Karpeo · Business in Switzerland
Sole proprietorship in Switzerland: liability, tax and obligations
A Swiss sole proprietorship lets you run a business in your own name without a statutory minimum capital. It does not create a separate legal person. Understanding personal liability, business-name rules and the different registration thresholds is therefore essential before choosing this structure.
By Romain Prieur · Swiss certified public accountant
What is a Swiss sole proprietorship?
A sole proprietorship is a business owned and operated by one individual, at their own risk. In French-speaking Switzerland it is called a raison individuelle or entreprise individuelle, often abbreviated to RI. The German term is Einzelunternehmen. These terms refer to the same business structure.
There are no shares, shareholders or separate corporate legal personality. The owner makes the decisions and receives the profit. A sole proprietor can nevertheless employ staff: “sole” describes ownership, not the number of people working in the business.
Self-employed status is a separate social-insurance assessment. Calling your business a sole proprietorship does not automatically make you self-employed for AVS/AHV purposes. Our article on becoming self-employed in Switzerland covers recognition by the compensation office and the evidence needed when launching. This article focuses on the legal structure and how it operates.
Romain explains the structure in this 12-minute video about Swiss sole proprietorships (in French).
Benefits and personal liability
No statutory minimum capital or notarised incorporation deed is normally required. This makes the structure straightforward to start. You control your services, prices and expenses directly.
However, three limits matter:
- Unlimited personal liability: business debts can affect your private assets.
- No equity shares to sell: an investor cannot buy 20% of the shares in a sole proprietorship because no shares exist.
- Continuity depends on the owner: transferring the activity requires arrangements for the relevant assets, liabilities and contracts.
Turnover alone does not measure risk. A long lease, a substantial contract, a professional mistake or a loan can create significant exposure even in a small business.
Example: a Geneva consultant using her own equipment for short assignments has different commitments from a retailer who signs a commercial lease, holds stock and hires two employees. Compare the structures against those actual commitments using the comparison of Swiss business structures.
Appropriate business insurance can cover some risks, subject to deductibles, limits and exclusions. It does not turn the business into a limited liability company.
Choosing a business name
The owner’s surname must be an essential part of the registered business name. It can be combined with a first name, activity or invented designation, provided the result is lawful, truthful and not misleading.
For example, “Martin Consulting” or “Atelier Nova, Julie Martin” makes the owner identifiable. A brand name on a website should not obscure who is entering into the contract.
Check the business name, domain name and trademarks separately. Registration does not provide the same nationwide business-name protection as an SA/AG or Sàrl/GmbH. Third-party rights and unfair-competition rules still apply. Use consistent identification on quotations, invoices and contracts.
Setting up the business
A sole proprietorship arises from actually carrying on the business. Commercial-register entry does not normally create a new legal person. Prepare the formalities before making substantial commitments.
| Area | What to prepare |
|---|---|
| Right to operate | Professional authorisation and, where required for your circumstances, residence or work permission. |
| AVS/AHV recognition | Description of the activity, contracts, invoices, investments and evidence of economic independence. |
| Commercial register | Check whether entry is compulsory; prepare the business name, address, purpose and identification documents. |
| VAT | Identify the services supplied, expected relevant turnover and start date. |
| Organisation | Banking arrangements, record keeping, invoicing and insurance. |
The compensation office examines the real working relationship, including economic risk and autonomy. The number of clients is one indicator; there is no universal rule that three clients or three invoices guarantee recognition.
Submit the available evidence of genuine activity. Required documents vary by case, and a commercial lease is not systematically necessary for an activity lawfully run from home. If you keep your job, consider the specific rules for combining employment and self-employment.
Commercial register, VAT and accounting: separate thresholds
Commercial register
Registration is generally compulsory from CHF 100,000 of turnover in the preceding financial year. Liberal professions and farmers are exempt where they do not operate a commercially organised business. Voluntary registration is possible where entry is not compulsory. The precise conditions must be assessed for the activity concerned.
This video on commercial-register entry explains the issue in French.
VAT
The ordinary CHF 100,000 VAT threshold concerns relevant worldwide turnover from supplies not excluded from the scope of VAT. It is not simply a second version of the commercial-register test. Exempt healthcare and taxable consulting services, for example, require different analysis.
Assess whether VAT registration is required from the start. Waiting for the invoice that takes turnover over CHF 100,000 may be incorrect if exceeding the threshold is already foreseeable.
Accounting
Below CHF 500,000 annual turnover, a sole proprietorship must at least record income, expenses and assets. From CHF 500,000, full bookkeeping and financial reporting rules apply. Our explanation of bookkeeping for the self-employed shows how to organise the records.
Being below a threshold does not remove all obligations. Income declarations, social contributions, supporting records and any professional authorisations still need attention.
Start-up budget and ongoing costs
No minimum capital must be deposited, but you still need to finance equipment, software, insurance and operations until customers pay.
- Start-up costs: equipment, marketing, registration where applicable and professional advice.
- Operating costs: premises, travel, subcontracting and administration.
- Personal needs and reserves: household spending, taxes and social contributions.
Illustration: CHF 4,000 of monthly business expenses plus CHF 4,000 of personal needs means a two-month period without receipts already requires CHF 16,000, before initial investments. This is a cash-flow example, not a legal minimum.
Self-employed AVS contributions depend on income and the applicable rules. Adjust instalments when earnings change to reduce the risk of an unexpected balancing payment.
There is no unemployment-insurance cover for the self-employed activity. Accident, illness and retirement protection must be considered separately. Hiring staff adds the corresponding employer obligations.
Set out your assumptions in a business plan and compare the ongoing cost of a Swiss business bank account before choosing your operating setup.
How is a sole proprietorship taxed?
The business profit is attributed to the owner and included in taxable personal income. Business assets also form part of taxable wealth under the applicable rules.
Owner drawings are not a deductible salary paid by a separate company. Transferring CHF 3,000 from the business account to a private account does not, by itself, reduce taxable profit. The treatment is explained in our article on private accounts and drawings in sole-proprietor accounting.
Leaving profits in the business bank account does not automatically shelter them from income tax either. Set aside tax based on profit, rather than just the amounts you withdraw.
A sole proprietorship is not always less tax-efficient than an LLC. The outcome depends on profit, residence, family circumstances, contributions and how funds are used. A company also has its own taxes and running costs.
A separate business account makes transactions easier to track, even though it creates no legal separation. Document the business share of mixed private and professional expenses and keep records throughout the year.
When should you consider an LLC?
Review the structure when contractual commitments increase, a co-owner or investor wants to join, or a sale or succession is planned. A Swiss LLC (Sàrl/GmbH) may be suitable, depending on the facts.
This is more than changing the business name. Assets, contracts, liabilities and any employees must be dealt with. Check the tax treatment before transferring the business: any tax-neutral treatment is conditional.
Prepare up-to-date accounts and a list of receivables, debts, equipment and contracts. If you close the sole proprietorship instead, deregistration does not erase debts. Final filings, affiliations and contractual obligations still need to be settled.
If business assets are used to fund the new company, review the conditions for a contribution in kind alongside the legal and tax treatment of the transfer.
Frequently asked questions
Are “raison individuelle” and “entreprise individuelle” different?
No. In this Swiss context, both refer to a sole proprietorship. An individual runs the activity in their own name and at their own risk, without a separate corporate legal person. AVS/AHV self-employed status is assessed separately by the compensation office.
Can two people own a sole proprietorship?
No. It has one owner. Two people wishing to own a business together should compare other structures, such as a general partnership or an LLC. Employing or subcontracting to someone does not make that person a co-owner.
Must I be in the commercial register to be self-employed?
Not always. Commercial-register entry depends on the legal registration conditions. Social-insurance recognition depends on the actual activity. Register entry can support the application but does not automatically determine the compensation office’s assessment.
Can a sole proprietor employ staff?
Yes. The owner remains the only proprietor but can hire employees. Employment contracts, wages, social insurance, accident insurance and occupational pensions must be handled under the applicable rules. These commitments remain part of the owner’s personal exposure.
How much capital is required?
There is no statutory minimum capital. The amount needed depends on investments, start-up expenses and the period before the first customer payments. Budget separately for social contributions and tax reserves.
Sources and references
About the author
Romain Prieur
Romain Prieur is a Swiss certified public accountant and a partner at Karpeo. He supports entrepreneurs, self-employed professionals and SMEs with accounting, tax and business decisions in Switzerland.
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