You have an idea, skills, and the desire to go into business for yourself in Switzerland? A sole proprietorship (raison individuelle) is probably the right legal structure for you to get started. Simple, fast, and accessible, it attracts nearly 326,205 Swiss entrepreneurs. But is it really the right choice for you?
Sole Proprietorship at a Glance
The sole proprietorship is the most common legal structure in Switzerland. And for good reason: it's the simplest structure to start an independent activity.
✅ The Appealing Advantages
- Ultra-fast startup: no complex procedures, you can start your activity almost immediately
- No minimum capital required: you start with the resources you have
- Simplified formalities: registration in the commercial register is only mandatory from CHF 100,000 annual turnover
- You're the sole decision-maker: no shareholders, no board of directors
- Simplified taxation: single declaration (no double taxation as in SA/Sàrl), but no possibility of tax optimization through salaries and dividends - you're taxed on the entire profit at progressive rates
- Minimal creation costs: between CHF 0 and CHF 1,000 in advisory fees, plus CHF 120 for commercial register registration
Essential Considerations
Before diving in headfirst, understand these crucial issues:
1. Unlimited liability: your personal assets at stake
This is THE point to understand absolutely: you are personally and unlimitedly liable with your private assets. This means that in case of debts or lawsuits, your personal property (house, savings, car) can be seized to cover business debts.
This total liability makes the sole proprietorship an option to consider seriously depending on your activity's risk level.
2. Limited financing
Your possibilities of obtaining external financing depend directly on your personal wealth. Banks and investors are generally more reluctant to finance a sole proprietorship than a limited company.
3. No unemployment insurance
Often forgotten but crucial point: as a self-employed person, you cannot contribute to unemployment insurance. In case your activity fails, you won't be entitled to any benefits. This is a risk to integrate into your financial planning.
4. Difficult transmission
Your sole proprietorship cannot be resold or transferred as such. It ceases with you. If you plan to pass the torch one day, you'll need to plan a transformation into a limited company.
5. Personal and commercial assets combined
Often ignored but crucial tax point: your personal assets are part of your commercial assets in a sole proprietorship. This confusion has important consequences:
- Upon liquidation: the sale of commercial assets (clientele, equipment, inventory) is considered taxable income. No possible distinction between private and professional assets, unlike a limited company where liquidation can be optimized fiscally.
- For resale: impossible to sell your business as an entity. You can only transfer your assets individually, which greatly complicates transactions and reduces attractiveness for potential buyers.
- Tax consequence: when ceasing your activity, even after years of work, you'll be taxed on all gains realized upon liquidation, without the tax advantages that limited companies enjoy.
This is why transformation into a limited company before a resale or transmission is often essential - we'll return to this in detail in our next article on transformations.
WARNING: Tax Impact of Liquidation
An often overlooked point that can be costly:
In a sole proprietorship, there is no legal separation between your personal and professional assets. All your wealth (personal + commercial) is considered a single tax entity.
Concrete consequences:
- Upon cessation of activity: impossible to liquidate in a fiscally optimized manner
- Upon sale of assets: everything is considered taxable income at progressive rates
- Upon transmission: no possibility of advantageous succession planning
- In limited companies: multiple tax optimization strategies available
Concrete example: An entrepreneur who stops their activity after 20 years and sells their business for CHF 200,000 will be taxed on the entire amount as income. In a Sàrl/SA, tax optimizations could have considerably reduced this burden.
DHAC recommendation: If you're considering reselling or transferring your business in the medium term (3-5 years), anticipate a transformation into a limited company now. The cost of transformation will be largely offset by the tax savings realized.
Who is it for? Ideal Profiles
The sole proprietorship is particularly well-suited for:
- Freelancers and consultants (graphic designers, developers, coaches, trainers)
- Liberal professions (architects, lawyers, doctors in practice)
- Craftspeople (plumbers, electricians, carpenters)
- Small local businesses (shops, salons, startup restaurants)
- Service activities closely linked to your person
Do you recognize yourself? Then the sole proprietorship is probably right for you, provided your activity presents a manageable level of risk.
Your Business Name: How to Choose It?
Your business name must obligatorily include your surname (with or without first name). You can add:
- A description of your activity: Dupont Consulting
- A fantasy name: Dupont & Associates
Important: your business name must be truthful, not misleading, and must not suggest the existence of a company (no "SA" or "Sàrl"!).
Creation timeframe: With all your documents in hand, you can create your sole proprietorship in a few days to 3 weeks maximum.
Commercial Register Registration: Mandatory or Optional?
Registration becomes mandatory in two cases:
- Your activity is conducted in commercial form
- AND your annual turnover exceeds CHF 100,000
If you operate multiple sole proprietorships, the turnovers are added together to determine the registration obligation.
Below this threshold, registration remains optional but recommended to:
- Gain credibility with your clients
- Protect your business name
- Facilitate banking procedures
Verify your name's availability on the Central Business Name Index (Zefix) before launching.
Essential Administrative Procedures
Beyond commercial register registration, three administrative procedures are mandatory to start legally:
1. Confirmation of Self-Employed Status with AVS
This is THE most important procedure and often neglected by new entrepreneurs!
You must have your self-employed status confirmed by the AVS compensation fund of the canton where your business is located. Without this confirmation, you risk being considered an employee and owing retroactive contributions.
Important: You can only register after starting your activity. No advance registration possible.
Documents to provide to prove your self-employed status:
- Multiple contracts/clients (offers and invoices)
- Market presence under your name (website, business cards, professional email)
- Investments made
- Premises rental contract (if applicable)
Mandatory contributions:
- AVS (Old-age and survivors' insurance)
- AI (Disability insurance)
- APG (Loss of earnings compensation)
2. VAT: Are You Subject?
You are mandatorily subject to VAT if:
- Your annual turnover exceeds CHF 100,000
Sectors exempt from VAT:
- Health (doctors, therapists)
- Insurance
- Agriculture
- Education/training in certain cases
Check your situation on the Federal Tax Administration website and register online if necessary.
3. Insurance: Mandatory or Optional?
MANDATORY insurance:
- AVS/AI/APG (state pension)
OPTIONAL insurance (but highly recommended):
- Pension fund (LPP): occupational pension not mandatory for self-employed
- Accident insurance (LAA): covers occupational and non-occupational accidents
- Business liability insurance: mandatory in certain sectors (construction, health)
- Loss of earnings insurance: in case of illness
Critical point: As self-employed with a sole proprietorship, you CANNOT insure yourself with the unemployment fund. No right to unemployment benefits in case of business failure!
Need help clarifying your insurance needs? DHAC Switzerland can guide you to the right solutions for your situation.
Accounting: Simple or Complete?
Turnover < CHF 500,000: Simplified accounting sufficient (receipts, expenses, assets)
Turnover ≥ CHF 500,000: Complete accounting mandatory according to Code of Obligations standards
Checklist: Steps to Create Your Sole Proprietorship
To help you not forget anything, here's the chronological list of actions to take:
Before Launch
- Precisely define your activity and services
- Develop your business plan (DHAC can support you)
- Plan your capital needs (even without minimum capital, anticipate the first months)
- Choose and verify your business name's availability on Zefix
- Verify web domain name availability (.ch)
At Startup
- Create your website and professional email address
- Open a business bank account
- Register with the AVS compensation fund to confirm your self-employed status
- Verify VAT liability (if turnover > CHF 100,000)
- Register in commercial register (if turnover > CHF 100,000 or if desired)
- Subscribe to recommended insurance (RC, LAA, loss of earnings)
After Launch
- Set up your accounting (simplified or complete depending on turnover)
- Declare your income and AVS/AI/APG contributions
- Manage your VAT statements (if subject)
- Plan the evolution of your legal structure if needed
Need help with these procedures? DHAC Switzerland supports you in administrative setup so you can focus on your core business.
What Next? Anticipating Growth
Your activity is taking off? That's excellent news! But the sole proprietorship can quickly show its limits:
- You want to protect your personal assets
- You need significant capital
- You want to integrate partners
- You're considering selling your business
Good news: you can transform your sole proprietorship into a limited company (Sàrl or SA). However, this strategic evolution requires rigorous planning. We'll dedicate a detailed upcoming article to this.
Initial Investment: Beyond Money
While the sole proprietorship requires no minimum capital, make no mistake: starting an activity requires time and resources.
As we detailed in our article on a company's life cycle, each development phase requires:
- Solid strategic planning
- Well-established administrative foundations
- Rigorous monitoring of your activity
- A clear vision of your evolution
This is precisely where many entrepreneurs underestimate the necessary investment. Result? Difficulties that could have been avoided with adequate preparation.
How DHAC Switzerland Supports You
Creating a sole proprietorship is simple. Building a sustainable business is another story.
We support entrepreneurs at every step:
Launch Phase
- Business plan review: validate your project's viability together
- Foundation setup: file constitution, mandatory registrations, insurance choices
- Strategic advice: tax optimization, appropriate legal structure choice
Growth Phase
- Professional accounting monitoring: stay focused on your core business
- Administrative management: salaries, VAT, social charges
- Financial management: dashboards, analyses, forecasts
Transformation Phase
- Transformation support into Sàrl or SA when the time comes
- Structure optimization to support your growth
- Smooth transition to a sustainable structure
10 Expert Tips for a Good Start
After supporting hundreds of entrepreneurs, here are the tips we wish we'd received when starting out:
1. Open a Separate Bank Account from Day 1
Even if not mandatory, immediately separate your personal and professional finances. It's the foundation of clear accounting and will simplify your life during tax declaration. The longer you wait, the harder it is to untangle!
2. Beware of Personal Expenses
The classic trap: thinking everything you buy is deductible. Only expenses strictly necessary for your professional activity are tax deductible. Examples of NON-deductible expenses:
- Clothing (except specific uniforms)
- Personal meals
- "Classic" home-office commutes
- Leisure subscriptions
When in doubt, ask DHAC for advice before deducting an expense.
3. Provision for Taxes and AVS
Fatal beginner mistake: spending all income without setting aside for charges. Systematically provision 25-30% of your income for:
- AVS/AI/APG contributions (about 10%)
- Taxes (depending on your canton, 15-20% or more)
Create a dedicated sub-account and transfer this amount as soon as you receive each client payment.
4. Plan for 6 Months of Cash Flow Minimum
Even if you don't need minimum capital, anticipate that first revenues take time to arrive. Between when you invoice and when you're paid, 30 to 90 days can elapse. Make sure you can cover:
- Your personal charges (rent, insurance, food)
- Your professional charges (premises, tools, marketing)
- Your social contributions
5. Set Your Rates Including ALL Your Charges
Don't calculate your rates like an employee! As self-employed, you must integrate:
- Your social contributions (AVS/AI/APG: ~10%)
- Your insurance (health, accidents, RC)
- Your non-billable days (vacation, illness, administration)
- Your personal pension
Basic rule: your hourly rate must be at minimum 1.5 to 2x your former hourly salary.
6. Document ALL Your Professional Expenses
Systematically keep:
- All invoices and receipts
- Professional travel documentation (mileage, dates, reasons)
- Expense notes with professional context
DHAC tip: Take a photo of each receipt with your smartphone and store them in a cloud folder. At year-end, you'll thank us!
7. Don't Neglect Your Personal Pension
Without mandatory pension fund and without unemployment insurance, you are your own safety net. Invest in:
- An optional pension fund (pillar 2) but highly recommended
- Loss of earnings insurance in case of illness
- LAA accident insurance
- A pillar 3a to optimize your taxation AND your retirement
8. Call on DHAC for Your Accounting
Two options depending on your needs and budget:
"Coaching" Option: You keep your accounting, we review it and guide you
- Quarterly review of your accounts
- Tax advice and optimization
- Verification before declaration
- Ideal if you're comfortable with numbers
"All-inclusive" Option: We manage your entire accounting
- Entry of all your transactions
- Bank reconciliations
- VAT statements
- Tax declarations
- Ideal to focus 100% on your activity
An accountant's cost is largely offset by:
- Time saved (= more billing)
- Tax optimization
- Peace of mind
- Avoiding costly errors
9. Anticipate Your Future Transformation
From the start, structure your activity as if you'll transform it into Sàrl or SA one day:
- Keep clean accounting (even simplified)
- Clearly separate personal and professional
- Document your processes and know-how
- Build transferable value
This will greatly facilitate transformation when the time comes, and make your business more attractive for resale.
10. Surround Yourself from the Start
Entrepreneurship can be lonely. Create your support network:
- An accountant/fiduciary (DHAC!)
- A trusted lawyer
- Other entrepreneurs in your field
- A mentor or coach
Mistakes are expensive. Good advice at the right time is an investment, not an expense.
11. Monitor the Tax Profitability Threshold
Beyond a certain profit level (generally around CHF 100,000-150,000), the sole proprietorship structure can become fiscally disadvantageous.
Why? In a sole proprietorship, you're taxed on the entire profit at progressive rates without optimization possibility.
With a Sàrl or SA, you can:
- Pay yourself a salary (deductible for the company)
- Distribute dividends (taxed at reduced rates)
- Optimize your overall tax burden
- Benefit from tax advantages upon liquidation or resale
Critical point: In a sole proprietorship, your personal and commercial assets are combined. Upon cessation of activity or resale, you'll be taxed on all gains without the optimization possibilities of a limited company. This difference can represent tens of thousands of francs!
DHAC helps you identify the optimal time to transform your structure according to your personal situation and objectives. A comparative simulation can save you thousands of francs per year, and even more at liquidation time!
Ready to Launch?
The sole proprietorship is an excellent starting point for testing your activity, validating your market, and building your professional independence. But like any strategic choice, it must be made with full knowledge of the facts.
Three questions to ask yourself before starting:
- Is my activity's risk level compatible with unlimited liability?
- Do I need significant external capital to start?
- Where do I see myself in 3-5 years? (alone, with partners, with a larger structure?)
Your answers will guide you to the best choice.
Key Takeaways
✓ Simple and fast: creation in a few days to 3 weeks
✓ No minimum capital required
✓ Mandatory procedures: AVS status confirmation, VAT verification, insurance
✓ Unlimited liability: your personal assets are at stake
✓ No unemployment insurance: a risk to anticipate
✓ Evolving: transformation possible into Sàrl or SA
✓ Essential support: good foundations make all the difference
Need support to structure your project?
The DHAC Switzerland team is here to transform your idea into solid reality.
📞 [Contact us for an initial discussion]
📧 [Request your free consultation]
Coming in Our "Legal Structures in Switzerland" Series
This article is part of a comprehensive series to help you choose and evolve your company's legal structure:
Coming soon:
- The Limited Liability Company (Sàrl): When protecting your assets becomes a priority
- The Corporation (SA): The structure for ambitious projects and capital access
- Transforming Your Sole Proprietorship: The complete transformation guide to limited companies - a critical question for transmission and resale of your business
Transforming your legal structure is a major strategic step, particularly if you're considering transmitting or selling your business. We'll cover in detail the issues, process, and pitfalls to avoid.
📬 Don't miss our upcoming articles - follow us or contact DHAC Switzerland to be informed of publications.