Starting a business in Switzerland: sole trader, GmbH or AG?
Before signing articles of association or reserving a name, one decision shapes everything else: the legal form. It determines who is liable for debts, how you are taxed, what you pay in social security contributions and how much the set-up costs. In Switzerland there are two broad families: the sole proprietorship, where you and the business are one, and the company with its own legal personality.
Sole proprietorship: you are the business
The sole proprietorship is the simplest way to start on your own. With several partners, it becomes a general partnership.
What makes it attractive
- No minimum capital and almost no formalities: you can start as soon as you are registered as self-employed with the AHV/AVS compensation fund.
- Entry in the commercial register is only mandatory from CHF 100,000 in annual turnover (optional below that).
- Simplified bookkeeping (income, expenses and a statement of assets) as long as turnover stays below CHF 500,000.
- Taxed only once: the profit is added to your private income.
What you have to accept
- Unlimited liability: your private assets are liable for the business's debts. In a general partnership, the partners are jointly and severally liable.
- All the profit is income subject to tax and to AHV/IV/EO contributions, even if it stays in the business account.
- A sometimes weaker image with banks and large clients, and a more complicated handover.
GmbH and AG: the company is a separate person
The GmbH (Sàrl, limited liability company) and the AG (SA, company limited by shares) have their own legal personality. The company signs contracts, owns assets and is liable for its debts with its own assets.
What they bring
- Limited liability: in principle you risk your contribution, not your private assets (unless you gave personal guarantees to a bank, for example).
- More credibility with banks, partners and investors.
- Easier handover: you sell shares.
- A lever for your pay: salary and dividends.
What they require
- Capital: CHF 20,000 fully paid up for a GmbH; CHF 100,000 for an AG, of which at least CHF 50,000 paid up.
- A notarised deed and entry in the commercial register.
- Full bookkeeping, annual accounts approved every year and, unless you opt out (possible with up to 10 full-time positions on average), an auditor.
GmbH or AG? The GmbH is the form most SMEs choose: lower capital and simple operation. Its members appear in the commercial register. The AG requires more capital but keeps shareholders confidential and makes it easier to bring in new capital: it makes sense for projects with investors or strong planned growth.
Salary, dividends and "double taxation"
In a GmbH or an AG, the manager is employed by their own company: their salary is subject to social security contributions like any employee's. The remaining profit is taxed at company level and can then be paid out as dividends.
This is called double taxation: the company pays tax on its profit, then the shareholder pays tax on the dividend. It is, however, reduced: if you hold at least 10% of the capital, the dividend is only partially taxed (70% for direct federal tax, and at least 50% in the cantons). Dividends are not subject to AHV/AVS contributions, but the salary must remain in line with the market: a salary that is too low, offset by high dividends, can be requalified by the compensation fund.
The right split between salary and dividends depends on your canton, your income and your pension planning: it is a calculation to be made, not a general rule.
Quick comparison
| Form | Minimum capital | Liability | Taxation | Pay |
|---|---|---|---|---|
| Sole proprietorship | none | unlimited | profit = private income | profit subject to AHV/AVS |
| General partnership | none | unlimited, joint and several | profit = partners' private income | profit subject to AHV/AVS |
| GmbH (Sàrl) | CHF 20,000 (paid up) | limited to the company | company profit + dividends (partially) | salary + dividends |
| AG (SA) | CHF 100,000 (50,000 paid up) | limited to the company | company profit + dividends (partially) | salary + dividends |
How much does it cost to set up?
- Sole proprietorship: almost nothing, apart from the commercial register entry if required (federal fee of CHF 80).
- GmbH or AG: notarised deed, commercial register fees (CHF 420 for the entry, plus small fees per registered person), and the capital to be deposited in a blocked account during incorporation.
Notary fees vary widely from one canton and notary to another. They are often the largest cost of the set-up.
Steps after incorporation
- Registration with the AHV/AVS compensation fund (as self-employed or as an employer).
- VAT: mandatory registration from CHF 100,000 of taxable annual turnover, voluntary below that. See our guide VAT in Switzerland.
- Insurance: accident (UVG/LAA) and occupational pension (BVG/LPP) from the first employee, including yourself if you are employed by your GmbH.
- Bookkeeping kept from day one.
How to choose?
Ask yourself four questions: what financial risk does your activity carry? Will you need investors or credit? What image must you give your clients? What profit do you expect? A low-risk service activity that is just starting can begin as a sole proprietorship. As soon as the risks, the amounts or the ambitions grow, the GmbH becomes the safest form.
Set up your GmbH or AG with Digital Admin
We prepare your file with you, a partner notary executes the deed online, and your documents are ready quickly. Incorporation is free if you entrust us with your accounting, and offered at a reduced price with the entry-level plan. Your management app (QR invoices, VAT, accounting) is ready from day one.
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