Which Legal Form is Suitable for a Craft Business?
For many founders in the craft sector, a sole proprietorship is the easiest way to start. A LLC makes sense if you want to limit your liability more clearly, found with partners, or present yourself more professionally to the outside world.
The sole proprietorship is quickly established and requires no minimum capital. It is particularly suitable if you are starting alone, want to keep initial costs low, and your personal risk is manageable. However, it is important to note: a sole proprietorship is not a separate legal entity. You operate the business yourself. This means that you are also personally liable for business debts and mistakes.
From an annual turnover of at least CHF 100'000, you must register your sole proprietorship in the commercial register at the place of business (Art. 931 Abs. 1 OR). Below this threshold, registration is voluntary (Art. 931 Abs. 3 OR). Furthermore, the company name of a sole proprietorship must contain your family name (Art. 945 Abs. 1 OR). A name like «Alpenbau» alone is therefore not sufficient. «Meier Alpenbau», on the other hand, may be permissible.
The LLC is more formal and expensive, but offers a clear legal structure. In principle, only the company's assets are liable for liabilities (Art. 772 Abs. 1 OR). The share capital must be at least CHF 20'000 (Art. 773 Abs. 1 OR). The incorporation takes place by public deed, articles of association, and appointment of the governing bodies (Art. 777 OR). The LLC only acquires its own legal personality upon registration in the commercial register (Art. 779 Abs. 1 OR).
So, if you are starting a small painting, joinery, sanitary, electrical, or gardening business alone, the sole proprietorship is often the pragmatic first step. If you take on larger projects, employ staff, work with high material values, or want to protect your personal assets better, there is a lot to be said for a LLC.
When Do You Have to Register Your Craft Business?
A sole proprietorship must register in the commercial register as soon as it has achieved a turnover of at least CHF 100'000 in the last financial year. A LLC must always be registered in the commercial register.
The commercial register entry is more than a formality. It makes your company more visible, creates trust, and can be important for banks, suppliers, or larger clients. In the case of a sole proprietorship, however, registration does not trigger the existence of the business. In principle, you can operate beforehand as long as there is no obligation to register.
With a LLC, it is different. It only comes into existence as a separate legal entity upon registration in the commercial register (Art. 779 Abs. 1 OR). The company must be registered in the commercial register at its registered office (Art. 778 OR).
In practice, this means: if you start small as an individual craftsperson, you can first accept orders, write invoices, and register your self-employment with the compensation office. If you establish a LLC, you should complete the founding process properly before operating under the LLC.
Which Insurances Do You Need at the Start?
If you are self-employed, you must consciously plan your personal protection. As soon as you employ staff, additional statutory insurance obligations apply.
As a self-employed person, you generate income from self-employment if you earn income from a commercial enterprise or another self-employed activity in a self-employed capacity (Art. 17 AHVV). The AHVG defines income from self-employment as earned income that is not remuneration for work in an employed capacity (Art. 9 Abs. 1 AHVG). In practice, you must have your self-employment recognized by the competent compensation office. Offers, invoices, contracts, an independent market presence, or proof of insurance, for example, can be important for this.
For yourself, AHV, IV, and EO are of central importance. Occupational pension schemes are not automatically mandatory for self-employed persons. However, you can voluntarily join a pension scheme, such as that of your profession or your employees (Art. 44 Abs. 1 BVG). If you cannot join such an institution, there is the option of insurance with the substitute occupational benefit institution (Art. 44 Abs. 2 BVG).
With accident insurance, the distinction is particularly important. Employees employed in Switzerland are compulsorily insured against accidents under the UVG (Art. 1a Abs. 1 lit. a UVG). Self-employed persons residing in Switzerland can take out voluntary insurance (Art. 4 Abs. 1 UVG). Especially in the craft sector, this is more than just a detail. An accident can quickly lead to a longer loss of earnings.
If you hire staff, you must register them correctly under social security law. For employees, mandatory occupational pensions also apply if they have completed their 17th year of age and receive an annual wage of more than CHF 22'680 from an employer (Art. 2 Abs. 1 BVG). Mandatory accident insurance must also be arranged in this case (Art. 1a Abs. 1 lit. a UVG).
In addition to personal insurance, you should particularly think about business liability insurance in the craft sector. It is not generally prescribed by federal law in every case, but it can be existential. If you cause water damage to a customer, damage a pipe, or a installed component is faulty, the damage can quickly exceed your starting budget.
How Do You Organize Accounting Correctly?
Clean accounting is important from the very first order. For sole proprietorships, the scope depends on the level of turnover, while for LLCs, the ordinary duty to keep accounts and file financial reports applies regardless of turnover.
Sole proprietorships and partnerships with a turnover of at least CHF 500'000 in the last financial year are subject to the duty to keep accounts and file financial reports (Art. 957 Abs. 1 Ziff. 1 OR). Legal entities, in particular LLC and stock corporation, are always subject to the duty to keep accounts and file financial reports (Art. 957 Abs. 1 Ziff. 2 OR).
If your sole proprietorship remains below CHF 500'000 in turnover, you do not have to keep full double-entry bookkeeping. However, you must at least record income, expenses, and the asset situation (Art. 957 Abs. 2 Ziff. 1 OR). This simplified accounting must also comply mutatis mutandis with the principles of orderly bookkeeping (Art. 957 Abs. 3 OR). In practice, this means: no shoebox full of receipts at the end of the year, but an ongoing, comprehensible system.
Bookkeeping must record business transactions completely, truthfully, and systematically. Furthermore, supporting documents are required for individual entries, as well as clarity, expediency, and auditability (Art. 957a Abs. 2 OR). Business books and accounting records must be kept for ten years (Art. 958f Abs. 1 OR).
Craft businesses in particular often have material purchases, down payments, cash payments, vehicle costs, and project-related expenses. Therefore, a separate business account is worthwhile from day one. If you accept cash or pay in cash, you should document particularly carefully. The Federal Supreme Court has emphasized that even for smaller independent businesses, prompt records are necessary and a cash book can be essential for cash-intensive businesses (BGer 2C_839/2016 E. 5.2).
Digital accounting is therefore not only convenient. It helps you to neatly bring together offers, invoices, receipts, and payments. If you need support with the topic of accounting, Jurata is always happy to help.
When Do You Become Liable for VAT?
A craft business generally becomes liable for VAT unless it falls under the turnover exemption. The most important threshold is CHF 100'000 turnover per year.
Anyone who operates a business and provides services in Switzerland or has their registered office, domicile, or permanent establishment in Switzerland is liable for VAT, regardless of legal form, purpose, and profit intent (Art. 10 Abs. 1 MWSTG). A person operates a business if they independently carry out a sustainable professional or commercial activity and appear externally under their own name (Art. 10 Abs. 1bis MWSTG).
Anyone who generates less than CHF 100'000 in turnover from taxable services within one year in Switzerland and abroad is exempt from liability (Art. 10 Abs. 2 lit. a MWSTG). Correct tax liability for companies with registered office, domicile, or permanent establishment in Switzerland generally begins with the commencement of entrepreneurial activity (Art. 14 Abs. 1 lit. a MWSTG). The exemption ends as soon as the turnover limit is reached or it is foreseeable that it will be exceeded within twelve months of the start or expansion of the activity (Art. 14 Abs. 3 MWSTG).
VAT is particularly relevant for craft businesses because materials are often purchased. Anyone liable for VAT can claim input tax deduction under statutory conditions. Whether voluntary submission to VAT makes sense therefore depends on your customers, your investments, and your price calculation.
What Should You Do Before Your First Order?
Before you found your craft business and actively accept orders, you should choose your legal form, register self-employment, check insurances, set up accounting, and keep VAT in mind.
Starting is much easier if you do not have to fix these points retrospectively. First, choose the legal form. Then clarify the company name, the commercial register entry, and registration with the compensation office. In parallel, you should check insurances, particularly accident, daily sickness benefits, business liability, vehicle, tools, and machinery.
Also, set up a business account and choose an accounting system. Determine how you create offers, number invoices, save receipts, and control payments. If you want to employ staff, also plan payroll, social security, accident insurance, and, if applicable, occupational pensions.
A good start in the craft sector is not just a question of the order situation. It also determines whether you will later bear unnecessary risks regarding taxes, insurances, or liability issues.
Frequently Asked Questions About Craft Businesses in Switzerland
Can I start a craft business without a commercial register entry?
Yes, as a sole proprietorship, this is possible as long as there is no obligation to register yet. A sole proprietorship only has to be entered in the commercial register from a turnover of at least CHF 100'000 in the last financial year (Art. 931 Abs. 1 OR). However, voluntary entry is also possible earlier (Art. 931 Abs. 3 OR).
Is a LLC always better for craftspeople than a sole proprietorship?
No. A LLC offers a clearer liability structure because in principle only the company's assets are liable (Art. 772 Abs. 1 OR). For this, it needs at least CHF 20'000 share capital (Art. 773 Abs. 1 OR) and formal incorporation. For small, low-risk starts, a sole proprietorship can be simpler.
Do I have to have accident insurance as a self-employed craftsperson?
Accident insurance is not automatically mandatory for self-employed persons. However, they can take out voluntary insurance (Art. 4 Abs. 1 UVG). As soon as you employ staff, they are compulsorily insured against accidents (Art. 1a Abs. 1 lit. a UVG).
Is simple accounting sufficient for a sole proprietorship?
Yes, if turnover is below CHF 500'000. In this case, accounting for income, expenses, and the asset situation is sufficient (Art. 957 Abs. 2 Ziff. 1 OR). Nevertheless, business transactions must be documented truthfully, systematically, and with supporting evidence (Art. 957 Abs. 3 OR, Art. 957a Abs. 2 OR).
