A sole proprietorship often suits a solo founder who wants a simple setup with manageable risks. A Swiss LLC creates a separate legal entity, lets partners share ownership and separates business assets from personal assets. An LLC requires at least CHF 20,000 in share capital and more formalities. In Switzerland, it is known as a Sàrl in French and a GmbH in German.
To choose between a sole proprietorship and an LLC in Switzerland, compare your business commitments, available funds, social insurance and how you intend to pay yourself. These are the differences that matter for your project.
Sole proprietorship or LLC: the essentials
- Starting alone with low fixed costs: a sole proprietorship may be a suitable first option.
- Starting with partners or taking on major commitments: consider an LLC from the outset.
- Your assets: a sole proprietor is personally liable for debts. An LLC generally meets its debts with company assets, subject to exceptions.
- Your budget: a sole proprietorship has no minimum capital; an LLC needs CHF 20,000 fully paid in, which the company can subsequently use.
- Your taxes: the outcome depends on profit, withdrawals, the canton and your personal circumstances. Compare actual figures before deciding.
Comparison table: sole proprietorship versus LLC
| Criterion | Sole proprietorship | LLC (Sàrl/GmbH) |
|---|---|---|
| Owner | One individual | One or more members, who may be individuals or legal entities |
| Legal existence | You operate in your own name | A separate legal entity upon registration in the Commercial Register |
| Minimum capital | No statutory minimum | CHF 20,000, fully paid in |
| Liability | Unlimited personal liability, including personal and business assets | Generally company assets; exceptions are explained below |
| Formation | Start trading, have self-employed status assessed and complete applicable registrations | Articles of association, capital deposit, notarial deed and registration |
| Commercial Register | Generally compulsory from CHF 100,000 annual turnover; check statutory exceptions | Compulsory at incorporation |
| Accounting | At least records of receipts, expenditure and assets below CHF 500,000 turnover; full accounts from that threshold | Accounting and annual financial statements under the Code of Obligations |
| Owner’s income | Business profit; private drawings | Salary for work, plus dividends where the conditions are met |
| Taxation | Profit forms part of the owner’s taxable income | The company pays tax on profit; the member pays tax on salary and dividends |
| Social insurance status | Self-employed if recognised under OASI/AHV rules | An employee of your company when employed by it |
| Staff | May employ staff | May employ staff |
| Partners and ownership transfers | No membership interests to divide; a business transfer must be arranged | Members can join or leave through transfers of membership interests, subject to applicable rules |
A sole proprietorship and an LLC meet different needs. Review the requirements for each, then use this comparison to assess their implications for your circumstances.
Sole proprietorship or LLC: a free comparison to keep
Our free French-language white paper, “RI ou Sàrl”, brings together the criteria to compare as you prepare your business project.
Sole proprietorship and self-employed status: what is the difference?
A sole proprietorship is a business structure. Self-employed status describes how social insurance rules apply to you. The compensation office assesses how you actually work: acting in your own name and on your own account, independence, clients and economic risk.
In an LLC, you can be both a member and an employee. You remain an entrepreneur in your daily work, but your social insurance treatment differs from that of someone recognised as self-employed under OASI/AHV rules.
Which assets are exposed under each structure?
As a sole proprietor, you personally contract with clients, suppliers and landlords. Business debts can therefore affect your private assets. The risk depends on your contracts, borrowing, stock and the damage your activity could cause.
An LLC owns its assets and enters into its own commitments. Creditors are generally paid from company assets. These can exceed the initial share capital: the company is liable with all its assets.
For a project involving a commercial lease, debt-financed investment or major client commitments, consider an LLC before signing contracts. For a small operation, first assess the risks you actually bear and how they are covered.
What budget do you need for each structure?
| Item | Sole proprietorship | LLC |
|---|---|---|
| Statutory capital | No minimum required | At least CHF 20,000 |
| Formation formalities | No notarised incorporation deed; registration and signature certification fees may apply | Notarial deed and registration required |
| Professional support | Depends on the work entrusted to a professional | Entreprendre.ch: from CHF 490 excl. VAT, including notary fees |
| Additional fees | Registration where applicable, signatures, permits and advice depending on the file | Commercial Register, signature certification and bank fees are additional |
| Ongoing administration | Accounting, insurance, contributions and taxes according to the activity | Full accounting, company returns and payroll administration where applicable |
For a sole proprietorship, the startup budget mainly depends on the activity: equipment, insurance, marketing, rent and a cash reserve. With no minimum capital requirement, you can size these resources to suit your needs.
An LLC’s share capital belongs to the company. After registration and release of the capital deposit account, it can finance business expenses. LLC formation costs are separate expenses to budget for in addition to capital.
Sole proprietorship or LLC: how do taxes differ?
As a sole proprietor
Business profit forms part of your taxable income alongside your other income. Business assets also enter the calculation of taxable wealth. Private drawings are not a salary that can be deducted from business profit.
With an LLC
The company pays tax on profit and, under cantonal rules, on capital. You personally declare your salary, dividends received and the value of your membership interests. A salary justified by your work is generally an expense for the company.
Distributed profit can be taxed first at company level and then at member level. This is economic double taxation. Partial taxation of dividends may apply to qualifying participations where the legal conditions are met.
At what profit level does an LLC become attractive?
An LLC can offer a more suitable tax arrangement in some circumstances, particularly where profits remain in the business to fund growth. Calculate the outcome using your own figures: municipality of residence, registered office, profit, other income, pension arrangements and household needs.
Two people with the same turnover can have very different margins and private spending needs. A business tax comparison should start with expected profit and how it will be used, then include each structure’s specific costs.
Unsure which structure to choose?
Discuss your project with our team and identify the risks and figures you need to compare. A free introductory call explains our services; personalised advice is provided through a separate consultation.
Social insurance, pensions and unemployment: what changes?
If your sole proprietorship is recognised as self-employment, OASI/DI/IC contributions are based on the relevant business income and paid entirely by you. You must arrange occupational pension provision and accident or loss-of-income cover according to your circumstances.
An LLC member who works as an employee of the company comes under employee social insurance rules. The company has employer obligations. Occupational pension coverage applies when the statutory conditions are met.
Compare equivalent protection: income during illness, accident cover, retirement provision and family coverage. A difference in contributions can reflect a difference in benefits.
Accounting, VAT and everyday administration
Organise accounting from the start
A sole proprietorship with turnover below CHF 500,000 in the preceding financial year must at least record receipts, expenditure and assets. From CHF 500,000, the Code of Obligations’ accounting and financial reporting rules apply. An LLC is subject to those rules regardless of turnover.
In either structure, keeping accounts up to date helps you monitor cash flow, outstanding invoices and amounts to reserve for upcoming payments. An LLC also requires formal records of member decisions, annual accounts and payroll where applicable.
VAT depends on your activity and turnover
Both structures may be liable for Swiss VAT. Liability generally arises from CHF 100,000 in relevant annual worldwide turnover from supplies not exempt without credit. It may begin at launch if reaching the threshold is foreseeable. Exceptions and voluntary registration need a separate assessment.
You can employ staff under either structure
A sole proprietorship can employ staff. It must meet employer obligations, including social insurance, accident insurance and payroll. Hiring is part of your decision, but it is possible under either structure.
How to choose between a sole proprietorship and an LLC
Review these five points before deciding. Your structure should fit your activity, available funds and personal circumstances.
Assess your commitments
List potential damage, contracts, leases, borrowing and guarantees requested. Separating business and private assets may matter more than administrative savings.
Identify who owns the project
A sole proprietorship belongs to one person. If you want to share ownership, bring in a partner or arrange transfers of membership interests, consider an LLC.
Plan your cash resources
Distinguish share capital, formation fees, launch expenses and your personal reserve. CHF 20,000 in share capital does not replace an operating budget.
Compare your disposable income
Model the outcome using expected profit, canton, household circumstances, remuneration, insurance and administration costs.
Look ahead two years
Hiring, new partners, investment or a future sale may justify a different structure from the one suitable for simply testing a business idea.
Three examples to help you decide
Testing a solo consulting business
A sole proprietorship may suit limited commitments, little available capital and a straightforward launch. Check recognition of self-employed status and professional insurance, especially if you mainly work for one client.
Launching an agency with a partner
An LLC lets you divide membership interests and organise decision-making. Also define each partner’s role, remuneration, contributions and exit terms.
Opening a shop with a lease and stock
Consider an LLC in light of your financial commitments. Examine any personal guarantees required by the landlord or bank: they can expose your private assets despite the company structure.
Prepare your business at your own pace
Our free French-language course on becoming self-employed in Switzerland explains the steps, preparation of your OASI/AHV application and the obligations to understand.
Can you start as a sole proprietor and later form an LLC?
Yes. A business started as a sole proprietorship can later be taken over by an LLC. This involves incorporating the company and arranging the transfer of the business, assets, contracts and, where applicable, staff.
The timing and conditions of the transfer can have tax implications. Plan the process with your accountant before moving assets or signing new contracts.
Sole proprietorship and LLC FAQs
What is the difference between self-employment and a sole proprietorship?
Self-employment is a status under social insurance rules; a sole proprietorship is a legal structure. The compensation office examines how you actually operate before recognising your self-employed status.
How much capital does each structure require?
A sole proprietorship has no statutory minimum capital. An LLC requires CHF 20,000 in fully paid-in share capital. Budget separately for formation fees and the cash needed to start trading.
Must I form an LLC when turnover reaches CHF 100,000?
No. This amount does not require you to change legal structure. It is relevant to compulsory Commercial Register registration for many sole proprietorships and, under separate rules, VAT liability. Assess the activities covered and turnover calculation separately.
At what profit level is an LLC more advantageous?
There is no universal threshold. The result depends on the canton, family circumstances, salary, possible dividends, pensions and administration costs. A personalised business tax calculation is more useful than a standard figure.
Can one person form an LLC in Switzerland?
Yes. One person can own all the membership interests. The company must, among other requirements, be representable by a person resident in Switzerland. See our article on forming a Swiss LLC.
Can a sole proprietorship employ staff?
Yes. It must then meet employer obligations, including contributions and insurance. Hiring staff does not automatically require conversion into an LLC.
Can the manager of their own LLC claim unemployment benefits?
Paying unemployment insurance contributions does not guarantee entitlement to benefits. A person who retains an employer-like position and influence over company decisions may be excluded. Have your circumstances assessed by the responsible unemployment insurance body.
Does an LLC always protect private assets?
The company is generally liable for debts with its own assets. Personal guarantees, specific obligations in the articles of association or liability arising from management can nevertheless create personal exposure.
Does VAT depend on choosing a sole proprietorship or an LLC?
Either structure may be liable. The general CHF 100,000 threshold is assessed under VAT rules, with exceptions. Our Swiss VAT article explains the criteria to examine.
How do you move from a sole proprietorship to an LLC?
You need to incorporate an LLC and prepare the business transfer. Review contracts, assets, insurance and taxation with your accountant before proceeding.
Ready to start your business?
Once you have chosen your structure, our team can help you prepare the steps for your sole proprietorship or LLC.
Official sources
- SECO SME portal: sole proprietorships
- SECO SME portal: limited liability companies
- OASI/DI: self-employed contributions, leaflet 2.02
- Federal Tax Administration: VAT (French)
Adapted from the French article reviewed on 14 September 2026. Tax and social insurance implications depend on your circumstances and the rules applicable to your activity.
Romain Prieur is a Swiss-qualified accountant and founder of Entreprendre.ch. With more than ten years of experience in auditing and supporting Swiss businesses, he advises entrepreneurs on company formation, accounting and taxation.
