individual business

The sole proprietorship is a very common legal form of business in Switzerland, also known as a sole proprietorship. Unlike other legal forms, such as the corporation or the limited liability company, a sole proprietorship is operated by a single individual, the sole trader, who is responsible for all business decisions and legal obligations relating to the business. In Switzerland, the Code of Obligations does not contain any specific regulations concerning the legal form of sole proprietorship.

Creation and management

Setting up a sole proprietorship in Switzerland is relatively straightforward, requiring no minimum share capital or written articles of association. However, the sole proprietor must be entered in the Commercial Register if he or she runs a commercial enterprise and if annual sales exceed CHF 100,000.

Setting up a sole proprietorship in Switzerland is a low-cost process. Consultancy fees for the formalities involved, such as consulting a trustee, are generally included at around CHF 1,500. The cost of registering the company in the Commercial Register is also minimal, amounting to just a few hundred francs.

On the other hand, the sole proprietor is liable for all the company’s debts from his or her private assets. It is therefore crucial to think carefully before embarking on a sole proprietorship, as the financial risks can be high in the event of commercial difficulties.

The sole proprietor is solely responsible for all business decisions relating to the company. They are also responsible for the company’s accounting and tax returns. However, he or she may call on the services of chartered accountants or tax consultants to help with administrative tasks.

Taxes

In Switzerland, sole proprietorships are subject to income and wealth taxes levied directly on the company’s profits and the sole proprietor’s personal wealth. A sole trader’s business income is closely linked to his private income for tax purposes. As a result, only one tax return is required. As with all businesses in Switzerland, taxes are collected at three different levels: federal, cantonal and communal.

Tax rates vary according to the entrepreneur’s personal situation, business location and annual sales. If the company’s registered office is different from the entrepreneur’s private residence, he or she can opt for tax planning.

In addition, there are other taxes that sole traders must take into account. For example, sole traders must pay VAT if their annual sales exceed CHF 100,000. Social security contributions are another major tax burden for sole traders, who must pay contributions for AHV, IV and IV. Sole proprietorships are also required to pay wealth tax, which is generally calculated according to the value of their assets.

Advantages of sole proprietorship

The sole proprietorship has many advantages in Switzerland. Firstly, setting up a sole proprietorship is relatively straightforward, with little red tape to deal with. This means that entrepreneurs can launch their business quickly and easily, without having to deal with a large number of complex administrative procedures.

Another advantage of the sole proprietorship in Switzerland is that entrepreneurs have total control over their business. As the sole owner of the company, the entrepreneur has the power to make all major decisions concerning the business, without having to obtain the approval of other shareholders or a board of directors. This enables entrepreneurs to make decisions quickly and react swiftly to market changes.

What’s more, the sole proprietorship offers great management flexibility. Entrepreneurs can decide how they wish to run their business, according to their own needs and vision.

Finally, the sole proprietorship is often considered less expensive to run than other forms of business, such as the limited liability company (SARL) or the public limited company (SA). This is partly because sole proprietorships require no minimum capital, and administrative costs are relatively low. Entrepreneurs can also benefit from more favorable tax treatment, thanks to tax deductions for the self-employed.

Disadvantages of sole proprietorship

• The owner is personally liable for all the company’s debts, without limit. This means that his or her personal assets can be seized if the company runs into financial difficulties.
• Unlike partnerships, it is difficult to transfer ownership shares. In the absence of a separate legal personality, sole proprietorships can only be transferred by transferring the assets and liabilities of the business.
• Access to the capital market can be difficult for partnerships, of which sole proprietorships are a part, as they do not offer the same guarantees as corporations.
• Business protection is limited to the territory. When expanding abroad, the sole proprietorship may encounter obstacles.
• Nominative entry in the commercial register means that anonymity is not protected. Third parties can easily gain access to information about the company and its owner, which can present privacy and security risks.

In conclusion, the sole proprietorship under Swiss law is an attractive option for entrepreneurs wishing to pursue a commercial, craft or liberal activity independently, thanks to the simplicity of administrative procedures and the flexibility of management. However, it is important to consider the disadvantages. We strongly recommend that you consult a lawyer.