What is a simple partnership and when SMEs choose it
A simple partnership (Art. 530–551 CO) is a form of collaboration between two or more natural or legal persons pursuing a common purpose without assuming the status of a commercial trader. Unlike an GmbH (Sagl) or a general partnership, it does not have its own legal personality and, as a rule, does not require registration in the Commercial Register.
In practice, the simple partnership is widely used among independent professionals combining complementary skills, entrepreneurs launching a joint project of defined duration, and SMEs managing a property or investment in common. Formal simplicity is an advantage, but it does not exempt partners from the need to set out in writing the profit-sharing arrangement, powers of representation and accounting rules.
This guide covers the aspects that really matter for anyone managing the accounts of a simple partnership in Switzerland: from the partnership agreement to year-end closing, with up-to-date references for 2026 and the needs of users of accounting software such as Accountex.
Simple partnership compared with other collaborative forms
Before defining accounts and allocations, it is useful to place the simple partnership within the landscape of the closest corporate forms:
| Criterion | Simple partnership | General partnership | GmbH (Sagl) |
|---|---|---|---|
| Legal basis | Art. 530–551 CO | Art. 552–594 CO | Art. 772–827 CO |
| Legal personality | No — direct relationship between partners | Yes, but without share capital | Yes, with minimum capital of CHF 20'000 |
| Commercial Register entry | Not mandatory | Mandatory | Mandatory |
| Partner liability | Joint and several, unlimited (Art. 544 para. 3 CO) | Joint and several, unlimited | Limited to share capital |
| Profit sharing | Free — in default, equal shares | Free — in default, equal shares | Proportional to ownership shares |
| Taxation of profits | Tax transparency — attributed to partners | Tax transparency — attributed to partners | Profit taxed at company level, then dividends to shareholders |
| Mandatory accounting | Simplified below CHF 500'000 in revenue; ordinary from CHF 500'000 (Art. 957 CO) | Simplified below CHF 500'000 in revenue; ordinary from CHF 500'000 (Art. 957 CO) | Commercial double-entry accounting |
| Typical SME use case | Joint project, associated practice, co-investment | Permanent joint commercial activity | Structured business with asset separation |
Partnership agreement: foundation for profits and liability
The law does not require written form, but a documented agreement is essential to avoid disputes in accounting and tax matters. The minimum elements to define are:
Purpose and duration
State the object of the collaboration (e.g. management of a client portfolio, development of a product, leasing of a property) and whether the partnership is for a fixed or indefinite term. A clear duration facilitates year-end closing and settlement of remaining liabilities.
Contributions and allocation
Specify contributions in cash, assets or services (work-for-equity). Define the key for sharing profits and losses: fixed percentages, proportional to contributions or mixed (e.g. 60/40 between operating partner and financing partner).
Management and representation
Establish who signs contracts, collects invoices and assumes obligations towards third parties. In the absence of clauses, each partner may manage the joint activity and act on behalf of the partnership towards third parties (Art. 535 and 543 CO), with direct consequences for joint and several liability.
Withdrawal and dissolution
Provide for notice periods, methods for valuing a partner's share and rules for liquidating the joint assets. Without such clauses, the statutory provisions apply, which are often more burdensome to translate into accounting entries.
Profit sharing: legal rules and practical criteria
Under Art. 533 CO, profits and losses are shared according to the agreement between the partners. If the contract is silent, the law presumes equal shares — regardless of actual contributions. This rule often surprises those who have invested different amounts of capital or devoted unequal hours of work.
For SMEs, the most commonly used allocation keys are:
- •Fixed shares — e.g. 50/50 or 70/30, simple to apply at year-end.
- •Proportional to capital contributions — suitable when one partner predominantly finances the activity.
- •Mixed allocation — one share linked to work (internal salary or bonus) and the remainder shared according to agreed percentages.
- •Investment reserve — part of the profit remains in the joint assets before distribution, useful for multi-year projects.
Numerical closing example
Two partners, A and B, with a 60/40 allocation. At year-end, the income statement of the simple partnership shows net profit of CHF 100'000 after costs and internal remuneration. The accounting allocation provides for:
- • Partner A — CHF 60'000 (credited to capital/partner A account)
- • Partner B — CHF 40'000 (credited to capital/partner B account)
If A has already withdrawn CHF 25'000 during the year (advances on profits), CHF 35'000 remains to be distributed at closing. The entries must link withdrawals, credits and final balance for each partner, so as to reconcile internal accounts and individual tax returns.
Partner liability: implications for assets and accounting
The most significant feature of the simple partnership is the joint and several unlimited liability of each partner for joint obligations assumed together or by representation (Art. 544 para. 3 CO). Creditors may take action against a single partner for the entire debt; the partner who pays may then seek contribution from the others according to internal shares.
This structure has concrete consequences for those keeping the books:
Liabilities towards third parties
Supplier invoices, bank loans and contractual obligations appear in the income statement of the simple partnership, but asset risk falls on the partners individually. Documenting who signed each obligation helps track any internal recourse claims.
Personal obligations of a partner
If a partner acts beyond agreed limits and third parties acted in good faith, the obligation binds the entire partnership. Orderly accounting, with written resolutions for material expenses, reduces the risk of unauthorised commitments.
For activities with significant risk exposure, many SMEs consider converting to an GmbH (Sagl) or a joint-stock company (AG), precisely to limit asset liability. The general partnership, although structured differently, also maintains joint and several unlimited liability of the partners (Art. 568 CO). The choice of legal form should be reviewed when turnover, staff or investments exceed thresholds that make unlimited liability disproportionate.
Compliant accounting: chart of accounts and entries
As a partnership of persons, the simple partnership must keep at least simplified accounts — income, expenditure and balance sheet — under Art. 957 para. 2 CO. Once the threshold of CHF 500'000 in revenue in the last financial year is exceeded, ordinary accounting and financial statements under Art. 957 para. 1 and 958 et seq. CO apply, as well as document retention obligations. Partnerships of persons are not subject to mandatory external audit; this applies only upon conversion into a capital company.
Recommended accounting structure
| Account / register | Function | Operational note |
|---|---|---|
| Capital account Partner A / B | Tracks contributions, credited profits and withdrawals | Balance = partner's net position in joint assets |
| Partners' current account | Advances, expenses paid in advance, reimbursements | Reconcile monthly to avoid overlap with profit withdrawals |
| Operating revenue and costs | Income statement of the collaboration | Cost centre or management accounting if partners work on separate mandates |
| Common reserve | Profits not yet distributed | Useful for multi-year projects or amortisation of joint investments |
| General journal and ledgers | Traceability of every transaction | Retention for 10 years (Art. 958f CO) |
Typical entries during the financial year
Initial contribution: Debit partner capital account, credit bank or clearing account. If the contribution is in kind, attach an appraisal or agreed valuation.
Remuneration for partner work: If the agreement provides for an internal salary before allocation of the remaining profit, record personnel costs and the obligation to the partner as in any business.
Year-end closing: Determine net profit, allocate it according to the contractual key, credit partners' capital accounts and record any withdrawals already made as a partial reversal of the distribution.
With Accountex, you can manage the accounts of the simple partnership as a separate entity (management accounting) while maintaining tax transparency: the allocated profit then flows into each partner's individual tax return.
Taxation and VAT: tax transparency and joint obligations
At federal level, the simple partnership is not subject to a separate profit tax: profit is attributed directly to the partners in proportion to the agreed allocation and taxed within each partner's individual income or commercial profit. Each partner declares their share in the cantonal and municipal tax return.
For VAT, the situation is different: if the joint activity exceeds the exemption threshold (CHF 100'000 in annual taxable turnover from supplies in Switzerland and abroad, under Art. 10 VAT Act), the simple partnership must register as a taxable person. Registration is generally in the name of the joint activity; partners are jointly and severally liable for VAT obligations (Art. 15 VAT Act). Invoices issued and received pass through the joint accounts, with internal allocation of tax previously agreed between the partners.
Tax points to watch
- • Align the accounting allocation as at 31 December with that shown in partners' tax returns
- • Document internal remuneration: it reduces profit to be allocated but forms part of the receiving partner's income
- • Check cantonal rules on real estate assets if the partnership holds property in common
- • On dissolution, assess implicit gains on joint assets and allocate them before final liquidation
When to evolve towards a structured corporate form
The simple partnership works well for lean collaborations, but has limits when the activity grows. Signs that call for a review:
Growing turnover and staff
With an GmbH (Sagl) or AG, limited audit obligations arise; above 10 full-time equivalents on average per year, waiving the audit is no longer possible (Art. 727a CO). Ordinary audit applies when two of the three size criteria — including CHF 40 million in revenue and CHF 20 million in assets — are exceeded in two consecutive financial years (Art. 727 CO).
Need to limit liability
Investments, leasing or multi-year contracts expose partners' private assets. An GmbH separates business risks from personal ones.
Entry of new partners or investors
Transferring shares in a simple partnership is contractually complex. Forms with share capital offer clearer tools for entries and exits.
Accounting checklist for simple partnerships
Before the annual closing, verify that every point is covered:
A well-documented simple partnership, accounted for with rigour, reduces friction between partners, simplifies the tax adviser's work and maintains the traceability required in the event of an audit. Accountex supports this workflow with clear entries, per-partner reports and structured year-end closings — so that legal simplicity does not become accounting disorder.