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What is a sole proprietorship and what are the pros and cons of this legal form?

The sole proprietorship is the simplest way to set up a business and a condition for being recognised as self-employed by the authorities. In the following, we have compiled a list of what you can and cannot do with a sole proprietorship.

What is a sole proprietorship?
A sole proprietorship is the simplest legal form: as a rule, it is established as soon as you start a business activity. You only have to enter it in the commercial register if your annual revenue exceeds CHF 100,000. However, to ensure that your sole proprietorship is easy to find and inspires confidence, we recommend that you register it in all cases – the costs for this at Foundera come to just CHF 150 (plus the fees charged by the commercial register).

Pros:

  • Forming a proprietorship is easy with little effort.

  • You do not need any capital to form a sole proprietorship.

  • Subject to certain conditions, you can apply to the compensation fund (Ausgleichskasse) for self-employed status when you form a sole proprietorship. For example, this allows you to withdraw your pension fund assets.

  • As a rule, you don’t have to use double-entry bookkeeping.

  • You can employ other people – the same requirements apply as for a GmbH or an AG (old-age and survivor’s insurance, accident insurance, pension fund, etc.)

Cons:

  • As a minimum, your last name must be included in the company name (e.g. “Smith’s British Goods”).

  • As the owner, you are personally liable without limit for claims and losses.

  • You can’t have any partners in your business – a sole proprietorship means that there is only a single owner.

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