Setting up a sole proprietorship in Switzerland: A simple guide

creating a sole proprietorship in switzerland

A sole proprietorship is a legal form of business in which a single person is responsible for all activities and decisions. Unlike corporations such as LLCs, which are legal entities distinct from their owners, a sole proprietorship has no separate personality.

This legal form, also known as "self-employed activity", is particularly popular with craftsmen, doctors, dentists and restaurateurs when it comes to working alone.

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Creating IR in Switzerland

Steps to setting up a sole proprietorship in Switzerland

Setting up a sole proprietorship in Switzerland may seem complex, but by following a few key steps, you can make your project a reality. Here are the steps you need to follow to set up your own sole proprietorship.

1. Obtaining the necessary authorizations

Before starting your business, it's important to check whether you need any specific authorizations in your sector of activity. Certain sectors, such as catering or healthcare, may require additional authorizations, especially if you have a foreign diploma. Contact the relevant authorities to find out what formalities you need to complete.

2. Find your company name

The name you give your sole proprietorship must contain your family name. For example, "Muller Conseils", "AZ Consulting, Muller".

Check that the name you have chosen is not already used by an active company. To check, go to zefix.ch.

3. Registration in the Commercial Register

Once you have the authorizations and the name, you can register with the Commercial Registry. Fill in the registration form and provide all the required information, such as address and purpose of your company.

Registration in the Commercial Register is compulsory if you exceed sales of CHF 100,000.

4. Social security registration

Once you have actually started working and have received your first revenues, you will need to register with an AVS compensation fund. You'll need to register with an AVS compensation fund. This will enable you to start paying quarterly instalments towards your pension. To register, you need to complete an affiliation questionnaire, which you can request directly from the compensation fund.

5. VAT

This step is not compulsory, but can be carried out voluntarily, especially if you think you're going to have major capital expenditure right from the start, or if your business consists of buying goods and sending them back. In such cases, it might be wise to consider, or at least analyze, the possibility of VAT liability.

VAT registration is compulsory if your sales exceed or are expected to exceed CHF 100,000 in one year. An assessment must be made 3 months after the start of business.

Advantages of sole proprietorship in Switzerland

When it comes to setting up a sole proprietorship in SwitzerlandThere are many advantages to consider. Whether you're self-employed or simply want to start your own business, sole proprietorship offers interesting tax and financial opportunities.

Tax advantages

One of the main advantages of a sole proprietorship in Switzerland is the tax benefits it offers.

Unlike companies (SARL, SA), sole proprietorships are taxed on profits only once.

Companies, on the other hand, are taxed once on the profit earned and again when the salary or dividend is paid to the entrepreneur.

Total independence

By opting for a sole proprietorship, you retain total independence in the management of your business. You make all important decisions without having to consult partners or shareholders. This entrepreneurial freedom allows you to develop your business according to your own values and objectives.

Limited initial investment

Setting up a sole proprietorship generally requires less initial investment than other types of business structure.

You don't need to bring in any capital to start your business, which makes it easier to enter the business world.

Administrative simplification

Accounting and administrative formalities are simpler for a sole proprietorship than for a company.

You can manage your accounting yourself. However, we advise you to call in a professional. A mistake repeated over time can be costly. This will help you develop your business.

Disadvantages of sole proprietorship in Switzerland

Full of advantages, but sole proprietorship also has its drawbacks. Important ones to consider before taking the plunge. 

Here are some of the most common disadvantages of setting up a sole proprietorship in Switzerland:

Bankruptcy risk

Setting up a sole proprietorship implies a high level of personal responsibility. As sole proprietor, you are fully responsible for the debts and financial obligations of your business. If your business fails to generate enough income to cover its expenses, this can lead to personal bankruptcy. So it's crucial to carefully assess the financial potential of your project before you take the plunge.

Lack of benefits

As a sole trader, you don't enjoy the benefits available to salaried employees. This means you won't be entitled to unemployment insurance in the event of job loss, or to automatic health cover. You'll need to make your own arrangements for private health insurance, and build up savings to cope with periods when your business may slow down.

Heavy workload

Setting up and running a sole proprietorship requires a considerable personal investment of time and energy. As sole proprietor, you'll be responsible for everything from administration and marketing to sales and production. It's important to be ready to take on this heavy workload and find a balance between professional and personal life.

Taxation

As asole trader in SwitzerlandYou'll be taxed differently from salaried employees. The income generated by your business will be treated as your personal income, and taxed at personal rates. This may result in higher taxation than if you were employed by another company. It is advisable to consult a tax expert to understand the tax implications specific to your situation.

Health risks

As a sole trader, you won't be entitled to the paid sick leave or disability benefits available to salaried employees. Should illness or accident prevent you from working for an extended period, this could have a significant financial impact on your business and personal income.

Conclusion: IR in Switzerland

Setting up a sole proprietorship in Switzerland has its advantages, and the administrative formalities involved are relatively straightforward.

It is important to bear in mind the main disadvantage of unlimited liability for the debts of the sole proprietorship.

It is also important to take into account the tax aspects in the event of cessation of the business, resale of the goodwill, etc.

Our experts will be happy to discuss and advise you.

FAQ - Sole proprietorship Switzerland

Yes, you can hire employees as a sole trader in Switzerland. However, this also entails additional responsibilities as an employer.

As a sole trader in Switzerland, you can benefit from tax advantages such as lower tax rates and the possibility of deducting certain expenses related to your business activity.

As a sole trader in Switzerland, you are required to keep clear and accurate accounts of your business income and expenses. We recommend that you use the services of a fiduciary to ensure that you meet all your legal obligations.

Yes, it is possible to convert your sole proprietorship to another legal form (such as a limited liability company or a limited liability partnership) at a later date if this better suits your development or business objectives. However, this conversion may have tax and administrative implications.

The cost of setting up a sole proprietorship in Geneva is around CHF 150. (RC registration). If you opt for professional support, this can cost between CHF 400 and 800 in total.

There is no minimum capital requirement for setting up a sole proprietorship in Switzerland. Unlike other legal forms of business, such as a public limited company (AG) or a limited liability company (GmbH), it is not necessary to provide initial share capital to start a sole proprietorship.

Setting up a sole proprietorship in Switzerland generally takes very little time. The administrative procedures can be completed in a matter of weeks, or even days if all the formalities are carried out correctly.

Make sure the name is not protected (e.g. FBI, CIA, etc.) and is not already in use. To check, you can search for the name in the Swiss company register Zefix.

No, it is not compulsory for self-employed people to register with the Commercial Register. However, there is an obligation to register if your business generates annual sales of over CHF 100,000. This sales limit also ties in with the obligation to pay VAT.

All companies carrying out economic activities and exceeding the annual sales threshold of CHF 100,000 must register with the Federal Tax Administration (FTA) and collect VAT on their sales.