You want to start a business in Switzerland - but which legal form is right for you? This is the first question almost every founder asks. And the answer has far-reaching consequences: for your liability, taxes, social insurance, and ongoing costs.
In this article, we compare the three most common legal forms - sole proprietorship, LLC (GmbH), and corporation (AG) - with concrete figures, pros and cons, and a clear decision framework. All information reflects the status as of 2026.
Sole Proprietorship: The Quick Start
The sole proprietorship (Einzelunternehmen) is the simplest and most common legal form in Switzerland. It's particularly suitable for freelancers, consultants, tradespeople, and anyone starting on their own.
Advantages of a Sole Proprietorship
- No minimum capital required - you can start with zero francs
- Simple formation - no notary, no complicated paperwork
- Full control - you decide alone, without shareholder meetings
- Low ongoing costs - no audit requirement, simplified accounting under CHF 500,000 revenue
- Flexible - profits flow directly into your personal income
Disadvantages of a Sole Proprietorship
- Full personal liability - you're liable with your entire personal assets
- No separation of private/business - legally, you and the business are one entity
- Less trust for large contracts - some companies prefer LLC/AG as partners
- Profit taxed as income - less favorable for high profits compared to an LLC
- Social insurance - you pay AHV/IV/EO yourself (minimum contribution: CHF 530/year)
Costs of a Sole Proprietorship
Formation Costs - Sole Proprietorship
Essentially free to set up. Commercial register entry only mandatory from CHF 100,000 annual revenue (cost: approx. CHF 120-150). Voluntary registration possible at any time. Trade permits may apply depending on the industry.
Starting a Sole Proprietorship: 7 Steps
- Validate your business idea - check the market, create a business plan (at least a rough one)
- Choose a business name - must contain your surname (e.g., "Mueller Consulting")
- Contact the AHV compensation office - register as self-employed; the office verifies your status
- Open a business account - not mandatory but strongly recommended for clean bookkeeping
- Check VAT obligations - VAT registration mandatory from CHF 100,000 revenue; voluntary below that
- Commercial register entry - mandatory from CHF 100,000 revenue; voluntary entry protects your business name
- Arrange insurance - professional liability, accident insurance (BU/NBU), possibly daily sickness benefits
Open a separate business account from day one - even though it's not mandatory. The clean separation of personal and business expenses will save you hours and nerves when filing your tax return.
LLC (GmbH): The Professional Alternative
The limited liability company (GmbH, Sagl in French) is the most popular type of corporation in Switzerland. It offers limited liability with comparatively moderate effort.
Advantages of an LLC
- Limited liability - you're only liable with company assets, not your personal wealth
- Professional appearance - "GmbH" signals credibility to clients and partners
- Tax optimization possible - profit is taxed at the corporate level; you can pay yourself a salary and optimize dividends
- Multiple shareholders possible - ideal for teams and partnerships
- Free name choice - no surname required (e.g., "Alpine Solutions GmbH")
Disadvantages of an LLC
- CHF 20,000 share capital required - must be fully paid in at formation
- Notarial certification - formation must be done at a notary (cost: approx. CHF 1,500-3,000)
- Higher ongoing costs - double-entry bookkeeping mandatory, possibly auditing body
- Less flexible - shareholders' meeting required for certain decisions
- Economic double taxation - profit taxed at both corporate AND shareholder level
Costs of an LLC
Formation Costs - LLC
Notary costs: CHF 1,500-3,000. Commercial register entry: approx. CHF 600. Publication in SHAB: approx. CHF 200. Possibly formation consulting: CHF 500-1,500. The share capital of CHF 20,000 belongs to the company afterwards - it's not lost money but your starting capital.
Corporation (AG): For Larger Ventures
Corporation (AG) - Key Facts
The AG offers the strongest liability protection and highest prestige. Disadvantage: high formation costs (CHF 8,000-15,000+), audit body requirement (opt-out possible for SMEs), and significantly more administrative effort. For most founders, the LLC is the better choice.
Comparison Table: Sole Proprietorship vs. LLC vs. AG
| Criterion | Sole Proprietorship | LLC (GmbH) | Corporation (AG) |
|---|---|---|---|
| Liability | Unlimited (personal assets) | Limited to company assets | Limited to company assets |
| Minimum capital | CHF 0 | CHF 20,000 | CHF 100,000 (min. 50,000 paid in) |
| Formation costs | CHF 0-600 | CHF 3,000-5,000 | CHF 8,000-15,000+ |
| Profit taxation | As income (marginal tax rate) | Corporate tax + dividend tax | Corporate tax + dividend tax |
| Bookkeeping | Simplified (under CHF 500,000) | Double-entry (mandatory) | Double-entry (mandatory) |
| Notary required | No | Yes | Yes |
| Commercial register | From CHF 100,000 revenue | Mandatory | Mandatory |
| Business name | Must contain surname | Freely chosen + "GmbH" | Freely chosen + "AG" |
| Formation time | 1-3 days | 2-4 weeks | 3-6 weeks |
| Ideal for | Solo starters, freelancers | SMEs, teams, planned growth | Larger companies, investors |
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The Complete Founding Guide - All Steps
You know which legal form fits? Our founding guide walks you through every step - from AHV registration to your first invoice. Including checklist and cost overview.
Decision Guide: When Which Legal Form?
Choose a sole proprietorship if…
- You're starting alone and the risk is manageable
- You have little starting capital (under CHF 20,000)
- Your liability risk is low (e.g., consulting, freelancing, online business)
- You're starting as a side business and want to test first
- You want minimal administration
Choose an LLC if…
- You want to protect your personal assets
- You're founding with a partner
- You expect profits above CHF 80,000-100,000 per year (tax optimization pays off)
- You have B2B clients who expect a corporation
- You plan to grow long-term and possibly hire employees
Many founders start with a sole proprietorship and convert to an LLC later when the business grows. This is possible at any time - but involves effort (new LLC formation + asset transfer). If you expect growth from the start, a direct LLC formation saves money and hassle long-term.
VAT, AHV and Other Obligations
Value Added Tax (VAT)
Below CHF 100,000 you're exempt - but can register voluntarily. This pays off if you can claim significant input tax (e.g., expensive purchases, investments). Standard rate 2026: 8.1%.
AHV Contributions
Self-employed pay AHV/IV/EO themselves (5.371-10.6% of income). As an LLC managing director, you're employed and pay half through payroll.
Commercial Register Entry
Mandatory for LLC and AG. For sole proprietorships from CHF 100,000 revenue - voluntary below. Protects your business name and creates transparency.
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Ready to start?
From article to action: Our founding guide contains the complete step-by-step instructions for sole proprietorship and LLC - up to date and up to date for 2026.
Sources
- Federal SME Portal (Company Formation): kmu.admin.ch
- Legal Forms Overview: kmu.admin.ch - Legal forms
- Swiss Code of Obligations (GmbH, Art. 772ff): Fedlex - CO
- VAT Obligations & Rates: ESTV - VAT
- AHV Contributions for Self-Employed: ahv-iv.ch
- Central Business Name Index (Zefix): zefix.ch