The sole proprietorship (also known as Einzelfirma) is one of the most popular business structures among new entrepreneurs interested in living and working in Switzerland. As a legal form, the sole proprietorship is widely used to pursue commercial activities.

What is the Swiss sole proprietorship?

The sole proprietorship in Switzerland is similar in structure to an individual enterprise, a one –man business, a self-employed person or a sole trade. This type of business structure is registered as a private person who manages their business individually and has unlimited liability. Sole proprietorships are a good option for small businesses and start-ups. They can also hire employees, just like any other business structure.

Requirements for sole proprietorship registration

The equity capital for a sole proprietorship is limited only by the financial circumstances of the owner. There are no regulations regarding equity capital. In addition, it is not necessary to have a special constituent instrument.  The business structure comes to life whenever the owner of the sole proprietorship starts its business activity.  Since only one person is operating the company there is no need to have separate corporate and operating agreements.

A sole proprietorship doesn’t need to be registered in the Swiss Commercial Registry, if the annual turnover is less than 100,000 CHF.  However, even if the annual turnover does not exceed 100,000 CHF, it is still advisable to register the sole proprietorships in the Commercial Registry.

By entering the sole proprietorship into the Commercial Registry, this process is accompanied by certain rights and obligations. The name of the company is protected and the owner of the company becomes a subject to compulsory execution.  The sole proprietorship’s owner is also required to maintain orderly and double-entry accounting records.  It is important to keep in mind that keeping books and records is a legal requirement, regardless if the sole proprietorship is entered into the Commercial Registry or not. This is necessary in order to provide the competent tax authorities with the accounting records upon request.

Foreign individuals who wish to register a sole proprietorship in Switzerland may do so only if they hold C permits (Swiss work and residence permit).  EU citizens are allowed to register a sole proprietorship in Switzerland without any special permits.  However, domicile in Switzerland is not mandatory. 

Other required permits are business licenses for those types of businesses that demand it according to Swiss law.

Sole proprietorship business names

One important aspect regarding the formation of a sole proprietorship is naming. In Switzerland, a sole proprietorship must have a name that contains the family name of the business owner, with or without adding the first name.

It is not allowed to use the same name in a local area, therefore it another person has already registered their business with the desired business name, the newest business must take a type of suffix to its name in order to make a distinct change.

Taxation of the sole proprietorship

Sole proprietorships are obliged to pay a Federal Direct Tax at the personal income tax rate. There are other duties for social insurance as well, such as health insurance, retirement, invalidity or loss of earnings compensation.

Advantages of the sole proprietorship

  • The sole proprietorship is easy to incorporate because it requires less paperwork.
  • The owner of the sole proprietorship has full control of their business and obtains all the profits made.
  • There is no minimum starting capital required.
  • Legal audits and disclosure are not required.
  • Entrepreneurial freedom – the owner of the sole proprietorship can make its own business decisions.
  • Taxation – the personal income of the entrepreneurs and the income derived from the business is excluded from fiscal double-burden.
  • The sole proprietorship, if successful, can easily be converted into a GmbH or AG.
  • Easy liquidation procedure, compared to other business structures.

Disadvantages of the sole proprietorship

  • The owner of the sole proprietorship has full legal responsibility for their business and debts with all their assets.
  • The capital is limited by the financial resources of the business owner.
  • The owner of the sole proprietorship must be disclosed publicly (in contrast to an AG, for example).
  • Sole proprietorship business names are not freely selectable, as the name of the owner is mandatory to be included in the business name.
  • Sole proprietorships that are entered in the Commercial Registry are a subject of the accounting obligation, although the criteria are much less stringent than I the case of other business structures.

Therefore, if you are thinking about opening this type of business structure in Switzerland, it is necessary to start with the sole proprietorship business names first and choose one that is not already taken and contains the last name of the owner. The rest of the formation procedures are rather quick and simple.

For more details and assistance regarding sole propritorship in Switzerland, feel free to reach out to our expert consultants. Our highly experienced and well-informed team is ready to answer all your questions and give you all the help you might need.

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