Sole proprietorship in Switzerland: costs, tax and obligations

Swiss sole proprietorships at a glance

• The business belongs to one natural person and has no separate legal personality.
• No minimum capital or notarial deed is required.
• The owner has unlimited personal liability.
• Self-employed status is assessed by the OASI compensation office; commercial register registration does not automatically establish it.
• Commercial register registration generally becomes compulsory from CHF 100,000 in turnover in the previous financial year for a business operated on commercial lines.
• Simplified accounting is generally sufficient below CHF 500,000 in turnover in the previous financial year. Full accounting is required from that threshold.
• Business profit and business assets are taxed directly in the owner’s hands.
• VAT liability generally starts from CHF 100,000 in worldwide turnover from supplies that are not exempt without credit. The start date depends in particular on whether the business is new or already operating.

What is a Swiss sole proprietorship?

A sole proprietorship is a business run by one natural person. The owner makes the decisions, receives the profits and bears the losses. Unlike an LLC or an SA/AG, it does not create a separate legal entity.

In practice, a sole proprietorship arises when a person starts an ongoing independent economic activity. Commercial register registration may be compulsory or voluntary depending on the activity and turnover, but it is not always the point at which the business begins.

Key characteristics

• no share capital to pay in;
• no articles of association or general meeting;
• no mandatory statutory auditor;
• direct management by the owner;
• a registered business name that includes the owner’s surname;
• unlimited personal liability;
• business profit reported in the owner’s personal tax return.

Sole proprietorship or self-employed status: what is the difference?

These concepts are related, but they mean different things.

The OASI office considers factors such as working in your own name, organising your work independently, bearing financial risk, investing in the business and serving several clients. No single factor is decisive in every case.

Commercial register registration, a Swiss UID number or invoices bearing a business name do not guarantee recognition as self-employed. Read more about obtaining self-employed status in Switzerland and our article on applying to the OASI compensation office (in French).

Who is a sole proprietorship suitable for?

This structure often suits someone starting alone with low fixed costs and manageable financial risk. It is common among consultants, craftspeople, therapists, retailers, creative professionals and digital service providers.

Having one owner does not mean working without a team: a sole proprietorship can hire employees. The owner then takes on the obligations of an employer.

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Advantages and disadvantages of a Swiss sole proprietorship

Main advantages

• Quick to set up: limited formalities and no notary required.
• No minimum capital: the owner funds the business according to its actual needs.
• Simple organisation: no general meeting, board of directors or mandatory statutory auditor.
• Direct decision-making: the owner retains full control of the business.
• One level of profit taxation: profit is taxed as the owner’s income, without separate corporate profit tax.

Main limitations

• Unlimited liability: private assets may be used to settle business debts.
• Less automatic social protection: the owner does not contribute to unemployment insurance for the self-employed activity and must arrange parts of their pension and insurance cover themselves.
• More limited equity funding: there are no company shares to sell to investors.
• A more complex transfer: the business cannot be sold as a separate legal entity; its assets, contracts and liabilities need to be transferred.
• Less freedom over the name: the registered business name must include the owner’s surname.

Sole proprietorship or Swiss LLC: which should you choose?

The choice depends mainly on financial risk, expected profit, funding needs and future plans. A sole proprietorship prioritises simplicity. An LLC provides a separate legal entity, with liability generally limited to company assets. You can also form a single-member Swiss LLC without taking on a business partner.

An LLC’s limited liability is not absolute. Personal liability may arise from breaches of management duties, personal guarantees or violations of the law. Our free “Sole proprietorship or LLC” white paper in French can help you explore the choice. You can also book a 30-minute consultation for CHF 89 including VAT to discuss your plans with an expert.

Setting up a Swiss sole proprietorship: the formalities

Formation is straightforward, but the sequence matters. Distinguish starting the activity, obtaining OASI recognition, any commercial register registration and VAT registration. For the detailed process, read our article on becoming self-employed in Switzerland.

How much does a sole proprietorship cost?

There is no share capital to deposit and no mandatory notary’s fee. Costs mainly relate to commercial register registration, any signature certification, permits, insurance and professional support.

For support, you can choose our free course in French, a 30-minute consultation for CHF 89 including VAT or our sole proprietorship formation service from CHF 690 excluding VAT. These services address different needs.

Tax and VAT for a Swiss sole proprietorship

How is profit taxed?

A sole proprietorship does not file a separate company tax return like an LLC. Net business profit is added to the owner’s other income. Net business assets are included in the owner’s taxable wealth.

Commercially justified expenses are deductible. These may include equipment, software, business rent, business travel, professional fees and insurance. Private expenses are not deductible, and mixed-use expenses must be apportioned.

When does VAT registration become compulsory?

The general threshold is CHF 100,000 in worldwide turnover from supplies that are not exempt without credit. Supplies exempt without credit do not count; supplies exempt with credit, such as exports, generally do. Voluntary registration may be possible below the threshold.

For a new business expected to reach this threshold within the following twelve months, VAT liability generally begins when the activity starts. For an existing business previously exempt from registration, liability generally begins at the end of the financial year in which the threshold is reached.

Both VAT and commercial register registration commonly involve a CHF 100,000 threshold, but their calculation rules and exceptions differ. Assess them separately. Our article on Swiss VAT explains liability, rates and registration.

Social insurance for the owner

Once recognised as self-employed, the owner pays OASI, disability insurance and income compensation contributions directly to the compensation office. The final amount depends on the net income reported by the tax authority. Advance contributions are generally billed during the year and adjusted later.

• OASI, disability and income compensation: mandatory contributions, with a declining contribution scale for lower incomes.
• Family allowances: affiliation and contributions under the applicable scheme.
• Unemployment insurance: no contributions are paid for the self-employed activity, so the owner does not have the same unemployment cover as an employee.
• Accident insurance: the self-employed owner is not personally subject to compulsory accident insurance under the Accident Insurance Act. Accident cover is still needed, for example through health insurance, and voluntary occupational accident insurance can be considered.
• Sickness-related loss of earnings: optional, but important for protecting income during an inability to work.
• Occupational pension: second-pillar membership is generally optional for the owner; voluntary arrangements and pillar 3a can supplement retirement provision.

A sole proprietorship that hires staff becomes an employer. It must manage payroll, social insurance, accident insurance and occupational pensions where the conditions are met.

Accounting requirements for a sole proprietorship

A simple legal structure still needs reliable accounts. They support business management, tax returns, OASI calculations and any audit of the figures. The threshold is based on turnover in the previous financial year.

Below CHF 500,000 in turnover

Simplified accounts recording at least income, expenses and assets are permitted. Records must still be complete, verifiable and supported by documents.

From CHF 500,000 in turnover

The business must keep accounts and prepare financial statements under the Swiss Code of Obligations, including a balance sheet, income statement and the required information.

• clearly separate private and business transactions;
• document private capital contributions and withdrawals;
• retain the required accounting records, supporting documents and reports for ten years from the end of the financial year;
• reconcile bank accounts;
• track receivables, payables and any VAT returns.

For day-to-day bookkeeping, read our article on accounting for sole proprietorships and general partnerships (in French).

Converting or closing a sole proprietorship

Moving from a sole proprietorship to an LLC

A change often becomes relevant when risk increases, a partner joins, investors are sought or the owner wants better separation between private assets and the business.

Legally, this is not always a simple change of legal form. Assets, liabilities, contracts and employment relationships must be transferred to the new company. A tax-neutral restructuring may be possible if statutory conditions are met. An advance review helps identify potential taxation of hidden reserves. Read about the steps to transfer a sole proprietorship to an LLC (in French).

Closing the business

Closure involves completing outstanding billing, paying creditors, collecting receivables, notifying the OASI office and, where relevant, cancelling VAT and commercial register registrations. Tax and record-retention obligations continue after trading stops.

Common mistakes to avoid

• assuming commercial register registration automatically establishes self-employed status;
• relying economically on one client without being able to demonstrate genuine independence;
• mixing private and business expenses;
• failing to set aside money for taxes and OASI contributions;
• waiting until thresholds are exceeded before preparing for VAT or full accounting;
• retaining a sole proprietorship when financial exposure warrants a limited-liability structure.

Prepare with our free course in French

Choosing a sole proprietorship is only part of starting a business. You also need to understand OASI status, pricing, insurance, taxation and administration.

Frequently asked questions about Swiss sole proprietorships

A simple structure that should match your risk

A sole proprietorship can work well when starting alone with a simple organisation and manageable risk. It becomes less suitable as financial commitments, funding needs or the number of business partners increase.

Before choosing, assess your exposure through private assets, expected profit and how the business should develop over the next few years. A straightforward initial choice should not become an obstacle a few months later.