Set up a sole proprietorship: Here's how you start successfully

Introduction

Setting up a sole proprietorship (Einzelfirma) represents the first step towards entrepreneurial independence. In a time of digital transformation and flexible work models, this legal form is becoming increasingly significant.

The sole proprietorship offers a straightforward entry into self-employment:

• Minimal bureaucratic effort

• No minimum capital requirements

• Quick decision-making paths

• High entrepreneurial freedom

This guide takes you through the entire process of founding a sole proprietorship in Switzerland. You will learn all the important steps from the initial business idea to successful registration in the commercial register:

• What is a sole proprietorship

• Requirements for founding a sole proprietorship

• Steps to founding a sole proprietorship

• Advantages and disadvantages of a sole proprietorship as a legal form for self-employed

• Conclusion on the topic of setting up a sole proprietorship

What is a sole proprietorship?

A sole proprietorship is the simplest legal form for self-employed individuals in Switzerland. It is run by a natural person as the sole owner who fully assumes liability for the business with their private assets.

Key Features:

• No separation between business and private assets

• Direct and unlimited liability on the owner's private assets

• Full decision-making freedom of the owner

• Obligation to register in the commercial register from CHF 100,000 annual turnover

Differences to corporate entities (LLC/Stock Corporations):

Unlike other forms of business, a sole proprietorship does not require a minimum capital. With an annual turnover of less than CHF 500,000, entrepreneurs benefit from simplified bookkeeping. Additionally, double taxation, as is common with corporate forms, is eliminated, and the withdrawal of business assets is more flexible.

This legal form is particularly advantageous for freelancers, sole traders, small businesses, and startups in their initial phase. It is especially attractive for service providers who require little capital.

Requirements for setting up a sole proprietorship

The founding of a sole proprietorship in Switzerland is subject to specific legal conditions. It's important to know that one is considered a sole trader from the first business activity - even without formal registration. Registration in the commercial register is not fundamentally mandatory, but becomes obligatory only from an annual turnover of CHF 100,000. Nevertheless, there are certain basic requirements:

• A natural person operating a business

• Business address in Switzerland

• Business activity in Switzerland

No financial requirements:

There is no legally prescribed minimum capital, so entrepreneurs can determine the amount of equity based on their own judgment and the needs of the business. Founding is very affordable with costs from approximately CHF 500, which facilitates entry into self-employment and is particularly attractive for small entrepreneurs and startups.

Commercial register entry:

The entry in the commercial register is mandatory for sole proprietorships with an annual turnover of over CHF 100,000. With lower turnover, voluntary registration is possible. Registration in the respective commercial register district legally protects the company name, providing an important advantage for the business.

Steps to setting up a sole proprietorship

The path to self-employment as a sole trader follows a clear process with defined milestones.

1. Develop a business idea and conduct market analysis

A viable business idea forms the foundation of any successful sole proprietorship. The development of this idea includes:

• Identification of market gaps: Analysis of existing offerings, recognizing unmet customer needs, developing innovative solutions

• Target group analysis: Definition of primary customer groups, determination of specific needs, assessment of willingness to pay

• Competition analysis: Examination of direct competitors, evaluation of their strengths and weaknesses, identification of differentiation features

The market analysis provides important insights into the feasibility of the business idea.

The insights gained allow for a realistic assessment of the chances of success and form the basis for the further steps of business founding. A professional market analysis reduces entrepreneurial risk and increases the chances of success for the sole proprietorship.

2. Register with the responsible cantonal commercial register

The commercial register registration is optional when founding your sole proprietorship, as long as your annual turnover is below CHF 100,000. The statutory obligation to register arises only from this threshold. However, voluntary registration is recommended as it lends more credibility to your business and strengthens the trust of potential business partners.

The registration is carried out directly at the commercial registry office of the canton where your sole proprietorship business address is located.

The fees for commercial register registration are approximately CHF 200, depending on the canton.

3. Apply for a VAT number with the competent tax authority

From an annual turnover of CHF 100,000, you must register with the respective cantonal tax office or the Federal Tax Administration.

The registration is carried out by:

• Filling out the cantonal tax form

• Submitting a copy of the commercial register excerpt

• Providing valid identification proof

The tax office checks your documents and issues you the VAT number. This number is required for the correct accounting of VAT.

4. Set up an accounting system to comply with accounting obligations

The legal accounting obligations for sole proprietorships depend on the turnover. With a turnover of less than CHF 500,000, simple bookkeeping is sufficient, recording income, expenses, and asset status. If turnover exceeds CHF 500,000, commercial bookkeeping according to OR Art. 957 ff. is required.

A professional accounting system enables automatic recording of receipts, digital invoicing, clear profit and loss statements, timely liquidity control, and simple VAT returns. When choosing accounting software, individual needs should be considered, with cloud-based solutions offering the advantage of location-independent use and automatic updates. Early implementation of the system ensures legally compliant business management from the start.

Advantages and disadvantages of a sole proprietorship

The sole proprietorship offers specific advantages for self-employed individuals:

Positive aspects:

• Fast, uncomplicated founding without minimum capital

• Full entrepreneurial decision-making freedom

• Simple accounting for turnover under CHF 500,000

Aspects to consider:

• Unlimited personal liability with private assets

• Limited expansion possibilities

• Difficult sale or transfer of the business

• Higher tax burden with high profits

Choosing a sole proprietorship is particularly suitable for:

• Freelancers and craftsmen

• Small businesses

• Part-time activities

• Business models with low liability risk

Conclusion on setting up a sole proprietorship

For many self-employed individuals, founding a sole proprietorship represents the ideal entry into the world of entrepreneurs. The simple structure, minimal formalities, and low costs make this legal form particularly attractive. A structured founding process forms the foundation for sustainable business success. Personal liability requires special attention to risk management.

With the right preparation and competent support, nothing stands in the way of successful self-employment. A later conversion to other legal forms remains possible with growth at any time.