Sole Proprietorship Switzerland: Einzelfirma Guide

The Swiss Einzelfirma (sole proprietorship) is the simplest business structure available in Switzerland. It requires no minimum capital, no notarial deed, and — for small businesses — no Commercial Register entry. But it comes with full personal liability and limited scalability. This guide explains when an Einzelfirma makes sense and when a GmbH is the better choice.

When the Einzelfirma Is the Wrong Choice

The Einzelfirma is the simplest Swiss business structure — no minimum capital, no notary, minimal administration. But it is the wrong choice in four common situations:

1. You are not a Swiss resident. Foreign nationals without a valid Swiss residence permit cannot register an Einzelfirma. Full stop. If you are based outside Switzerland, you need a GmbH or AG with a Swiss-resident director.

2. Your income exceeds CHF 100’000-150’000. Above this threshold, the Einzelfirma becomes tax-disadvantageous. Personal income tax at marginal rates (25-40%) plus AHV/IV/EO contributions (~10% of net profit) exceed what you would pay through a GmbH (corporate tax at 11.8% in Zug on retained profit). One Zug-based consultant earning CHF 180’000 saved approximately CHF 8’000 in the first year after converting to a GmbH.

3. Your business carries meaningful liability risk. The Einzelfirma offers zero liability protection. All business debts are your personal debts. A single contract dispute or employee claim can result in personal bankruptcy.

4. You want to take on partners or investors. The Einzelfirma is structurally a one-person business. There is no mechanism to bring in co-owners or issue equity. Growth beyond a sole operation requires conversion to a GmbH (CHF 1’900 registration cost + CHF 20’000 share capital).

If none of these apply — you are a Swiss resident, earning below CHF 150’000, with low commercial risk, and no plans to scale — the Einzelfirma is genuinely the right choice. It is a business run by a single natural person. The business is not a separate legal entity — it is the individual. There is no separation between the person’s private assets and the business’s liabilities.

Registration: When Is It Required?

Under Swiss law (Art. 36 HRegV), an Einzelfirma must register with the Commercial Register when annual turnover exceeds CHF 100’000.

Below CHF 100’000, registration is voluntary. Many small freelancers and consultants operate below this threshold and never register. They still have a business — it simply is not registered.

Practical point: The CHF 100’000 threshold is a hard boundary that triggers two simultaneous obligations: Commercial Register registration and VAT registration. Both kick in at the same revenue figure. Founders who cross this threshold mid-year often discover both requirements retroactively — and retroactive VAT registration means recalculating invoices already issued.

Even without Commercial Register registration, a sole proprietor must register for tax (income tax is paid on the business profit as part of the individual’s personal income tax return).

Voluntary registration: A sole proprietor below the CHF 100’000 threshold can still choose to register. Benefits include a public Register entry, which some clients and banks prefer. The registration fee is the same as for mandatory registration.

How to Register

Registration of an Einzelfirma with the Swiss Commercial Register is done directly by the individual — no notarial deed is required. Documents typically needed:

• Application form (available from the cantonal register)
• Copy of the owner’s passport or Swiss ID
• Confirmation of Swiss domicile (the proprietor must be resident in Switzerland)
• Business name (Firma) — must contain the owner’s surname

Swiss residency requirement: The owner of a Swiss Einzelfirma must be domiciled (resident) in Switzerland. This is a fundamental distinction from a GmbH or AG, which can be owned and operated by non-resident foreigners (with a Swiss-resident director). Foreign nationals without Swiss residence cannot operate an Einzelfirma. For non-residents looking to start a business in Switzerland, a GmbH or AG is the required structure.

Registration fee: Approximately CHF 200-400 for a new Einzelfirma, depending on canton.

Tax Treatment

An Einzelfirma does not pay corporate tax. Instead, the business profit is added to the owner’s personal income and taxed as personal income at the individual’s marginal rate. In Switzerland, combined federal, cantonal, and communal income tax rates can reach 25-40% for high earners, depending on the canton.

Additionally, sole proprietors pay social insurance contributions (AHV/IV/EO) of approximately 10.1% of net business profit on the employer and employee portions combined — a significant additional cost.

Comparison with GmbH: A GmbH can generate substantial savings for a profitable business:

• Corporate tax at 11.8% (Zug) on retained profit
• Salary to the owner is deductible from corporate income — but AHV applies to the salary portion
• Retained profit stays in the company at corporate tax rates rather than being taxed immediately at personal rates

For income above approximately CHF 100’000-150’000, the GmbH typically becomes tax-advantageous compared to the Einzelfirma.

Cost comparison for the conversion decision:

• GmbH registration (including notary): CHF 1’900
• Minimum share capital: CHF 20’000 (remains in the company as working capital)
• All-in package with registered address, nominee director, and accounting: approximately CHF 12’000/year

Against this, a sole proprietor earning CHF 150’000 in Zug pays roughly CHF 15’000 in AHV/IV/EO alone (10% of net profit), plus personal income tax at marginal rates that can reach 25-30%. The GmbH’s combined corporate tax and salary-based AHV on a portion of the income produces a measurably lower total tax burden once the numbers are run for the specific situation.

Accounting Requirements

Unlike an AG or GmbH, a sole proprietor with turnover below CHF 500’000 may use simplified accounting — a straightforward income and expense summary rather than full double-entry bookkeeping. Above CHF 500’000, double-entry bookkeeping applies (Art. 957 CO).

Liability: The Key Risk

There is no liability protection. All debts of the Einzelfirma — contracts, employee claims, tax liabilities — are personal debts of the owner. A business failure can result in personal bankruptcy.

For businesses with any meaningful commercial risk — contracts with third parties, employees, leases, credit — the GmbH provides limited liability for a relatively small additional administrative cost.

When an Einzelfirma Makes Sense

An Einzelfirma is appropriate for:

• Freelancers and consultants with low commercial risk and income below CHF 100’000-150’000
• Sole traders who are Swiss residents starting small-scale operations
• Temporary or low-volume business activity while assessing whether to scale

An Einzelfirma is not appropriate for:

• Foreign nationals without Swiss residence (not eligible)
• Businesses with meaningful liability risk
• Companies expecting to take on investors or partners
• Businesses targeting significant retained profit (GmbH more tax-efficient above ~CHF 150’000)

Converting to GmbH

A Swiss Einzelfirma can be converted to a GmbH as the business grows. The conversion involves:

• Formation of a new GmbH with the required CHF 20’000 minimum share capital
• Transfer of the business assets and liabilities from the sole proprietorship to the GmbH
• Deregistration of the Einzelfirma from the Commercial Register

This is a standard process. We handle such conversions regularly as part of company formation engagements.

Einzelfirma vs GmbH vs AG: Decision Matrix

The conversion cost: Converting an Einzelfirma to a GmbH involves forming a new GmbH (CHF 1’900), transferring business assets, and deregistering the Einzelfirma. Total professional fees: approximately CHF 3’000-5’000 plus the CHF 20’000 share capital deposit. Most conversions complete within 4-6 weeks.

Case Study: The Consultant Who Waited Too Long

A Zug-based IT consultant operated as an Einzelfirma for three years, earning CHF 200’000 annually. Total tax and social insurance burden: approximately CHF 65’000/year (personal income tax at ~22% effective rate plus AHV/IV/EO at ~10%). After converting to a GmbH, he paid himself a salary of CHF 120’000 (with AHV on that salary) and retained CHF 80’000 in the company at Zug’s 11.8% corporate rate. Annual saving: approximately CHF 12’000. Over the three years he delayed the conversion, he overpaid by roughly CHF 36’000 — far more than the conversion cost.

Frequently Asked Questions

Do I really need to convert to a GmbH, or can I stay as Einzelfirma?

If your annual net income consistently exceeds CHF 100’000-150’000, the numbers almost always favour conversion. The GmbH’s corporate tax rate (11.8% in Zug) on retained profit, combined with a modest salary, produces a lower total tax burden than the Einzelfirma’s personal income tax plus AHV. GmbH registration costs CHF 1’900 — the tax saving in year one typically covers the entire conversion cost.

How much does it actually cost to convert an Einzelfirma to a GmbH?

Formation of the new GmbH: CHF 1’900 (including notary). Share capital deposit: CHF 20’000 (remains in the company as working capital). Asset transfer documentation and Einzelfirma deregistration: approximately CHF 1’000-3’000 in professional fees. Total: CHF 3’000-5’000 plus the share capital, completed within 4-6 weeks.

Can a foreign national register an Einzelfirma in Switzerland?

Only if they are resident in Switzerland with a valid Swiss residence permit. The owner of an Einzelfirma must be domiciled in Switzerland. Non-residents cannot operate an Einzelfirma. Foreign nationals wishing to start a Swiss business without Swiss residence must use a GmbH or AG with a Swiss-resident director.

What happens if my Einzelfirma exceeds CHF 100’000 in turnover?

Registration with the Commercial Register becomes mandatory. You must apply for registration within three months of the financial year in which turnover exceeds CHF 100’000. At the same time, VAT registration is triggered (MWST registration threshold is also CHF 100’000 in turnover).

Is the Einzelfirma suitable for a consulting business?

For a sole consultant earning below CHF 100’000-150’000 annually with no employees and minimal commercial risk, yes. Above that income level, or once you hire employees or take on meaningful contracts, the GmbH becomes more appropriate for both tax and liability reasons.

What are the ongoing costs of an Einzelfirma?

Ongoing costs are minimal: AHV/IV/EO contributions (approximately 10% of net profit), income tax on business profit (at personal rates), and optional accounting software or bookkeeper fees. There are no annual Commercial Register fees, no audit requirements, and no minimum capital to maintain. This makes it the lowest-cost business structure in Switzerland.

Can I hire employees as a sole proprietor?

Yes. An Einzelfirma can hire employees, though doing so triggers employer obligations including AHV registration, accident insurance (UVG), and potentially BVG pension fund affiliation. The key consideration is that you, as the owner, remain personally liable for all employment-related obligations — including salary claims if the business fails.

How is the Einzelfirma name (Firma) chosen?

The business name must contain the owner’s surname. It may also include a description of the business activity (e.g., “Muster IT Consulting”). Fantasy names without the surname are not permitted for sole proprietorships under Swiss commercial register law.

What residence permits allow operating an Einzelfirma?

Swiss citizens and holders of C permits (permanent residence) can operate an Einzelfirma without restriction. B permit holders may operate an Einzelfirma if their permit allows self-employment — this depends on the permit conditions. L permit holders and cross-border G permit holders face restrictions and should verify their permit conditions before registering.

Can I convert my Einzelfirma to an AG instead of a GmbH?

Yes. The conversion process works for both GmbH and AG formation. The choice between them depends on capital requirements (AG minimum CHF 100’000 vs. GmbH minimum CHF 20’000), governance preferences, and whether you plan to issue shares to outside investors. For most sole proprietors upgrading, the GmbH is the more practical and cost-effective option.

Do I need a separate bank account for my Einzelfirma?

Swiss law does not strictly require a separate business bank account for a sole proprietorship. However, mixing personal and business finances creates accounting difficulties and tax compliance risk. Most banks offer business accounts for sole proprietors, and keeping finances separate is strongly recommended — particularly once turnover exceeds CHF 100’000 and formal accounting obligations apply.

What happens to the Einzelfirma if the owner dies?

The Einzelfirma is not a separate legal entity, so it cannot be inherited as a going concern in the way company shares can. The business assets and liabilities become part of the estate. Heirs may choose to continue the business (re-registering under their own name) or wind it down. For business continuity planning, a GmbH or AG structure — where shares can be transferred to heirs — provides a more straightforward succession path.