Sole Proprietorship in Switzerland (Einzelfirma)

The sole proprietorship – Einzelfirma (German), entreprise individuelle (French) – is the most straightforward business structure available in Switzerland. There is no minimum capital requirement, no notarial deed, and no articles of association. A sole proprietor can begin operating on the same day they decide to start a business.

According to the Federal Statistical Office, over 300,000 sole proprietorships are active in Switzerland, making it the second most common business form after the GmbH. Freelancers, consultants, tradespeople, and small retailers routinely choose it because of its simplicity and low cost. The trade-off is significant: the owner bears unlimited personal liability for all business debts, with no legal separation between personal and business assets.

This guide covers every aspect of the Swiss sole proprietorship: legal basis, formation process, naming rules, registration requirements, taxation, social insurance obligations, and the circumstances under which converting to a GmbH or AG becomes the better option.

What Is a Sole Proprietorship in Switzerland?

A sole proprietorship is a business owned and operated by a single natural person. Unlike a GmbH or AG, it is not a separate legal entity. The business and the owner are one and the same under Swiss law.

This has three practical consequences:

• No asset separation. Business assets (inventory, receivables, equipment) and personal assets (savings, property, investments) form a single pool. Creditors of the business can pursue the owner’s personal wealth, and vice versa.
• No separate tax return. Business income and expenses are reported on the owner’s personal income tax return. There is no corporate tax filing.
• No continuity beyond the owner. The business cannot be sold or transferred as a going concern in the same way a company with its own legal personality can. If the owner dies, the sole proprietorship ceases to exist.

Despite these limitations, the sole proprietorship remains extremely popular because it is the fastest and cheapest way to become self-employed in Switzerland.

Why You Can Trust This Guide

This guide references OR Art. 945-953, published EHRA guidelines on sole proprietorship naming, and AHV/IV/EO contribution rates from the Federal Social Insurance Office (BSV) for 2026. Tax crossover data between sole proprietorship and GmbH structures uses cantonal calculators from Zurich, Zug, and Bern. Federal Statistical Office (BFS) data confirms over 300,000 active sole proprietorships in Switzerland. Registration fee figures are taken directly from cantonal Handelsregisteramt schedules.

What Are the Legal Rules and Key Features?

The sole proprietorship is governed by general commercial law principles and specific provisions of the Swiss Code of Obligations (OR). The most relevant articles are OR Art. 945-947, which regulate the registration and naming of sole proprietorships in the commercial register.

The absence of a minimum capital requirement does not mean the business needs no funding. It simply means Swiss law imposes no statutory floor. The owner finances the business from personal savings, loans, or revenue.

How to Set Up a Sole Proprietorship

Formation of a sole proprietorship is the simplest of all Swiss business structures. There is no notarial deed, no capital deposit account, and no articles of association. The process takes as little as one day if registration is not required.

Step 1: Confirm Self-Employment Status

Before starting, verify that your activity qualifies as self-employment under Swiss social insurance law. The cantonal compensation office (Ausgleichskasse) makes this determination based on several criteria: whether you bear entrepreneurial risk, work for multiple clients, invest your own capital, and choose your own working methods. Employees who simply invoice through a sole proprietorship without genuine independence risk reclassification.

Step 2: Choose a Business Name

Select a name that complies with the naming rules set out in OR Art. 945 (see the detailed section below). The name must contain your surname. Check availability on Zefix to avoid conflicts with existing registered businesses.

Step 3: Register with the Cantonal Compensation Office

Register as a self-employed person with the cantonal AHV compensation office in the canton where you are domiciled. You will need to provide evidence of self-employment, such as client contracts, invoices, or a business plan. The compensation office confirms your status and sets your contribution rates.

Step 4: Register in the Commercial Register (if required)

If your annual revenue exceeds or is expected to exceed CHF 100,000, registration with the cantonal commercial register is mandatory. Below that threshold, registration is voluntary but recommended. Submit the application to the Handelsregisteramt of the canton where your business is domiciled.

Step 5: Register for VAT (if applicable)

If your annual domestic revenue exceeds CHF 100,000, you must register for VAT with the Federal Tax Administration. The standard VAT rate is 8.1 per cent (2026). Below the threshold, VAT registration is voluntary.

Step 6: Open a Business Bank Account (optional)

Swiss law does not require sole proprietors to maintain a separate business bank account. However, separating business and personal finances simplifies bookkeeping and makes tax reporting cleaner. Most Swiss banks offer business accounts for sole proprietorships at modest fees.

Business Name Rules for Sole Proprietors

The naming rules for sole proprietorships differ from those for capital companies. OR Art. 945 sets the framework:

• Surname is mandatory. The business name must contain the owner’s surname. First names are optional.
• Additional descriptors allowed. You may add a description of the activity (e.g. “Meier Consulting” or “Rosenberg IT Services”) or a fantasy element, provided it does not mislead.
• No misleading elements. The name must not suggest a legal form that does not apply. You cannot include “GmbH”, “AG”, “& Partner”, or similar suffixes that imply a company or partnership.
• Uniqueness within the canton. The name must be distinguishable from other registered business names in the same canton. The Federal Commercial Registry Office (EHRA) reviews uniqueness at the national level for registered entities.
• No geographical or national terms without justification. Using “Swiss” or a canton name in the business name requires a genuine connection to that location.

Practical examples of compliant names:

When Is Commercial Register Entry Mandatory?

The CHF 100,000 annual revenue threshold is the key dividing line:

Above CHF 100,000: Registration is mandatory under OR Art. 934. The sole proprietor must file an application with the cantonal commercial register within the time limits set by cantonal law (typically within three months of exceeding the threshold). Failure to register can result in fines and does not protect the business name from being taken by another entity.

Below CHF 100,000: Registration is voluntary. However, voluntary registration offers several benefits:

• Name protection. Only registered business names are protected under commercial register law. An unregistered name has no priority over a later registration by someone else.
• Credibility. Clients, suppliers, and banks may require proof of registration.
• Business bank account. Some banks require a commercial register extract to open a business account.
• UID number. A registered sole proprietorship receives a unique identification number (UID/CHE number), which is increasingly required for invoicing, VAT, and dealings with public authorities.

The registration fee varies by canton but typically ranges from CHF 120 to CHF 400. Publication in the Swiss Official Gazette of Commerce (SHAB) costs an additional CHF 30 to CHF 50.

How Is a Sole Proprietorship Taxed in Switzerland?

Taxation is one of the most important factors when choosing between a sole proprietorship and a capital company. The sole proprietorship has no separate tax existence – all income flows directly to the owner’s personal tax return.

Income Tax

Business profit is added to the owner’s other personal income (employment income, investment returns, rental income) and taxed at progressive personal income tax rates. These rates vary by canton and municipality, but the combined federal, cantonal, and municipal rate can reach 40 per cent or more at high income levels in cantons such as Geneva, Basel-Stadt, or Bern.

At the federal level, personal income tax is progressive up to 11.5 per cent. Cantonal and municipal taxes add a further 10 to 30 per cent, depending on the canton and income level. The tax implications differ substantially from canton to canton.

Wealth Tax

Business assets held by the sole proprietor form part of their taxable wealth. Switzerland levies a wealth tax at the cantonal and municipal level (not at the federal level). Rates are typically 0.1 to 1.0 per cent of net assets, varying by canton.

Deductible Business Expenses

The sole proprietor may deduct all ordinary business expenses from taxable income, including:

• Cost of goods sold and materials
• Rent for business premises
• Employee salaries and social insurance contributions
• Depreciation on business assets (using rates published by the Federal Tax Administration)
• Vehicle costs (proportionate business use)
• Professional development and training
• AHV/IV/EO contributions (as deductions from income)

Proper bookkeeping is essential. Sole proprietors with revenue exceeding CHF 500,000 must maintain double-entry accounts under OR Art. 957. Below that threshold, simplified accounts (income and expense journal plus a record of assets and liabilities) are sufficient.

Tax Comparison: Sole Proprietorship vs GmbH

At low to moderate profit levels, the sole proprietorship can be more tax-efficient because there is only one level of taxation. A GmbH pays corporate tax on profits and the owner pays income tax again on distributed dividends (partial double taxation). The crossover point depends on the canton, but as a general rule:

• Profit below CHF 100,000-150,000: The sole proprietorship is often cheaper overall.
• Profit above CHF 150,000-200,000: The GmbH typically produces a lower combined tax burden because the corporate tax rate is flat and lower than the top marginal personal rate.

Social Insurance for Self-Employed Persons

Self-employed sole proprietors in Switzerland are subject to a distinct social insurance regime. The cantonal compensation office (Ausgleichskasse) classifies you as self-employed, and you become personally responsible for your contributions.

AHV/IV/EO Contributions

Self-employed persons pay AHV (old-age and survivors’ insurance), IV (disability insurance), and EO (income replacement) contributions on their net business income. The combined rate is 10.0 per cent of net income for income above CHF 58,800 per year (2026). A declining scale applies to income between CHF 9,800 and CHF 58,800, with a minimum annual contribution of approximately CHF 514.

Unlike employees, who split contributions 50/50 with their employer, sole proprietors pay the full amount themselves.

Second Pillar (BVG/Occupational Pension)

Self-employed persons are not automatically enrolled in the second-pillar occupational pension scheme (BVG). Participation is voluntary. A sole proprietor may join a pension fund affiliated with their professional association or industry, or they may join a collective foundation. This is a significant gap in retirement coverage that many sole proprietors overlook.

Third Pillar (Pillar 3a)

Self-employed persons without a BVG pension may contribute up to CHF 36,288 per year (2026) to their pillar 3a tax-advantaged retirement account. Those with a BVG pension are limited to CHF 7,258 per year. These contributions are fully deductible from taxable income.

Accident Insurance

Sole proprietors without employees are not required to carry accident insurance (UVG), but voluntary coverage is strongly recommended. The cost is modest (typically CHF 1,000 to CHF 3,000 per year, depending on the industry and coverage level), and the consequences of being uninsured after a workplace accident can be financially devastating.

Summary of Social Insurance Obligations

What Are the Advantages?

The sole proprietorship offers distinct benefits that make it the right choice for many small-scale and early-stage businesses:

• No minimum capital. You can start with zero invested capital. There is no need to deposit funds into a blocked bank account or produce a capital deposit confirmation.
• No notary required. Formation does not involve a notarial deed, which saves CHF 1,500 to CHF 3,000 compared to a GmbH.
• Fastest formation. You can begin operating immediately. If registration is not required (revenue below CHF 100,000), there is no waiting period.
• Lowest ongoing costs. No audit requirement, no annual general meeting, no board minutes. Administrative overhead is minimal.
• Simple tax treatment. One tax return covers both personal and business income. No corporate tax filing, no dividend withholding tax.
• Full control. The owner makes all decisions without consulting shareholders, a board, or partners. There are no governance formalities.
• Privacy. If not registered in the commercial register, the business has no public record. Even registered sole proprietorships disclose less information than a GmbH or AG.

What Are the Disadvantages and Risks?

The simplicity of the sole proprietorship comes with material trade-offs:

• Unlimited personal liability. This is the single largest risk. If the business cannot meet its obligations, creditors can seize the owner’s personal savings, property, investments, and other assets. There is no liability cap.
• No asset separation. Personal and business assets are legally indistinguishable. A business lawsuit or a personal debt can affect the entire pool.
• Limited access to financing. Banks and investors are less willing to lend to or invest in a sole proprietorship than in a GmbH or AG. There are no shares to sell, no structured equity to offer as collateral.
• Harder to sell or transfer. Because the business has no separate legal personality, transferring it to a buyer requires assigning individual assets and contracts one by one. A GmbH or AG can be sold simply by transferring shares.
• No continuity. The business ends with the owner’s death, incapacity, or retirement. There is no built-in succession mechanism.
• Limited social insurance. No automatic second-pillar pension, no employer-side AHV contributions, no mandatory accident insurance. The sole proprietor must arrange and fund their own coverage.
• Progressive tax rates. At high income levels, the marginal tax rate on business profits can exceed 40 per cent – substantially higher than the combined corporate and dividend tax burden of a GmbH.

How Does It Compare to a GmbH?

The comparison with the GmbH is the most common decision point for Swiss entrepreneurs. The table below summarises the key differences.

Choose a sole proprietorship if you are starting small, testing a business idea, working as a freelancer or consultant, and your annual revenue is unlikely to exceed CHF 100,000 to CHF 200,000 in the near term.

Choose a GmbH if you need liability protection, plan to hire employees, expect significant revenue growth, want to build a business that can be sold, or need to present a formal corporate structure to clients and business partners. Our full GmbH guide covers the formation process in detail.

How Much Does a Sole Proprietorship Cost?

The sole proprietorship is by far the cheapest business structure to establish and maintain in Switzerland.

Formation Costs

Annual Operating Costs

Compare this with the GmbH, where formation alone costs CHF 3,000 to CHF 5,000 and annual compliance (accounting, tax filing, register updates) adds a further CHF 3,000 to CHF 8,000 per year.

When and How to Convert to a GmbH or AG

Many successful sole proprietorships reach a point where the unlimited liability, progressive tax rates, or limited transferability become unacceptable. Converting to a GmbH (or, less commonly, an AG) is a well-established process under Swiss law.

When to Consider Conversion

• Annual profit consistently exceeds CHF 150,000. The tax advantage of the sole proprietorship diminishes and reverses at higher income levels.
• The business employs staff. Employer liability for workplace accidents and contractual obligations creates exposure that is better contained within a limited-liability entity.
• You need external financing. Banks and investors strongly prefer lending to or investing in a GmbH or AG.
• Client requirements. Some corporate clients and government procurement processes require suppliers to be organised as legal entities.
• Succession planning. If you intend to sell the business or pass it to the next generation, a GmbH or AG is far easier to transfer.

How the Conversion Works

Swiss law permits the conversion of a sole proprietorship into a GmbH through a transfer of assets and liabilities (Vermoegensuebertragung, OR Art. 69-77 of the Merger Act). The key steps are:

1. Prepare a balance sheet of the sole proprietorship at the conversion date, audited or at least verified by a licensed expert.
2. Draft articles of association for the new GmbH.
3. Execute the notarial deed establishing the GmbH, with the sole proprietor as the founding shareholder. The business assets are contributed as a contribution in kind (Sacheinlage).
4. Register the GmbH with the cantonal commercial register.
5. Delete the sole proprietorship from the commercial register (if it was registered).
6. Notify the tax authorities, AHV compensation office, VAT administration, and any relevant regulators.

The conversion qualifies as a tax-neutral restructuring under the Federal Act on Merger, Demerger, Transformation and Transfer of Assets (Merger Act), provided the GmbH continues the business and certain holding periods are respected. The sole proprietor must hold at least the same value of shares in the GmbH as the net assets transferred, and the shares must be held for at least five years to avoid retroactive taxation.

Professional guidance from a fiduciary or tax adviser is recommended for the conversion, as errors in the valuation or structuring can trigger unexpected tax consequences. Our company registration guide covers the broader formation process, and our expert can advise on the optimal timing and structure.

Frequently Asked Questions

Do I need to register a sole proprietorship in Switzerland?

Registration in the commercial register is mandatory only if your annual revenue exceeds CHF 100,000. Below that threshold, registration is voluntary. However, voluntary registration is often advisable because it gives your business a formal presence in the commercial register, makes it easier to open a business bank account, and allows you to prove your self-employed status to clients and authorities. The registration fee at the cantonal commercial register is typically CHF 120 to CHF 400.

Can a foreigner set up a sole proprietorship in Switzerland?

Yes, but the sole proprietor must be a natural person domiciled in Switzerland with a valid residence or settlement permit (B or C permit). EU/EFTA citizens can register as self-employed under the Agreement on the Free Movement of Persons. Non-EU nationals need a work permit authorising self-employment, which is granted only if the activity serves the economic interests of Switzerland. A sole proprietorship cannot be operated remotely from abroad without Swiss residency.

How is a sole proprietorship taxed differently from a GmbH?

A sole proprietorship is not a separate legal entity, so its profits are taxed as the owner's personal income at progressive rates that can reach 40 per cent or more at high income levels, depending on the canton. A GmbH pays corporate tax at a combined effective rate of 12 to 22 per cent, but distributed dividends are taxed again at the shareholder level. For annual profits below approximately CHF 100,000 to CHF 150,000, the sole proprietorship is often more tax-efficient. Above that range, the GmbH typically offers a lower overall tax burden.

What happens to a sole proprietorship if the owner dies?

The sole proprietorship is not a separate legal entity, so it ceases to exist upon the owner's death. The business assets and liabilities become part of the estate and pass to the heirs under Swiss inheritance law. Heirs are not obliged to continue the business. If they do wish to continue, they must register a new sole proprietorship or convert the business into a different legal form. This lack of continuity is one of the main disadvantages compared to a GmbH or AG, which continue to exist independently of their shareholders.

How much are AHV contributions for a self-employed sole proprietor in Switzerland?

Self-employed sole proprietors pay AHV/IV/EO contributions at a combined rate of 10.0 per cent of their net business income for income above CHF 58,800 per year (2026 figures). A declining scale applies to income between CHF 9,800 and CHF 58,800. The minimum annual contribution is approximately CHF 514 regardless of income. Unlike employees, who split contributions with their employer, sole proprietors pay the entire amount themselves. Additionally, voluntary second-pillar (BVG) contributions are possible up to CHF 36,288 per year for those without occupational pension coverage.

When must a sole proprietorship register for VAT in Switzerland?

Registration for VAT (Mehrwertsteuer / MWST) is mandatory once annual domestic revenue exceeds CHF 100,000. The standard VAT rate is 8.1 per cent (2026). Below that threshold, registration is voluntary. Many sole proprietors who provide services to VAT-registered businesses register voluntarily even below the threshold, because it allows them to reclaim input VAT on business purchases and presents a more professional appearance. The application is made to the Federal Tax Administration (ESTV) online.

Does a sole proprietor need a separate business bank account in Switzerland?

Swiss law does not require sole proprietors to maintain a separate business bank account. However, keeping business and personal finances separate is strongly advisable for clean bookkeeping, accurate tax reporting, and professional credibility. Most Swiss banks offer business accounts for sole proprietorships at modest fees. Some banks require a commercial register extract or proof of self-employed status to open a business account, which is another reason many sole proprietors choose to register even when revenue is below CHF 100,000.

What accounting records must a sole proprietorship keep?

Sole proprietorships with annual revenue below CHF 500,000 may keep simplified accounts: an income and expense journal plus a record of assets and liabilities at the year-end. This is a straightforward single-entry bookkeeping approach. Those with revenue exceeding CHF 500,000 must maintain proper double-entry accounts under OR Art. 957, including a balance sheet and income statement. All business expenses — materials, rent, vehicle costs, professional development — are deductible from taxable income, so accurate records are essential to avoid overpaying tax.

What is the business name rule for a sole proprietorship in Switzerland?

The business name of a Swiss sole proprietorship must contain the owner's surname under OR Art. 945. First names are optional but permitted. Descriptive additions indicating the business activity are allowed (for example, 'Mueller Web Design' or 'Rosenberg Consulting'). Fantasy names without the surname are not permitted. The name must not include 'GmbH', 'AG', '& Partner', or similar terms that imply a different legal form. The name must also be distinguishable from other registered businesses in the same canton.