint activity.

What is certain, whichever reading is adopted:

• every partner may inspect the partnership's books and papers (Art. 541 CO);
• each year, the partnership gives the tax authorities a statement of each partner's share of its income and assets (Art. 129 para. 1 let. c DFTA);
• a self-employed partner attaches their accounts to their tax return or, if they keep simplified accounts, a statement of income, expenditure, assets, private withdrawals and private contributions (Art. 125 para. 2 DFTA), and keeps their supporting documents for ten years.

In practice, even when the law only requires a record of income and expenditure, double-entry accounts are invaluable: they let you split the result between partners without dispute, track each partner's contributions and withdrawals, and give each partner the figure they need for their own tax return.

Taxes: transparency

A simple partnership is not taxed as such: each partner adds their share of the partnership's income to their own taxable income (Art. 10 DFTA), and their share of its assets for cantonal wealth tax — as self-employment income if they carry on a gainful activity, as investment income if it is merely the joint management of assets. A self-employed partner pays AHV/AVS contributions on their share of the income (Art. 20 para. 3 AHVV). Some cantons have the partnership fill in an information return, to allocate the result. If a partner is a GmbH or an AG, its share is included in its own taxable profit.

VAT

A simple partnership can itself be liable for VAT when it acts in its own name towards third parties, for example under a common name — a construction consortium, a hair salon run by two people (VAT Info 02, section 1.2). It becomes liable from CHF 100,000 of turnover a year, in Switzerland and abroad, from supplies that are not excluded from the tax (Art. 10 of the VAT Act, VATA). The partners are jointly and severally liable for the VAT due (Art. 15 para. 1 let. a VATA).

Simple partnership, general partnership, sole proprietorship

How BeMyTalent adapts

When you activate accounting, you choose the legal form Simple or general partnership. The chart of accounts then includes:

• 2800 Capital des associés (partners' capital) for contributions;
• Comptes courants des associés (partners' current accounts), Prélèvements privés des associés (partners' private withdrawals) and Apports privés des associés (partners' private contributions), to track what each partner puts in and takes out;
• the accounts specific to corporations (dividends, statutory reserves, own shares) and the entity's direct tax accounts hidden, since it is the partners who are taxed.

Invoices, payments, VAT if the partnership is registered: the day-to-day work is prepared, and the year-end closing gives the result to be split between the partners. Each partner can then pass their share on to their own fiduciary.

BeMyTalent does not replace your fiduciary: it takes the data entry off their hands. You keep the final say on every entry.

Other legal forms: GmbH (Sàrl), AG (SA), association, foundation.

FAQ

Does a simple partnership have to keep accounts?

The law does not say so expressly, and cantonal authorities take different views. In practice, you need them: the partners have the right to inspect the partnership's books (Art. 541 CO), and the tax authorities expect each partner's share of income and assets every year. Accounts of income, expenditure and assets are the minimum; double-entry accounts make the split easier.

Does a simple partnership pay taxes?

Not as such: each partner is taxed on their share of the income (Art. 10 DFTA) and, at cantonal level, on their share of the assets; they pay AHV/AVS contributions on their share if they are self-employed. The simple partnership can, however, itself be liable for VAT.

How is a simple partnership's profit shared?

Equally, unless the partnership agreement provides for a different key (Art. 533 CO). A written key — based on contributions, time invested or a fixed percentage — avoids many discussions at year-end closing.

When does a simple partnership become a general partnership?

As soon as its partners, all of them natural persons, run a commercial business together: it is then a general partnership, which must register in the commercial register (Art. 552 CO). Without a commercial activity, it only becomes a general partnership by registering (Art. 553 CO). A consortium of GmbHs or AGs remains a simple partnership: a legal entity cannot be a partner in a general partnership.

Try BeMyTalent free — choose “Simple or general partnership” when you activate accounting, and the chart of accounts adapts. → Start the trial