Establishing a Sole Trader in Switzerland

Updated on Thursday 29th July 2021

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Sole traders in Switzerland

Natural persons can start a business in their own name under a sole trader, which is the most basic way of conducting a commercial activity in Switzerland. Recently, sole traders have become very popular as they are the first step to financial independency and self-employment in Switzerland.

Swiss sole traders, also known as sole proprietorships or individual enterprises, are the simplest form of doing business and also allow the owners to hire personnel. Not only Swiss citizens are allowed to open sole traders, foreign citizens living in the country are also entitled to set up this type of business. Our team of Swiss lawyers is prepared to assist local and foreign natural persons with in-depth information concerning the registration requirements available for this business structure; our lawyers can assist any person in opening a sole trader in Switzerland and in the process of opening a Swiss bank account for your business.

How easy is it to set up a sole trader in Switzerland?

The sole trader is usually registered as a private person who manages his or her own business and this is the first step to the registration of a start-up company in Switzerland. Sole traders registered in this country can be used for starting a wide range of business activities.

Since it represents the simplest business structure available for investors, it also has the simplest registration procedure, which does not follow the same steps as it is the case of other types of legal entities available in Switzerland. However, there are a few requirements to be met when opening an individual enterprise in Switzerland:

• the owner of the sole trader has to register for social security with the Old Age and Survivor’s Insurance;
• the sole trader needs to have a trading name, which has to include the owner’s name (the family name is compulsory in this case);
• since the sole trader does not represent a separate legal entity, its owner is fully responsible for the debts of his or her business;
• the sole trader is legally required to register with the Swiss Commercial Register in the situation in which the annual revenue reaches the threshold of CHF 100,000.

Please note that when the Swiss sole proprietorship reaches a revenue of CHF 100,000, it is also compulsory to register for value added tax (VAT) purposes, as the entity will legally become a VAT payer. Thus, it is necessary to register with the Federal Tax Administration.

Depending on the activities developed through the sole trader in Switzerland, the owner may be required to obtain specific business permits and licenses. This can be the case of persons developing business activities related to the financial sector, the accommodation and catering industries, for those carrying a liberal profession, such as doctors, lawyers or pharmacists, wine specialists, persons working in the field of human resources and others.

Can the sole trader be changed into another Swiss legal entity?

Yes, sole traders can be transformed into any other type of Swiss company at any given time. In most cases, the sole trader is usually changed into a limited liability company and this happens when the business activities developed through the sole trader expand, in which case, the limited liability company would represent a better option to protect the investor (as he or she will benefit from limited liability, as opposed to the situation of sole trader). Our team of lawyers in Switzerland can assist with legal advice and representation when changing a business structure into another.

The presentation below offers more details on the Swiss sole traders:

What are the regulations for foreigners opening Swiss sole traders?

The sole trader in Switzerland is a business structure that is available for registration for both local and foreign persons. As a general rule, foreigners can start a sole trader in this country if they own a residency permit. The requirements for persons who are residents outside the European Union and the European Economic Area are more complex, in the sense that such persons have to be the owners of a C residence permit.

They may also open a sole trader here in the case in which they are married to a Swiss citizen or to a person who obtained a C permit in Switzerland. As a general rule, when starting a sole trader, it is not required to provide a business plan, but it is recommended to prepare a presentation on how the respective business will have a positive impact on the Swiss economy.

How can one transfer the assets of a sole trader in Switzerland?

The owner of a Swiss sole trader can transfer the assets of the business to a given party. The assets of this type of business can be transferred to a person through succession and it is necessary to know that the person who inherited any material or immaterial assets obtained through the respective sole trader can also inherit the liabilities attached to it.

It is important to know that the transfer of assets is regulated under the local legislation for sole traders registered with the Trade Register. The main regulations can be found in the Merger Act and the Swiss Code of Obligations; our team of Swiss lawyers can assist investors with in-depth information concerning the stipulations included in these rules of law.

What are the accounting requirements for Swiss sole traders?

Due to the fact that the sole trader benefits from a very simple structure, its accounting requirements are also limited. In the case of sole traders that have a yearly income of maximum CHF 500,000 it is necessary to keep simplified accounting documents presenting the income, the expenditures and the assets of the business.

In the case of Swiss sole traders which have an income of minimum CHF 500,000, the accounting principles that must be applied are prescribed under the Article 957 of the Swiss Code of Obligations. Our law firm in Switzerland can offer more details on the main accounting requirements and accounting documents available for a local sole trader.

Taxation of sole traders in Switzerland

The sole proprietorship is required to pay the personal income tax in Switzerland and the social insurance, comprised of the following: the health insurance, the invalidity insurance and the loss of earnings and compensation insurance. It is also necessary to know that the costs associated with the registration of a Swiss sole trader are very low compared to the incorporation of other business entities, investors having to pay CHF 120 when registering with the Trade Register; other associated costs can appear of course, including those related to obtaining professional advice.

In order to determine the payment of the social insurance premiums, the Swiss sole trader must submit certain documents such as invoices, offers, contracts, special licenses or other relevant documents that could help with the clarification of the sole proprietor’s situation. These documents must be submitted no later than 3 months after starting operating. Persons who are interested in starting a company in this country through a sole proprietorship are invited to address to our law firm in Switzerland.