Craftsmen and doctors often opt for sole proprietorships. They are suitable for companies whose business activities are closely linked to the owner.
- 1. Legal basis
- 2. Ideal for/main purpose
- 3. Economic importance
- 4. Advantages
- 5. Disadvantages
- 6. Legal nature
- 7. Creating the company name
- 8. Establishment
- 9. Registration in the commercial register
- 10. Number of owners or partners required
- 11. Capital requirement
- 12. Contributions in kind to replace cash
- 13. Organization and corporate bodies
- 14. Powers of the management/corporate bodies
- 15. Liability/obligation for additional payments
- 16. Use of investors or foreign funds
- 17. Allocation of profits/liability for losses
- 18. Formation of reserves
- 19. Accounting obligations
- 20. Taxation
- 21. Start-up costs
- 22. Management and representation
- 23. Termination/transfer
- 24. Provisions relating to nationality and domicile
1. Legal basis
The Swiss Code of Obligations does not impose any special requirement regulating the legal form of sole proprietorships.
2. Ideal for/main purpose
Sole proprietorships are ideal for activities closely linked to the owner. Architects, craftsmen, doctors, lawyers and local commercial businesses often opt for the legal form of a sole proprietorship.
3. Economic importance
Numbering around 326,205, sole proprietorships make up the most common form of company in Switzerland. Sole proprietorships enjoy a privileged position due to the benefits offered by the simple start-up requirements and the absence of minimum capital requirements.
4. Advantages
Sole proprietorships can be created simply and do not require any specific formalities. Business activities can therefore start quickly.
- Only registration in the trade register is required: it is mandatory when the business operates in a commercial form and its annual revenue exceeds CHF 100,000.
- The payment of fixed core capital is not mandatory.
- Partners may personally take on the role of corporate bodies.
- Double taxation of profits can be avoided.
5. Disadvantages
- The owner assumes unlimited personal liability.
- Ownership shares are more difficult to transfer than those of a corporation.
- Partnerships, which include sole proprietorships, have greater difficulties accessing the capital markets.
- The protection of the social enterprise is limited to Swiss territory.
- Due to nominative registration in the trade register, anonymity is not guaranteed.
6. Legal nature
The owner is the sole manager of the sole proprietorship.
7. Creating the company name
The name of the company must include the family name (with or without the first name) of the founder.
In addition to the name, it is possible to add extra elements such as the field of activity or a creative designation. However, the company name must be truthful and not misleading, and must not be harmful to the public interest. Additional elements implying the existence of a company are not permitted (Art. 944 and 945, Swiss Code of Obligations).
Sole proprietorships without an entry in the commercial register are also published in the UID register. For these companies, the first name and surname of the self-employed person are always used as the company name. Fictitious or factual names of sole proprietorships without a commercial register entry are published in the UID register exclusively in the field « Additional name ».
8. Establishment
Sole proprietorships are created when independent and sustainable economic activity begins. This does not necessarily imply the pursuit of profits.
9. Registration in the commercial register
It is compulsory to register the business in the trade register when:
- professional activities are run in a commercial form,
- annual income exceeds CHF 100,000. If the same person operates several sole proprietorships, the business figures of these companies are added together when determining the obligation to register.
For all other one-person businesses, registration is optional (Art. 931, ORC - Ordinance on the commercial register).
10. Number of owners or partners required
In sole proprietorships, a natural person is the sole owner.
The natural person must be recognized as self-employed by social insurance. For this, registration is required at the competent compensation fund of the municipality where the company’s head office is located.
11. Capital requirement
Creating a sole proprietorship does not require any minimum capital.
12. Contributions in kind to replace cash
Contributions in kind are permitted.
13. Organization and corporate bodies
A sole proprietorship does not require corporate bodies. However, it can use the services of a fiduciary or auditor.
14. Powers of the management/corporate bodies
-
15. Liability/obligation for additional payments
The owner is personally liable, and this liability extends to his/her own personal assets.
16. Use of investors or foreign funds
The option to fund a sole proprietorship using foreign funds is limited and closely related to the entrepreneur's assets. In addition, the solvency of the owner and the corporate risk must be covered by guarantees furnished based on commercial or personal assets. Third parties may provide sureties. However, the involvement of third parties in the company is limited to providing loans (external/foreign funds).
17. Allocation of profits/liability for losses
The owner of a sole proprietorship benefits from all profits but also assumes full liability for the risk of losses.
18. Formation of reserves
No special regulations
19. Accounting obligations
Sole proprietorships whose turnover does not exceed CHF 500,000 are required, at a minimum, to keep simplified accounts to report their income, expenditure and assets.
Sole proprietorships posting a turnover greater than or equal to CHF 500,000 over the last fiscal year must keep and present accounts in accordance with the rules set out in the Swiss Code of Obligations (Art. 957 et seq.).
20. Taxation
The owner of a sole proprietorship is liable for tax on all income and professional and personal assets.
Tax planning can be used whether the business and private home are at the same location or different locations. If the head office and private home are not at the same location, the owner will pay overall less tax – this is also the case for general partnerships. The head office is sometimes located at a more advantageous location in terms of the tax rate. In this case, the sole proprietorship is more advantageous (see the example below).
Tax comparison of corporations and limited liability companies versus sole proprietorships (company in town, home in suburbs).
(Values in CHF)
|
SA / SARL |
Sole |
|---|---|---|
Profits reported on annual accounts |
50,000 |
300,000 |
Distribution of dividends |
50,000 (legal entity) |
- |
For SA/SARL, as charges according to the articles of association: |
||
Salary of director |
250,000 |
- |
Total Revenue/Profits |
300,000 |
300,000 |
Tax on the company’s site |
20% rate* |
25% rate* |
Sole proprietorship: on profits* according to tax |
- |
75,000 |
SA/SARL: on profits |
10,000 |
- |
Tax at private domicile |
18% rate* |
18% rate* |
For the owner of the SA/SARL: on the salary |
45,000 |
- |
For the owner of the SA/SARL: on dividends |
4,500** |
- |
** at a reduced rate: in ZH, tax rate is 50% |
||
Total tax |
59,500 |
75,000 |
General remark: calculation excluding OASI, with fictitious interest rates; no general declaration, to be determined on a case-by-case basis.
21. Start-up costs
Starting up a sole proprietorship does not involve many costs. Advice for starting up a proprietorship costs between CHF 0 and 1,000 (cost of an advisor) and CHF 120 for registration in the trade register.
22. Management and representation
The owner of a sole proprietorship is the only person who is responsible for its management. However, other persons may be used to deputize.
23. Termination/transfer
A sole proprietorship cannot be transferred as such. It terminates with the succession or end of the business. The successor will then open a new sole proprietorship. On a material level, the full or partial transfer of the business takes place by transferring the assets and liabilities.
The transfer of assets or business activities of a sole proprietorship registered in the trade register is governed by the provisions of the Merger Act (Art. 181, IV Swiss Code of Obligations). In other cases, the provisions of Article 181 I, II and III Swiss Code of Obligations, must be respected, which stipulates the joint liability of the former debtor. For the transfer of working reports, Article 333, Swiss Code of Obligations applies.
24. Provisions relating to nationality and domicile
In a sole proprietorship, the owner does not need to be domiciled in Switzerland, but he or she must have a work permit and residence permit.
Additional information on the subject is available at the following address:
Information
Last modification 30.10.2023
