How To Set Up A Sole Proprietorship
A sole proprietorship is a legal form of business ownership under which a natural person alone takes up business activities for the purpose of economic gain. Together with the GmbH (limited liability company), this is the most frequently chosen legal form in Switzerland. Below you will find a summary of the key points.
Suitability
The sole proprietorship is especially suitable for new entrepreneurs wishing to start out with a small company. A natural person is the sole owner of the business. If several persons wish to set up a business jointly, another legal form must be chosen (e.g. a general partnership).
Liability
The business risk in operating as a sole proprietorship is borne by the owner who has unlimited liability with his/her personal business and private assets.
Conversion
A sole proprietorship can be converted at any time into a GmbH (limited liability company) or AG (public limited company) by transferring assets or making a contribution in kind.
Commercial Register
If annual sales are above CHF 100,000, the sole proprietorship must be entered in the commercial register. A voluntary entry is possible at any time and demonstrates the earnestness of the venture not only to the authorities but also to customers and business partners. An entry in the commercial register also provides a company ID number.
Advantages
A sole proprietorship can be set up easily and with almost no formal requirements. This facilitates a quick start to business operations. The simplicity of a sole proprietorship gives entrepreneurs a lot of freedom. The law does not stipulate the need for start-up capital. Additional advantages:
- No double fiscal burden on the income and assets of both the company and the entrepreneur
- Low set-up fees, i.e. possibly only commercial register office charges
- Modest accounting expenditure, simple bookkeeping is sufficient
Disadvantages
The owner of the sole proprietorship is liable with his/her personal and business assets and bears sole responsibility. Additional disadvantages:
- Bankruptcy proceedings may be filed against a sole proprietorship entered in the commercial register (Art. 39 Debt Enforcement Bankruptcy Act (DEBA)); seizure proceedings will not be initiated. After deletion of the sole proprietorship due to bankruptcy, it will still be possible to find.
- The company name must include the business owner’s surname
- The company designation may not contain an addendum that suggests a business relationship (e.g. M. Müller & Co.)
- No tax distinction between business and personal assets
