Timestamps:
1:03 - Young founders and taxes
9:39 - Cantons and tax advantages
24:00 - The wealth tax burden
32:19 - Employee participation plans
40:33 - Tax pitfalls in structuring a sale
About Peter Kempin and Patrick Arnold
Peter Kempin is a Team Head of Executives & Entrepreneurs at UBS, where he has been working for the past 15 years. Patrick Arnold is a tax expert at UBS and certified financial planner.
Decades in the industry have taught Peter and Patrick that young founders don't think much about taxes. They're heavily focused on their business idea, and taxes aren't a very sexy topic to begin with. But they are nonetheless a crucial step of every business journey.
The first thing you should concern yourself with is the business plan:
- Take into consideration the liquidity needs of the company. This is the basis for your financial requirements: is it possible for you to bootstrap the business and "keep a large portion of the cake" or if there is a need to bring on investors in order to grow the company?
- If you have a business plan for your company, you need one for your personal life as well. How much money can you contribute to your own business? Is it possible to draw pension assets? Do you want to? Should you have a private, non-touchable reserve?
- Keep in mind the founders' financial situation. Do they all have low fixed costs, which will allow you to bootstrap and keep costs and income low? Or do some of them have families already, and aren't able to take on as much risk?
Profit taxes vary from 12-20% depending on the canton. At the beginning of a company, when you haven't broken even because you're not even profitable yet, tax benefits aren't really on your mind — so founders usually choose a domicile in the geographical zone most relevant to their business. But you should take into consideration that the corporate tax reform gives you different advantages/disadvantages depending on the canton you choose, so choose wisely. But even if you make the wrong decision, you can always change domicile later on.
Many founders wonder whether they should set up an individual company or a corporate one. Here are some differences to consider:
- If you're running an individual company, you're taxed on your business profit with the income tax, together with all the other private factors you have: rental income, investment income, etc... But if you're running a corporate company, you're taxed with profit taxes. The income tax only applies if you draw a salary.
- If you have a corporate company and you sell it, you can benefit from tax free capital gains. If you sell an individual company, it's fully taxed.
Memorable Quotes:
"Becoming an entrepreneur means tapping into your savings. It should not be done lightly."
If you would like to listen to the two previous parts of this UBS co-production, check out our conversations with Lukas Reinhardt and Alexander Curiger.
