Paying Private Money into Your Own LLC: What You Need to Know in Switzerland

What does it mean to pay private money into a LLC?

Founders or shareholders often face situations where extra funds are needed – for investments, liquidity shortages, or overcoming payment difficulties. Such contributions are possible but differ depending on their form.

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Types of contributions:

• Equity contribution (shareholder equity): capital increase or voluntary payment‍
• Loan (debt capital): repayable credit to the company‍
• Hidden contributions or services without compensation: e.g. paying expenses privately for the company

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Loan contribution: flexible but regulated

• Written loan agreement stating amount, interest rate, repayment terms, termination notice
• Market-based interest rate to avoid tax issues
• Recorded as a liability in the accounts
• Taxation: interest = expense for the LLC, taxable income for the lender

Without a contract, tax authorities may reclassify it as an equity contribution.

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Equity contribution: strengthening the LCC's capital

• Capital increase with notarial deed and commercial register entry
• Contribution to statutory capital reserves (without increasing share capital, but documented and tax-relevant)

Advantages:

• Improves creditworthiness
• No repayment obligation
• Positive signal to creditors and investors

Disadvantages:

• No capital repayment possible
• Additional notarial and administrative work

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Unclear contributions: risks

• Paying company bills from a private account
• Transfers without contract or clear agreement
• Repeated “bridging payments” without repayment clarity

Risks: tax reclassification, accounting errors, issues during audits or company sale.

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Accounting and tax treatment

• Proper booking (e.g. “loan from shareholder”)
• Contractual documentation
• Reporting to tax authorities, especially for capital reserves
• VAT implications if services are involved

Examples:

1. ‍Loan: a shareholder transfers CHF 20,000 to cover short-term debts. Contract, 1.5% interest, 24-month term. Booked as debt; interest taxed as private income.‍
2. Capital increase: two shareholders increase share capital from CHF 20,000 to CHF 50,000. Notarial certification, commercial register update. Improves creditworthiness.

Practical tips:

• Always document in writing
• Agreement before money transfer
• Clarify tax/accounting implications with a specialist
• Keep private and company funds separate

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Conclusion

Injecting private money into a LLC can strengthen the company but requires planning and clarity.

Recommendation: consult a fiduciary or tax advisor to avoid pitfalls and find the best solution.

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