The right legal form for your self-employment - the last big decision before founding your business

If you want to become self-employed in Switzerland, the foundation of a sole proprietorship is the cheapest and easiest way. As long as your expected annual turnover is less than CHF 100,000, you don't even have to register with your canton's commercial register. However, we always recommend registering, as this will definitely bring you advantages.

The biggest disadvantage of this legal form is that you have unlimited liability for all debts, including your private assets.

You can find all information on the legal form of a sole proprietorship on a separate page. There you can read up on the subject in detail. We have compiled an overview of the most important advantages and disadvantages for you below:

✅ No start-up capital: You don't need any start-up capital for the foundation of a sole proprietorship! With CHF 349 for our advice and the founding documents as well as around CHF 200 in fees from the commercial register, you're all set.

✅ Self-employment status: You can only be recognised as self-employed by your cantonal compensation office if you have a sole proprietorship. This means that a sole proprietorship is the only legal form that does not require you to employ yourself.

✅ Pension fund withdrawal: As you can only withdraw your pension fund money as starting capital as a self-employed person, the sole proprietorship is the only legal form with which this advance withdrawal is possible.

✅ Simple bookkeeping: Up to a turnover of CHF 500,000, you can keep so-called ‘simple bookkeeping’.

❌ Unlimited liability: A sole proprietorship is not a so-called legal entity. Instead, it is closely linked to you, which is why you have unlimited private liability for all debts and damages.

❌ No business partners: A sole proprietorship is always linked to an individual. If you would like to include business partners, we recommend the foundation of an LLC or Ltd.

❌ Taxation as a private individual: The profit you make with your sole proprietorship is taxed as a salary. So if you run the sole proprietorship as a part-time self-employed business and also have a permanent job in which you already receive a salary, this can quickly mean a higher tax rate.

❌ External capital is difficult to obtain: As a sole proprietorship is not a legal entity, third parties cannot invest in your company. The only option is a loan to you as an individual. Loans from banks depend on your personal creditworthiness. Other legal forms are more trustworthy.

❌ No pure fantasy names allowed: The sole proprietorship must contain your name - at least the surname. Only additions such as your business activity, your registered office or a fantasy element are possible.

A sole proprietorship is therefore a simple solution in both a positive and negative sense. It is ideal if you want to start your own business on a small scale without having to invest a lot of capital. However, as soon as you want to grow, need external capital or want to bring in business partners, limited companies are more suitable.

The foundation of a limited liability company (LLC for short) is a simple solution for several participating business partners with low capital requirements. Unlike a sole proprietorship, an LLC is a legal entity. This means that your liability is limited to the share capital.

This means that the LLC is also taxed separately, which can lead to double taxation: Taxes are first incurred on the business profit and then on your profit distributions as income. Nevertheless, an LLC can be more tax-efficient for you than a sole proprietorship. For example, it offers greater flexibility when it comes to recognising expenses.

One disadvantage often cited is that all persons or companies involved in an LLC are visible in the commercial register. Investors who prefer to remain anonymous therefore favour the public limited company. More on this legal form later.

Back to the LLC. On a separate page you will find all the detailed information on the legal form of LLC. For quick orientation, here is an overview of the advantages and disadvantages:

✅ Low start-up capital: the nominal capital required for the foundation of an LLC is at least CHF 20,000 in cash or in the form of a contribution in kind. This is significantly lower than the share capital for a Ltd.

✅ Multiple business partners: LLCs allow multiple business partners. These usually form the management of the company together. ‘Silent partners’, on the other hand, are rather unusual.

✅ Limited liability: As the name suggests, the liability of the business partners is limited to the company capital. Your private assets are therefore protected from the liability risk.

❌ Double-entry bookkeeping: An LLC, like a Ltd, must always keep double-entry bookkeeping.

❌ No anonymity: The shareholders and their shares are visible in the commercial register. This can deter potential investors.

The foundation of an LLC is a good compromise if several business partners want to found a company together. However, if the company grows rapidly or someone wants to sell their shares, it is advisable to convert the LLC into a public limited company.

The biggest advantages of a public limited company (Ltd.) are the high degree of organisational freedom and the ease with which shares can be issued. However, the required share capital is CHF 100,000, of which 20% and at least CHF 50,000 must be paid up from the beginning.

The freedom of this legal form also entails further legal requirements, which makes a public limited company more complex than an LLC. For example, the relationship between shareholders must be regulated in order to avoid disputes. A shareholders' agreement creates clear conditions here. Of course, Foundera not only supports you with the foundation of your company, but also with the drafting of such an agreement.

You can read more details about the legal form of a Ltd. on our information page about the Ltd. We have summarised the most important plus and minus points for you below:

✅ High flexibility: you are free to decide who holds how many shares in the company and who appears in the commercial register.

✅ Multiple business partners: The Ltd. allows any number of shareholders who are not listed in the commercial register. Only members of the Board of Directors and other persons with signing authority must be entered.

✅ Limited liability: Similar to LLCs, the liability of shareholders is limited to the share capital.

❌ Double-entry bookkeeping: A Ltd, like an LLC, must always keep double-entry bookkeeping.

❌ High capital requirements: The share capital must be at least CHF 100,000. If you carry out a partial capitalisation, you are obliged to inject the missing capital.

The foundation of a Ltd offers you the greatest freedom of organisation and unlimited growth potential. If you run a capital-intensive business or want to grow quickly, then a public limited company is certainly the best legal form for you.

Of course, there are also other legal forms for special cases. Depending on what kind of company you want to found, a cooperative or an association may make sense. However, associations must not be profit-orientated and cooperatives focus on shared values, self-help and direct democracy. We can also advise you in detail on these legal forms - feel free to contact us if you are thinking about it.

However, we only recommend the foundation of a general partnership in absolutely exceptional situations. The main reason for this is that liability is unlimited, as with a sole proprietorship - with the big difference that the partners are also liable for each other's private assets! An LLC is almost invariably more suitable in such cases.