Starting a business in Switzerland often raises the same question: choose a sole proprietorship, which is relatively quick and simple to establish, or form a limited liability company (LLC), with more formal requirements and a separate legal structure?
A sole proprietorship generally costs less to establish and involves lighter administration. An LLC separates company assets from personal assets and can support a more formal business presence. The right choice depends on your project, its risks and your medium- and long-term development plans.
This article examines both structures and their characteristics to help you make a decision suited to your circumstances.
For further comparison, see our French-language white paper, which sets out key criteria for choosing a structure for your project.
Need advice on choosing your legal structure?
Get personalised advice from an expert: 30 minutes for CHF 89 incl. VAT
Choose a sole proprietorship or LLC for your activity
Some sectors, such as hospitality and construction, often need substantial investment. Consulting, digital services and other freelance activities may start with much less. Investment requirements directly affect the choice between a sole proprietorship and an LLC.
In Switzerland, a sole proprietorship is attractive for its simple setup and relatively flexible administration. It often suits someone working alone with limited fixed costs and financial risks. An LLC involves more formalities but offers a clearer separation between the entrepreneur’s private assets and the business.
Before choosing, assess your activity, risks and growth objectives.
The comparison table highlights the main criteria to consider when weighing the two structures.
Sole proprietorship: a straightforward way to start
A sole proprietorship is one of the most accessible ways to start a Swiss business. Relatively inexpensive and simple to establish, it offers independence while exposing the owner to risks that need careful assessment.
Want to understand sole proprietorships in more detail? Watch our video.
A quick start with limited setup costs
A sole proprietorship is a straightforward way to start trading in Switzerland. For a commercially run business, Commercial Register registration is generally compulsory once annual turnover reaches CHF 100,000; below that threshold, it may be voluntary, subject to the rules for your activity.
The main initial steps include:
- Applying to the OASI/AHV compensation office for recognition of your self-employed status.
- Arranging accident insurance if you hire staff and reviewing your own accident cover.
- Keeping accounting records appropriate to your obligations: at least income, expenses and assets below CHF 500,000 of turnover in the previous year, with full accounting from that threshold.
A key advantage is the limited legal setup cost: no notarial deed of incorporation and no statutory minimum capital. Your required funding depends on the activity’s expenses and cash needs. This appeals to entrepreneurs in services and trades who want to test a business without committing substantial capital.
Unlimited liability: a significant drawback
A sole proprietor has unlimited personal liability. If business debts arise, creditors can seek repayment from the owner’s private assets under the applicable enforcement rules.
This can create substantial risk where financial commitments are high, such as buying expensive inventory or taking on bank financing.
The business is closely tied to its founder: it has no separate legal personality. Bringing in a business partner or transferring the activity later involves a different process from transferring ownership in a company.
Key points about sole proprietorships
- Benefits: low legal setup costs, fewer formalities and independent decision-making.
- Drawbacks: unlimited personal liability, potentially greater financing challenges and more complex business transfers.
Work with our team to turn your project into a business.
Set up your sole proprietorship with clear, practical support.
LLC: a separate legal structure for your business
A Swiss LLC gives your business a formal legal framework. Separating company and personal assets can help manage financial exposure and provide a recognised corporate structure for clients and partners.
This choice also affects social protection. Learn how being an LLC member-manager can affect unemployment benefit entitlement.
You can also watch our video for a fuller explanation.
Limited liability and capital
A limited liability company (LLC) is a legal entity separate from its members, with assets of its own. Company assets generally cover company debts. Personal liability may still arise from officers’ breaches of duty, personal guarantees or additional obligations in the articles.
The Swiss Code of Obligations sets the minimum LLC capital at CHF 20,000, fully paid in at formation. Cash contributions are standard. Qualifying contributions in kind, such as machinery or vehicles, are legally possible but require specific documentation, valuation and verification, with the required details recorded in the articles. They are outside our standard formation offer.
More extensive formalities
Forming an LLC requires a notarial deed, compulsory Commercial Register registration and publication in the Swiss Official Gazette of Commerce (SOGC). Costs include:
- Notary fees: these vary by canton, provider and complexity. Obtain a quote specifying what is included.
- Commercial Register and publication fees: allow approximately CHF 520–600 for a standard formation, subject to the application and applicable charges.
Formation packages can help manage these costs. Entreprendre.ch offers LLC formation for CHF 490 excl. VAT, including notary fees. Commercial Register fees, signature certification and any bank charges are separate.
Once formed, an LLC must keep full accounts in accordance with legal requirements and prepare annual financial statements, including a balance sheet. Structured financial reporting can help banks and clients assess the business.
A formal business presence and scope for several members
An LLC provides a familiar corporate structure for clients and partners. It also allows new members to invest through newly issued or transferred ownership interests, subject to the required approvals and formalities.
Key points about LLCs
- Benefits: a separate legal entity, generally limited liability and the ability to bring in several members.
- Drawbacks: CHF 20,000 of initial capital, higher formation fees and full accounting obligations.
Get started with our company formation service.
Form your LLC from CHF 490 excl. VAT, including notary fees.
Sole proprietorship or LLC: how to choose
To make an informed decision, assess the following factors:
Assess your financial risk
If the project involves substantial machinery, premises or inventory investments, an LLC can provide a clearer separation of company and private assets. Review personal guarantees and management duties as well.
For a consulting, service or freelance activity with limited fixed costs and manageable risks, a sole proprietorship may be sufficient initially.
Compare the required initial capital
A Swiss LLC requires at least CHF 20,000 of capital, fully paid in at formation.
A sole proprietorship has no statutory minimum capital, making it more accessible for launching or testing an activity. Operating costs still need funding.
Consider clients’ expectations
An LLC may offer a familiar framework for clients, suppliers, banks and partners, particularly in B2B trade, e-commerce or sectors involving significant commitments.
A sole proprietorship can still be entirely suitable for someone working alone with local clients and limited financial commitments.
Plan for business development
An LLC may suit you better if you plan to bring in members, formalise the business or expand over the medium term.
A sole proprietorship is flexible initially, but changes in ownership or incorporation later require additional work.
Consider your private assets
A sole proprietor is personally liable for business debts and claims.
In an LLC, company assets generally cover its debts. Personal guarantees and liability for breaches of officers’ duties remain possible.
Practical examples: when to choose a sole proprietorship or LLC
These examples illustrate how the choice can depend on different business circumstances.
Example 1: a communications consultant working alone
Camille is based in Lausanne and wants to offer marketing consultancy to local SMEs. Initial investment is limited to a computer, telecommunications and possibly a coworking space. Assume the planned contracts involve limited financial exposure, after reviewing liability risks.
A sole proprietorship may be the simplest starting point. Camille can focus on finding clients and delivering good work without statutory capital or notarial incorporation.
Example 2: a joinery workshop with premises and machinery
Thierry wants to open a joinery workshop in Yverdon-les-Bains. He needs expensive cutting machinery and will commit to a multi-year commercial lease.
An LLC merits consideration because it separates company liabilities from private assets. In bankruptcy, personal guarantees or liability for misconduct can still expose Thierry’s private assets. A formal corporate structure may also help when negotiating with suppliers or institutional clients.
Starting a Swiss business: advice on choosing a structure
Choosing a legal structure is one part of preparing a durable business. A clear offer, realistic finances and suitable administration also matter.
Use these practical steps to prepare your decision.
1. Speak to professionals
Accountants, lawyers and chambers of commerce, such as CVCI in Vaud, can provide advice reflecting your sector and circumstances.
2. Calculate formation costs accurately
- Sole proprietorship: limited legal setup costs, with personal exposure to business debts. Registration, permits and operating expenses may still apply.
- LLC: CHF 20,000 minimum capital plus formation fees. Packages include CHF 490 excl. VAT formation support from Entreprendre.ch, including the notary. Commercial Register fees, signature certification and any bank charges are additional.
3. Plan for growth
If you expect expansion, an LLC or limited company offers a framework for bringing in investors and discussing bank financing. Approval of funding still depends on the business and lender’s criteria.
4. Consider taxation
- Sole proprietorship: personal income tax applies, with business profit added to your other income.
- LLC: company profits are taxed at company level, followed by tax on dividends distributed to members. This economic double taxation can be partly relieved through partial dividend taxation where the requirements are met.
5. Consider a later change of structure
You can later move a sole proprietorship’s business into an LLC, but this involves legal, administrative and potentially tax formalities. Starting directly with an LLC may make sense when growth is already planned.
Match your structure to your project
Your decision depends on the activity, risks, professional expectations and available resources. A sole proprietorship offers flexibility and low setup costs but exposes private assets to unlimited liability. An LLC involves higher costs, compulsory initial capital and additional formalities, while providing a separate legal structure and a framework for shared ownership.
Your legal structure affects how you finance, manage and develop the business you are starting. Compare scenarios and discuss them with an expert or accounting firm before committing, especially when liability or tax consequences are significant.
Whatever you choose, focus on the quality of your project and the value you provide to clients. A suitable legal structure supports those foundations.
What is the difference between a sole proprietorship and an LLC in Switzerland?
A sole proprietorship is relatively simple to establish, with limited legal setup costs and no statutory minimum capital. The owner has unlimited personal liability. An LLC is a separate legal entity requiring at least CHF 20,000 of capital. It separates company and private assets, subject to liability exceptions, but involves more formalities and higher formation costs.
Which criteria should guide the choice between a sole proprietorship and LLC?
Consider several factors:
- Financial risk: an LLC separates company and personal assets, subject to liability exceptions.
- Professional expectations: an LLC may provide a more familiar corporate framework for banks and partners.
- Available capital: a sole proprietorship has no statutory minimum; an LLC requires fully paid-in initial capital.
- Growth plans: an LLC allows new members to invest under a defined ownership structure.
Does an LLC offer tax advantages over a sole proprietorship?
A sole proprietor’s profits are taxed as personal income. An LLC can involve economic double taxation: first on company profits, then on dividends paid to members. Tax planning may be possible, including partial dividend taxation for qualifying holdings, but an LLC does not automatically produce a lower overall tax burden.
What are the main risks of a sole proprietorship in Switzerland?
The main risk is unlimited liability: private assets may be used to satisfy business debts. A sole proprietorship is often more suitable where financial and contractual risks are limited; service activities still need their own liability assessment.
Can a sole proprietorship be changed into an LLC in Switzerland?
Yes. The business can be transferred into an LLC, subject to the required legal, administrative and tax steps, including notarial incorporation and Commercial Register registration. Planning for growth can help you choose a suitable structure from the outset.
