What is meant by the term commerce? Find out everything you need to know about the definition, legal forms and important requirements for companies.
The definition of a commerce is a key issue for anyone involved in commercial activities in Switzerland. It doesn't matter whether you are opening a new business, expanding an existing company or simply want to find out about the legal basis. As soon as an economic activity is carried out with the intention of making a profit, it falls under the term ‘trade’ in most cases. This article explains what exactly this entails, why it is important to distinguish it from other activities such as freelancing or hobbies, and how this classification affects you in practice. We also shed light on the role of commercial space, offices and other business properties that are essential for smooth operations.
The definition of a business encompasses all economic activities that are geared towards generating a sustainable profit and are visible to the outside world. In many cases, this definition is closely linked to formal entry in the commercial register, at least once a company reaches a certain size. For smaller businesses, there may be some exceptions, for example if certain turnover thresholds are not exceeded or the activity is only carried out as a secondary occupation.
In Switzerland, the term ‘trade’ is not comprehensively regulated in a single law. Instead, the legal provisions arise from a combination of civil law, tax law and trade law. It is generally assumed that any actively pursued, planned activity that is intended to be permanent and carried out with the intention of making a profit is to be classified as a trade. This interpretation is essential because it lays the foundation for determining whether there is an obligation to keep double-entry books, whether social security requirements must be met and in what form registration with authorities such as the commercial registry office takes place.
In everyday life in Switzerland, you come across a large number of smaller businesses that are active in different sectors, from craft businesses to catering establishments to online shops. Anyone who decides to start their own business must not only fulfil tax obligations, but also deal with aspects such as labour law, tenancy law and insurance. The latter is particularly important in order to be covered in the event of damage and not to take on possible liability risks without thinking.
A commercial enterprise can be most easily understood as the concrete implementation of commercial activities. While the word ‘trade’ describes the general character of an economic activity, the term ‘commercial enterprise’ refers to the organisational unit in which this trade is carried out. A commercial enterprise can thus be a sole proprietorship that manufactures products in a small workshop, but also a large corporation that engages in international trade.
The legal classification of a commercial enterprise often depends on factors such as the size of the company, its legal form and the industry in which it operates. Depending on the nature of the company, additional requirements may arise. For example, certain industries require an official licence, as may be the case in the catering industry or in skilled trades that involve safety risks. In addition, further regulations must be observed in some cantons, for example in the area of environmental protection or noise control, if production and warehousing are relevant.
In Switzerland, the choice of legal form for the business is also an important step. A sole proprietorship is comparatively easy to set up and does not require a specific share capital, but it entails higher personal liability risks. A limited liability company or a joint-stock company, on the other hand, require a certain minimum capital and a formal establishment, but limit liability to the company's assets. This decision needs to be well considered, as it can have long-term consequences for company management, access to investors and, not least, the choice of workplace – especially if you are interested in your own office or commercial space.
When considering whether a company is commercially active, outsiders often look for certain characteristics that can be quickly identified in everyday life. One decisive factor is the intention to make a profit. As long as a company aims to generate regular and sustainable income, it typically falls under the commercial concept.
Another characteristic of a commercial enterprise is its independence: commercial enterprises operate independently on the market, conclude contracts in their own name and bear the economic risk themselves. This independence means that the business is not controlled by a higher authority and does not carry out pure contract work as a dependent activity. In addition, there is the aspect of participation in commercial trade. A commercial enterprise presents itself to the outside world, whether through advertising, a website, a retail store or customer service.
The organisational structure can also provide clues. For example, commercial enterprises often employ staff, maintain their own business premises and handle financial transactions and tax matters on their own behalf. In some sectors, however, a sole proprietor without employees can also run a commercial enterprise – the important thing is that all the other characteristics mentioned above are fulfilled.
The economy in Switzerland is very diverse, and this is also reflected in the examples of commercial enterprises. Traditionally, the first thing that comes to mind is perhaps skilled trade businesses: carpentry, bakeries or painting companies are classic examples of commercial enterprises. They work independently, market their services directly and generate income by providing services or selling products.
The same applies to catering establishments such as restaurants, cafés or takeaways. They are often subject to additional regulations with regard to hygiene, licences for serving alcohol and working hours. This type of business is also clearly commercial because it operates on a permanent basis and with the intention of making a profit, and actively participates in commercial transactions.
In addition, many new business models have emerged in the digital age. Online shops that sell goods on the internet are just as much considered commercial enterprises as traditional retail stores. Even digital services – such as web design, online marketing or software development – are often provided on a commercial basis, provided they are carried out systematically and with the intention of making a profit. This clearly shows how broad the spectrum of commercial activities has become.
Another area that is often underestimated is consulting and coaching services. Those who sell their professional expertise in the form of consulting are in many cases operating commercially, especially if a formal corporate structure has been created for this purpose and the activity is carried out on a large scale. However, in such cases there may be overlaps with the status of a freelancer – although this classification is regulated differently in Switzerland than in Germany, for example.
In the Swiss legal system, a distinction is made between self-employment and dependent employment, but a strict separation between trade and freelance work is more common in other countries. Nevertheless, the question of how to distinguish between the two is still relevant when operating in Switzerland. While the definition of a trade is primarily based on profit orientation and market participation, personal work input and special qualifications often play a central role in the liberal professions.
Artistic activities or journalistic work cannot always be clearly categorised as a trade. Often, it is more of a personal, artistic-creative service. For example, someone who only occasionally pursues a hobby and generates little turnover from it does not usually fall into the commercial category as long as there is no sustained intention to make a profit.
Nevertheless, it is worth taking a close look at your own activities, even if they appear to be on a small scale. As soon as regular sales are made and a certain level of professionalism is attained – for example, through your own marketing, a website, logo, business cards or similar – the activity moves closer to being a commercial enterprise. Particularly with regard to tax and social security obligations, it is advisable to obtain information at an early stage in order to avoid unpleasant surprises.
Anyone running a business usually also needs suitable premises. This is where our main area of activity comes into play: renting office and commercial space in Switzerland. Choosing the right location is of great importance for successful business operations. A central location, good accessibility by public transport and sufficient space to develop your own business idea are factors that can make the difference between success and failure in the long term.
Furthermore, the spatial conditions also influence the company's external image. Welcoming customers or business partners to modern office premises is a sign of professionalism and respect. Similarly, an attractive shop front can be the deciding factor for a spontaneous customer visit. The definition of a commercial business is that it is designed for the long term and aims to make a profit. Accordingly, the feel-good factor for employees plays an important role, as a positive working environment increases productivity.
However, when renting commercial space, there are also some legal peculiarities to be aware of. Commercial leases differ in certain respects from normal residential leases. For example, they can be designed to be more flexible in terms of notice periods or the possibility of subletting. The settlement of utility costs and the landlord's maintenance obligations may also be regulated differently.
Although Switzerland does not have a standardised business registration system like some other countries, entry in the commercial register is mandatory for many commercial activities. This step officially makes a company visible and enables business transactions to be conducted under a protected company name. Whether registration is necessary depends, among other things, on the annual turnover, the chosen legal form and the legal provisions in the respective canton.
As a rule, registration in the commercial register is mandatory if the business generates an annual turnover of more than CHF 100,000. Corporations such as limited liability companies or stock corporations must also be registered regardless of their turnover. This entry has various consequences: On the one hand, it entails publicity, which creates respectability and trust among potential customers and partners. On the other hand, from this point on, the business is subject to the obligation of double-entry bookkeeping and the preparation of an annual financial statement in accordance with the provisions of the Swiss Code of Obligations.
As soon as a commercial activity is taken up, the entrepreneur also has tax and social security obligations. This is a central part of the definition of a commerce, because the legislator makes a clear distinction between purely private activities and entrepreneurial activities with the intention of making a profit.
A self-employed person who runs a business must declare their income in their tax return. If the activity is carried out in the form of a sole proprietorship, the profit counts directly towards private income. In the case of a corporation, on the other hand, the company itself is taxed, while the shareholders receive wages or dividends. In addition, social security contributions to the AHV/IV/EO are due. Depending on the business activity, accident insurance for employees, professional liability insurance or legal expenses insurance may also be useful or even required by law.
Another important point is value added tax. Anyone who generates a turnover of over CHF 100,000 per year must register with the Federal Tax Administration as a VAT payer and carry out the corresponding accounting. This requires correct bookkeeping, since VAT must be shown for each invoice and input tax can be claimed. To avoid losing track of things, it is often worthwhile to consult a trustee or an accounting specialist at an early stage.
The definition of a commercial business is a broad concept in Switzerland that encompasses many different industries and business models. From small craft businesses to gastronomy and service companies, to start-ups and established large-scale enterprises – they all share the characteristics of a sustainable, profit-oriented and independent activity. This classification is important as it has tax, legal and organisational consequences.
Anyone who runs or wants to set up a business in Switzerland should find out about the relevant provisions at an early stage. This includes choosing the right legal form, clarifying licensing requirements, registering in the commercial register and fulfilling tax and social security obligations. Another important step is finding suitable commercial and office space. A well-thought-out rental contract can save a lot of trouble, while a central and well-equipped location can contribute to the success of the company.
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