How do I set up a sole proprietorship in Switzerland?

What is a Swiss Sole Proprietorship (Einzelfirma)?

The sole proprietorship (Einzelfirma) is the most popular legal form in Switzerland with over 300,000 registered businesses. It is ideal for solopreneurs who want to become self-employed without minimum capital and with minimal administrative effort.

Basic Characteristics:

• Owner: One natural person (sole ownership)
• Minimum Capital: CHF 0 (no start-up capital required)
• Liability: Unlimited personal liability with entire private assets
• Commercial Register Entry: Mandatory only from CHF 100,000 annual turnover
• Business Activity: Automatically created when commencing self-employed activity

Requirements for Formation

Personal Prerequisites:

• Swiss citizenship or valid residence permit with work authorization
• Legal capacity: At least 18 years old
• Sole ownership: Only one person can be the owner
• Residence in Switzerland: At least one person must be resident in Switzerland

Activity Areas:

• Crafts and trades
• Professional activities (doctors, lawyers, architects)
• Consulting and advisory services
• Trade and services
• Exception: Regulated professions require special permits

Advantages of Sole Proprietorship

Financial Benefits:

• No Minimum Capital: Immediate start possible without capital proof
• Lowest Formation Costs: Between CHF 700-1,000 total
• No Double Taxation: Profit taxed as personal income
• Use of Pillar 2/3a: Capital from pension accounts usable for formation

Administrative Benefits:

• Minimal Effort: Lowest administrative burden of all legal forms
• Immediate Start: Business activity can begin immediately
• Flexible Bookkeeping: Simplified accounting up to CHF 500,000 turnover
• Free Decisions: Complete entrepreneurial decision-making freedom

Disadvantages of Sole Proprietorship

Financial Risks:

• Unlimited Liability: Private assets fully liable for business debts
• Difficult Capital Procurement: Hindered credit acquisition and investor search
• No Profit Retention: All profits immediately taxed

Structural Disadvantages:

• No Anonymity: Company name must contain family name
• Difficult Succession: Business not easily transferable
• Limited Expansion: Adding partners requires legal form change
• Social Security: No unemployment insurance for owner

Step-by-Step Formation Guide

Phase 1: Preparation (1-2 weeks)

Step 1: Create Business Plan

• Business Model: Clear definition of business activities
• Target Group: Identification of customers and markets
• Financial Planning: Budget for basic expenses, operating costs, and reserves
• Market Analysis: Competition analysis and positioning
• Revenue Forecast: Realistic assessment for first 3 years

Step 2: Conduct Financial Planning

• Living Costs: Budget rent, food, insurance
• Operating Costs: Materials, equipment, marketing, professional services
• Reserves: Minimum 6 months living costs as buffer
• Retirement Planning: Plan for independent pension (Pillar 3a/3b)
• Taxes: Income and wealth tax estimation

Step 3: Determine Company Name

• Name Requirement: Must contain owner's family name
• Additions Allowed: First names, fantasy designations, activity references
• Availability Check: Control on zefix.ch (Central Company Index)
• No Deception: Name must not be misleading
• Examples: "Müller Consulting," "Anna Meier Architecture," "Schmidt & Partners"

Step 4: Clarify Permits

• Trade License: Apply at municipality/canton depending on activity
• Industry-specific Permits:
  • Gastronomy: Restaurant license
  • Construction: Trade authorization
  • Healthcare: Practice permit
  • Transport: Transport license
• Location Permits: Building permits for business premises

Phase 2: Formation (1-2 weeks)

Step 5: AHV Registration (Mandatory)

• Registration Office: Cantonal compensation fund
• Registration Deadline: Within 30 days after business commencement
• Required Documents:
  • Cantonal questionnaire for self-employed
  • Identity card or passport
  • Business documents (contracts, invoices, offers)
  • Business address and lease agreement
• AHV Review: Compensation fund examines self-employed status based on specific criteria

AHV Criteria for Self-Employment:

• Own Economic Risk: Bearing profit and loss
• Own Customers: Direct customer contact and own customer acquisition
• Own Work Tools: Use of own tools and equipment
• Free Work Schedule: Self-determined work organization
• Own Business Premises: Separate workplaces or home office

Step 6: Commercial Register Entry (optional/mandatory)

• Registration Requirement: From CHF 100,000 annual turnover
• Commercially Managed Trade: Also registration-required under CHF 100,000
• Voluntary Entry: Also possible with lower turnover
• Costs: CHF 120-150 depending on canton
• Duration: 1-2 weeks after complete document submission

Benefits of Commercial Register Entry:

• Increased Credibility: Professional appearance toward business partners
• Company Protection: Switzerland-wide protection of company name
• Banking Benefits: Facilitated business account opening
• Zefix Entry: Findability in central company index

Phase 3: After Formation (2-4 weeks)

Step 7: Open Business Account

• Business Account: Required for professional business operations
• Account Options: Compare different Swiss banks for best terms
• Required Documents:
  • Identity card
  • AHV certificate
  • Commercial Register extract (if registered)
  • Business plan or activity description

Step 8: Clarify Value Added Tax

• Registration Requirement: From CHF 100,000 annual turnover
• Voluntary Registration: Also possible with lower turnover
• Registration Deadline: Within 60 days after exceeding limit

Benefits of Voluntary Registration:

• Input Tax Deduction: On investments
• Professional Appearance
• VAT Invoicing Possible

VAT Rates 2025:

• Standard Rate: 7.7%
• Reduced Rate: 2.5% (basic foodstuffs, medications, etc.)
• Special Rate: 3.7% (accommodation)

Step 9: Conclude Insurance

Mandatory Social Insurance:

• AHV/IV/EO: 10.1% of net income (minimum CHF 514 per year)
• Family Allowances: 1.2-2.7% depending on canton
• Accident Insurance: Optional but recommended (approx. CHF 300-800 per year)

Mandatory Employee Insurance (if staff):

• AHV/IV/EO: 10.55% (5.275% each employer/employee)
• ALV: 2.2% up to CHF 148,200, above 1.0%
• BVG: For annual salary over CHF 22,050
• UVG: Occupational accidents mandatory, non-occupational from 8h/week

Recommended Business Insurance:

• Professional Liability: CHF 500-2,000 per year (depending on industry)
• Business Liability: Protection against damages in business premises
• Legal Protection: CHF 300-800 per year
• Loss of Earnings Insurance: For illness or accident
• Property Insurance: Protection of business equipment and goods

Step 10: Set Up Accounting

Bookkeeping Obligation:

• Under CHF 500,000 turnover: Simplified accounting sufficient
• Over CHF 500,000 turnover: Proper accounting required
• Commercial Register Entry: Always proper accounting

Simplified Accounting:

• Income-Expense Statement: Recording all business transactions
• Asset Inventory: Annual listing of business assets
• Document Collection: 10-year retention obligation

Proper Accounting:

• Double-entry Bookkeeping: According to Swiss accounting standards
• Balance Sheet: Annual closing required
• Income Statement: Profit and loss statement
• Accounting Software: Recommended for correct recording

Sole Proprietorship Formation Costs

Minimal Formation Costs:

• AHV Registration: Free
• Commercial Register Entry: CHF 120-150 (optional)
• Professional Liability: CHF 500-1,500 per year
• Business Account: Varies by bank
• Total Minimum Costs: CHF 700-1,000

With Professional Support:

• Startups.ch Formation Service: CHF 290 (ideally free)
• Consulting: CHF 200-500
• Accounting Software: CHF 20-50 per month
• Marketing/Website: CHF 500-2,000
• Total Costs with Service: CHF 1,200-2,500

Ongoing Costs (annually):

• AHV Contributions: Minimum CHF 514 per year
• Insurance: CHF 1,000-3,000 per year
• Accounting/Fiduciary: CHF 1,000-5,000 per year
• Business Account: CHF 60-200 per year depending on bank

Timeline for Formation

Optimal Schedule:

• Week 1-2: Preparation and planning
• Week 3: AHV registration and Commercial Register entry
• Week 4-6: Business account, insurance, VAT registration
• Total Duration: 4-6 weeks until complete operational readiness

With Startups.ch:

• Formation Duration: 2-4 weeks
• Online Process: Digital handling of all steps
• Professional Support: Lawyers, jurists, and notaries included

Avoiding Common Mistakes

During Preparation:

• Insufficient Financial Planning: Planning too few reserves
• Overestimating Income: Creating realistic revenue forecasts
• Neglecting Retirement Planning: Planning independent pension
• Missing Coverage: Not adequately insuring risks

During Formation:

• Late AHV Registration: Can lead to back payments
• Unclear Company Status: Not meeting AHV criteria for self-employment
• Name Rights Problems: Insufficient company name verification
• Missing Permits: Overlooking industry-specific requirements

After Formation:

• Mixing Business and Private Income: Separate account management
• Insufficient Bookkeeping: Systematically collecting all receipts
• VAT Oversights: Timely registration when crossing thresholds
• Neglecting Tax Obligations: Regular tax returns

Sole Proprietorship Formation Checklist

Before Formation:

• Create business plan and conduct financial planning
• Check and determine company name
• Clarify industry-specific permits
• Organize business premises (if necessary)
• Determine insurance needs

Formation Process:

• Register with AHV compensation fund
• Complete Commercial Register entry (if required/desired)
• Open business account at Swiss bank
• VAT registration (if turnover over CHF 100,000)
• Conclude mandatory and recommended insurance

After Formation:

• Set up accounting system
• Begin initial business activities
• Start marketing and customer acquisition
• Set up regular AHV contributions
• Prepare tax return

Comparison: Sole Proprietorship vs. Other Legal Forms

Sole Proprietorship vs. LLC (GmbH):

• Capital: Sole proprietorship CHF 0, LLC CHF 20,000
• Liability: Sole proprietorship unlimited, LLC limited
• Effort: Sole proprietorship minimal, LLC higher
• Flexibility: Sole proprietorship maximum, LLC structured

Sole Proprietorship vs. Corporation (AG):

• Capital: Sole proprietorship CHF 0, AG CHF 100,000
• Image: AG more prestigious, sole proprietorship more personal
• Complexity: AG very complex, sole proprietorship simple
• Taxes: AG double taxation, sole proprietorship simple taxation

Industry-Specific Guidelines

Professionals (Doctors, Lawyers, Architects):

• Professional Obligations: Join professional associations
• Professional Liability: Mandatory in most areas
• Continuing Education: Regular training required
• Practice Permits: Cantonal requirements vary

Crafts and Trades:

• Trade License: Apply at municipality
• Safety Regulations: Observe industry-specific requirements
• Apprentice Training: Authorization for training positions
• Accident Insurance: Especially important for physical work

Consulting and Services:

• Customer Contracts: Develop standard contracts
• Data Protection: GDPR-compliant data processing
• Home Office: Tax-optimize separate work spaces
• Continuing Education: Continuously update expertise

Tax Considerations

Income Tax:

• Personal Income: Business profits taxed as personal income
• Progressive Rates: Higher profits = higher tax rates
• Deductions: Business expenses fully deductible
• Timing: Annual tax return required

Self-Employment Tax Benefits:

• Business Expenses: All legitimate business costs deductible
• Home Office: Portion of home expenses deductible
• Professional Development: Training and education costs
• Equipment: Depreciation of business assets

VAT Obligations:

• Threshold Monitoring: Track annual turnover carefully
• Quarterly Returns: Standard reporting period
• Input Tax Recovery: Deduct VAT on business purchases
• Record Keeping: Maintain detailed VAT records

Growth and Expansion Considerations

Scaling the Business:

• Hiring Employees: Additional insurance and compliance requirements
• Adding Partners: Requires legal form change
• International Business: Additional regulations and tax implications
• Technology Investment: Leverage digital tools for efficiency

Exit Strategies:

• Business Sale: Personal nature makes sale complex
• Succession Planning: Consider legal form change
• Retirement: Wind-down procedures and final obligations
• Asset Transfer: Personal asset implications

Conclusion

The sole proprietorship is the ideal legal form for solopreneurs who want to start self-employment quickly and uncomplicated. This business structure offers maximum flexibility and minimal administrative burden for single-person operations.

Key Success Factors:

• Careful Preparation: Business plan and financial planning are crucial
• Professional Support: Consider using formation services for secure establishment
• Adequate Protection: Don't neglect insurance and reserves
• Clean Administration: Maintain proper bookkeeping from the start

When to Choose Sole Proprietorship:

• Solo Operations: Single-person business activities
• Low Capital Requirements: Minimal start-up investment needed
• Simple Structure: Straightforward business operations
• Maximum Flexibility: Full decision-making control desired
• Quick Start: Immediate business commencement needed

Long-term Considerations:

• Growth Plans: Consider future legal form changes
• Risk Management: Understand unlimited liability implications
• Tax Planning: Optimize personal and business tax strategies
• Succession: Plan for business continuity or exit

The sole proprietorship offers maximum flexibility at minimum cost—the perfect entry into the Swiss business world. However, carefully consider the unlimited liability implications and ensure adequate insurance coverage and financial reserves for sustainable business operations.