Key points at a glance
- Liability: With a sole proprietorship, you're liable with all your personal assets; with a GmbH, only the company's assets are at stake.
- Setup: A sole proprietorship costs almost nothing. A GmbH needs CHF 20'000 in share capital (Stammkapital), a notarized deed of incorporation and an entry in the commercial register (Handelsregister).
- Taxes and AHV: With a sole proprietorship, you pay income tax on the profit and AHV (old-age and survivors' insurance) contributions on it. In a GmbH, you're an employee and draw a salary; the profit is taxed in the GmbH.
- Effort: A GmbH always needs double-entry bookkeeping with a balance sheet - more work and higher accountant (Treuhand) fees.
Liability
A sole proprietorship isn't a separate legal person: you are the business. That's why you're liable for your business's debts with all your personal assets - savings, car, home. Business liability insurance covers damage you cause to customers, but not unpaid supplier invoices or leasing contracts.
A GmbH is a legal entity in its own right. Only the company's assets are liable for its debts (Art. 794 of the Swiss Code of Obligations, CO). Even so, you're not entirely free of risk: banks often require a personal guarantee for loans, and as managing director you're liable for breaches of duty and for social insurance contributions that haven't been paid over.
Setup and costs
A sole proprietorship comes into existence as soon as you start working for yourself. You register with the AHV compensation office (Ausgleichskasse); you only have to register in the commercial register once you reach CHF 100'000 in revenue (Art. 931 CO). Registration costs a basic fee of CHF 80 throughout Switzerland. The process is described in the article Starting a sole proprietorship.
For a GmbH, you need:
- share capital of at least CHF 20'000 (Art. 773 CO), which must be fully paid in at incorporation (Art. 777c CO) - in cash into a blocked account or as a contribution in kind;
- articles of association and a notarized deed of incorporation, meaning an appointment with a notary (Art. 777 CO);
- registration in the commercial register - the GmbH only comes into existence once it's registered (Art. 779 CO). The basic fee is CHF 420 (Commercial Register Fees Ordinance, in German), plus notarization costs, which vary by canton;
- a company name with the suffix "GmbH" (Art. 950 CO).
You can handle many of the steps - commercial register, VAT (MWST), AHV and accident insurance - free of charge via EasyGov.swiss, the federal government's online desk for businesses.
Taxes
With a sole proprietorship, the profit is your income from self-employment (Art. 18 of the Federal Act on Direct Federal Taxation, DBG, in German). It's taxed together with your other income - at the full progressive rate if the profit is high.
A GmbH pays profit tax itself: 8.5% of net profit at the federal level (Art. 68 DBG), plus cantonal profit tax. As a shareholder, you draw a salary, which you pay income tax on. If the GmbH distributes profit as a dividend and you hold at least 10% of the share capital, only 70% of the dividend is taxed at the federal level (Art. 20 para. 1bis DBG) and at least 50% at the cantonal level (Art. 7 of the Tax Harmonization Act, StHG, in German). Whether a GmbH saves you taxes depends on your profit, your canton and your personal situation - it's best to work it out with your accountant.
Social insurance
With a sole proprietorship, you pay AHV/IV/EO contributions on your profit, at most 10% (AHV/IV leaflet 2.02). A pension fund and accident insurance are voluntary, and unemployment insurance isn't available to you.
In a GmbH, you're an employee of your own company. The GmbH pays AHV/IV/EO and unemployment insurance (ALV) contributions on your salary (AHV/IV leaflet 2.01, in German), insures you against accidents as required by law and - above the entry threshold - in the occupational pension scheme. This gives you better cover, but you also pay more in contributions. Two points that often come as a surprise:
- Unemployment insurance: According to established case law, a shareholder who has a decisive influence on the GmbH's decisions isn't entitled to unemployment or short-time work compensation (applying Art. 31 para. 3 let. c of the Unemployment Insurance Act, AVIG, in German, by analogy) for as long as they hold that position - even though the GmbH pays ALV contributions.
- Salary or dividend: No AHV contributions are due on dividends. If you pay yourself a conspicuously low salary and high dividends instead, the compensation office can treat part of the dividend as salary.
Bookkeeping and audit
A sole proprietorship with revenue of up to CHF 500'000 may keep simple accounts of income, expenses and assets (Art. 957 para. 2 CO). A GmbH must always keep double-entry books with a balance sheet and income statement and hold an annual shareholders' meeting. An audit is required in principle (Art. 818 CO); small GmbHs with no more than 10 full-time positions can waive it with the consent of all shareholders (opting out, Art. 727a para. 2 CO).
Example: starting as a sole proprietorship, later a GmbH
Jan sets up on his own as an electrical design engineer. He starts with a sole proprietorship because it's quick and cheap. Three years later, he has two employees, larger contracts with liability risks and a profit that puts him in a high tax bracket. With his accountant, he transfers the business to a GmbH. Since then, he has drawn a fixed salary, is insured in a pension fund and his personal assets are separate from the business risks.
Switching later
Your decision isn't permanent. A sole proprietorship registered in the commercial register can transfer its business, with all assets and liabilities, to a new GmbH (transfer of assets, Art. 69 of the Merger Act, FusG, in German). This is tax-neutral only under certain conditions - among other things, you can't sell the shares for five years (Art. 19 DBG). So plan the switch with your accountant.
Decision guide
| Sole proprietorship | GmbH | |
|---|---|---|
| Start-up capital | none | CHF 20'000, fully paid in |
| Setup | AHV registration, commercial register from CHF 100'000 revenue | Articles of association, notary, commercial register |
| Liability | unlimited, with personal assets | company assets only |
| Taxes | profit taxed as income | profit tax in the GmbH; salary and dividends taxed privately |
| Social insurance | AHV on profit, everything else voluntary | as for employees: AHV, ALV, UVG, BVG |
| Bookkeeping | simple up to CHF 500'000 revenue | always double-entry, balance sheet, audit or opting out |
| Best for | starting out, side business, low risk | employees, liability risks, high profit |
How it works in Easly
Easly works for both legal forms - and grows with you if you switch:
- Legal form in the settings: Depending on your legal form, Easly issues the letterhead and QR-bill payment part in your name (sole proprietorship) or in the company name (GmbH) - matching the account your customers pay into.
- Your salary as a shareholder: In a GmbH, you process your own salary in the payroll run - with AHV/IV/EO and ALV, your pension fund and accident insurance amounts, payslip and salary certificate (Lohnausweis).
- Quotes, invoices, receipts and VAT work the same for both legal forms.
- Automatic double-entry bookkeeping: For a GmbH, Easly keeps the journal with debits and credits based on the Swiss SME chart of accounts (Kontenrahmen KMU) - from invoices, payments, receipts and payroll, without entering anything twice. Amounts you pay privately on the company's behalf go through the "Partner current account".
- Bank import: You upload the account statement (camt.053) from e-banking; Easly automatically matches payments to your QR-bills.
- Documents for your accountant: Journal, trial balance and chart of accounts as Excel, CSV or for Banana, plus income statement, VAT return, salary certificates and receipt archive at the push of a button.
What Easly doesn't do for you
Your accountant prepares the annual financial statements with balance sheet, income statement and notes - including depreciation and accruals. Easly posts the current year automatically and hands it over ready to import.
Frequently asked questions
How much does it cost to set up a GmbH?
You need at least CHF 20'000 in share capital, which belongs to the GmbH and can be used for the business. On top of that come the commercial register's basic fee of CHF 420 and the cost of the notarized deed, which varies by canton.
With a GmbH, am I no longer personally liable at all?
As a rule, only the company's assets are liable for the GmbH's debts. But you are personally liable if you sign a guarantee, breach your duties as managing director or fail to pay over social insurance contributions.
Can I convert my sole proprietorship into a GmbH later?
Yes. A sole proprietorship registered in the commercial register can transfer its business to a new GmbH. This is tax-neutral only under certain conditions, such as a five-year lock-up period for selling the shares. Plan the move with your accountant.
When does a GmbH make sense?
There's no fixed threshold. Typical reasons are liability risks, your first employees, a profit that puts you in a high tax bracket, or wanting a pension fund and unemployment insurance. For getting started, a sole proprietorship is usually simpler.
Information as of: see above. Sources: Swiss Code of Obligations (Art. 727a, 773, 777, 777c, 779, 794, 818, 931, 950 and 957 CO), Commercial Register Fees Ordinance (in German), Federal Act on Direct Federal Taxation (Art. 18, 19, 20 and 68 DBG, in German), Tax Harmonization Act (Art. 7 StHG, in German), Unemployment Insurance Act (Art. 31 AVIG, in German), Merger Act (Art. 69 FusG, in German), AHV/IV leaflets 2.01 (in German) and 2.02. Your choice of legal form has long-term tax and legal consequences - this article is not a substitute for advice from an accountant or notary.