Published on and written by Cyril Jarnias
Setting up a business in Switzerland starts with choosing a legal form. Behind this seemingly administrative choice lie very concrete issues: protection of your private assets, access to financing, taxation, credibility with banks, the ability to bring in investors, business succession, and start-up costs.
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In Switzerland, the sole proprietorship dominates in number, but the LLC is the preferred form for SMEs, while the corporation (AG) remains the benchmark for raising significant capital. Other structures such as partnerships, branch offices, cooperatives, associations, or foundations serve specific needs.
Overview of the main Swiss legal forms
Before diving into the details, it is helpful to visualize the main categories of legal forms provided by Swiss law. The Code of Obligations primarily distinguishes between personal forms, where the entrepreneur pledges their personal assets, and capital companies, which constitute a separate legal entity.
Below is a summary table of the most commonly used structures for a standard commercial activity.
| Legal Form | Legal Basis (CO) | Legal Personality | Minimum Capital | Owner Liability |
|---|---|---|---|---|
| Sole Proprietorship | Art. 552-593 | None (natural person) | None | Unlimited, on entire private assets |
| General Partnership (SNC) | Art. 552-593 | None (partnership) | None | Unlimited, joint and several, on partners’ private assets |
| Sàrl (GmbH) | Art. 772-827 | Yes (legal entity) | CHF 20,000 (100% paid up) | Limited to company assets |
| SA (AG) | Art. 620-763 | Yes (legal entity) | CHF 100,000 (min. CHF 50,000 paid up) | Limited to company assets |
| Branch of a foreign company | Various | No (depends on head office) | None (capital of parent company) | Parent company liable without limit |
| Cooperative | Law on Cooperatives & CO | Yes | No legal minimum | In principle limited to cooperative’s equity |
| Association | CC & CO | Yes | None | According to bylaws, often limited to association’s assets |
In practice, for an entrepreneur or startup, the choice almost always focuses on four options: sole proprietorship, Sàrl (LLC), SA (corporation) and, more rarely, partnership (general partnership) or branch for a foreign group.
The sole proprietorship: the simplest path… and the most exposed
The sole proprietorship – sometimes called an individual enterprise – is by far the most common form in Switzerland. There are several hundred thousand of them, making it the go-to structure for freelancing, crafts, and small local businesses.
Operation and conditions
The sole proprietorship is not a legal entity: legally, the business and the entrepreneur are one and the same. In practice, simply invoicing your clients is enough to exist economically. Once the activity is launched, the entrepreneur asks their OASI compensation fund to recognize their self-employed status.
No minimum capital is required by law. You can therefore start with whatever means are available, which explains the appeal of this form for founders with limited equity.
Registration in the commercial register is mandatory only if the turnover exceeds CHF 100,000 per year, in accordance with the Code of Obligations. Below this threshold, registration remains optional but improves the credibility of the business and protects the business name.
In terms of accounting, the administrative burden is lighter: if annual turnover remains below CHF 500,000, “simplified accounting” based on a record of income and expenses is sufficient. No audit requirement applies.
Concrete advantages of the sole proprietorship
The main appeal lies in simplicity and negligible setup costs.
| Aspect | Sole proprietorship |
|---|---|
| Start-up formalities | Very limited (no articles of association, no notarial deed) |
| Minimum capital | None |
| Typical start-up cost | 0–500 CHF (excluding advice), + 120–200 CHF if commercial register |
| Accounting | Simplified if turnover under CHF 500,000 |
| Audit obligation | None |
From a tax perspective, profits are taxed as personal income, without double taxation. The entrepreneur simply declares net profit in their tax return. This avoids the “corporate tax + dividend tax” mechanism inherent in capital companies.
The freedom of decision is total: no general meeting, no board of directors, no partners to convince. For a solo activity, this convenience is real.
Independent professional
The downside: unlimited personal risk
This ease, however, comes at a high price in terms of legal security. The entrepreneur’s liability is unlimited: in the event of debts or litigation, the entire private assets—house, savings, car—can be seized. There is no separation between business and personal assets.
The practical consequences are significant. An activity that requires purchasing expensive machinery, signing heavy commercial leases, or hiring employees directly exposes the founder’s assets. Banks are aware of this and are often more reluctant to finance a sole proprietorship than an LLC or corporation.
A sole proprietorship cannot be sold as such. Upon the founder’s death or withdrawal, the sole proprietorship ceases to exist. Only the assets (clientele, equipment, trademarks) can be transferred one by one. To plan for succession, conversion into a capital company must be considered.
On the social side, the status is less protective. The self-employed are not insured against unemployment and their affiliation with a pension fund (second pillar, BVG) remains optional. They can use pillar 3a to build up retirement savings and slightly optimize their tax burden, but they do not benefit from the mandatory framework that LLC or corporation structures provide from a certain salary level.
Profiles for which the sole proprietorship remains relevant
Despite these limitations, the sole proprietorship remains ideal in certain cases: marketing consultant, graphic designer, freelance developer, craftsperson starting out alone, liberal professions practicing individually, or small commercial activities with low risk and limited investments.
It is generally chosen when:
– the activity is carried out alone, without partners,
– the financial risk remains moderate,
– capital needs are low,
– the priority is to start quickly and at very low cost.
As soon as financial stakes increase – heavy investments, hiring, signing important contracts – or if you foresee significant growth, the question of switching to an LLC arises seriously.
The Sàrl (LLC): the “standard” for SMEs and startups
The Sàrl (limited liability company, GmbH in German) is today the most popular form for small and medium-sized enterprises, but also for many startups. It combines a reasonable capital requirement with clear protection of private assets and a image of seriousness appreciated by banks and partners.
Basic legal characteristics
The Sàrl is a legal entity distinct from its shareholders. It has its own assets, separate from those of the founders. Shareholders are liable only up to the amount of their contributions, unless special provisions require additional payments.
The key features are as follows:
| Feature | Sàrl (GmbH) |
|---|---|
| Legal basis | Art. 772-827 CO |
| Minimum capital | CHF 20,000 (100% paid up) |
| Minimum par value of shares | CHF 100 |
| Legal personality | Yes (legal entity) |
| Liability | Limited to company assets |
| Commercial register entry | Mandatory and constitutive |
| Publication of shareholders | Names, domiciles, shareholdings published in the commercial register |
| Management body | Directors (one or more managers) |
The capital of CHF 20,000 must be fully paid up upon incorporation, either in cash or in the form of contributions in kind valued and attested. This amount is not a “cost”: it becomes the company’s equity, available for operations once incorporation is complete.
Incorporation process and typical costs
Creating an Sàrl is more regulated than a sole proprietorship and involves several steps: drafting the articles of association, opening a blocked capital deposit account, notarization of the incorporation deed, and then entry in the commercial register.
Costs are broken down into several items
Details of the first cost item
Details of the second cost item
| Cost item (standard Sàrl/AG) | Indicative range (CHF) | Remarks |
|---|---|---|
| Notary fees (notarial deed) | 500 – 2,000 | Varies greatly by canton (Zug/Schwyz cheaper than Zurich/Geneva) |
| Commercial register | ~600 – 800 | Federal rate + cantonal fees |
| Blocked capital account (bank) | 150 – 500 | One-time fees for opening and deposit confirmation |
| Advice & drafting (articles, declarations, powers of attorney) | 1,500 – 5,000 | Depending on complexity, number of founders, presence of foreigners |
| Total third-party (excluding capital) | approx. 2,000 – 4,000 | Estimates for 2026 for a standard incorporation |
Some “packaged” providers offer LLC incorporation packages starting at around CHF 1,100–1,300 online, using standardized templates. In practice, for an LLC with personalized support, it is safer to budget overall (excluding capital) in the range of CHF 3,000–5,000, depending on the canton and complexity of the case.
Governance and transparency
The Sàrl is a structure designed for companies often run by their owners. Shareholders play a central role in management; the law generally provides for joint management, although the articles of association may arrange this distribution.
Unlike the corporation (AG), the names of the shareholders, their domicile, and the amount of their shares are entered in the commercial register and therefore accessible to the public. Likewise, any transfer of shares must be declared.
– be evidenced by a notarial deed,
– be approved by the shareholders’ meeting,
– and be registered in the commercial register.
This formality somewhat complicates the entry and exit of shareholders, but it enhances transparency, which may suit family structures or SMEs where you want to maintain control over ownership.
Advantages and disadvantages of the Sàrl
In terms of protection, the Sàrl marks a clear break from the sole proprietorship: barring gross misconduct, shareholders risk only their contributions. Company debts cannot be pursued against their private assets, except in cases of grossly negligent management.
It also offers a better professional image. The mention “Sàrl” in the company name often reassures banks and large clients, who see it as a solid structure subject to double-entry accounting and annual financial statements.
On the downside:
Incorporation requires a blocked capital of 20,000 CHF.
For very small activities with low margins, this extra formality may seem disproportionate. However, as soon as the activity involves significant contracts, employees, machinery, or premises, the Sàrl generally becomes the most coherent form.
When to choose an Sàrl over a sole proprietorship?
Several criteria favor the Sàrl:
– you need to invest in equipment, inventory, a commercial lease,
– you plan to hire,
– you wish to bring in one or more partners,
– you want to protect your private assets,
– you seek better banking credibility.
In comparison, the sole proprietorship remains suitable for a personal activity with low risk and low investment needs. As soon as the financial risk becomes “substantial”, the Sàrl is often recommended to confine this risk to the company’s equity.
The corporation (SA/AG): the premier form for raising capital and structuring growth
The corporation (SA, called AG in German) is the form of reference for larger companies, groups, but also for many ambitious startups seeking institutional investors or aiming, eventually, for an IPO.
Main characteristics
Like the Sàrl, the corporation is a capital company with legal personality. However, it is designed for a potentially broad and changing shareholder base, with greater flexibility in the transfer of shares and a higher degree of anonymity for shareholders.
| Feature | SA (AG, Ltd) |
|---|---|
| Legal basis | Art. 620-763 CO |
| Minimum capital | CHF 100,000 |
| Portion of capital to be paid up | Min. 20% per share, and at least CHF 50,000 total |
| Minimum par value | CHF 0.01 per share |
| Legal personality | Yes (legal entity) |
| Liability | Limited to company assets |
| Commercial register entry | Mandatory and constitutive |
| Commercial register publication | Only board members |
| Publicity of shareholders | Internal register, not public (for registered shares) |
Shares can be registered, and the law now provides for enhanced transparency rules to identify economic beneficial owners, but the shareholder register remains an internal document kept by the board of directors, not accessible to the public. This is a key point for entrepreneurs or investors concerned about discretion.
Incorporation, capital, and governance
The incorporation of a corporation (SA) follows steps similar to the Sàrl: deposit of capital into a blocked account (at least CHF 50,000, i.e., 20% of the capital, the balance can be paid up later), notarization of the deed of incorporation, filing of the articles of association, and then entry in the commercial register.
Governance is more formalized. Three bodies are provided for by the Code of Obligations:
– the general meeting of shareholders, the “supreme body”,
– the board of directors, which manages and represents the company,
– the audit body, mandatory except for very small companies that may opt for an opt-out below ten employees.
The corporation must be represented in Switzerland by at least one person domiciled in the country, whether a director or a manager with individual signature (or two with collective signature).
Why the corporation is the preferred form for fundraising
Several elements make the corporation a natural vehicle for large-scale financing operations:
A minimum capital of CHF 100,000 reinforces credibility with institutional investors. The transfer of shares is simply by written contract and entry in the register, without a notary or approval of the general meeting. Only directors are public in the commercial register, ensuring relative anonymity for shareholders. Finally, only the corporation allows for a stock exchange listing.
This structure is therefore essential for companies seeking substantial financing, for holding companies, or for companies operating in regulated sectors where a solid capital structure is expected.
Sàrl vs. corporation (SA): capital, confidentiality, flexibility
For a Swiss entrepreneur, the hesitation is often between the Sàrl and the corporation (SA). Both are capital companies, protect private assets, and are taxed similarly. The difference lies in other criteria.
| Criterion | Sàrl (LLC) | SA (Corporation) |
|---|---|---|
| Minimum capital | CHF 20,000 (100% paid up) | CHF 100,000 (min. CHF 50,000 paid up) |
| Publication of owners | Shareholders named in commercial register, shareholdings published | Shareholders not published (only board appears) |
| Transfer of shares | Notarial deed + approval of general meeting + registration in commercial register | Written contract + entry in the share register |
| External perception | Very suitable for SMEs, serious image | “Prestigious” form, standard for large companies |
| Suitability for startups | Very good for SMEs and self-financed startups / few shareholders | Ideal for fundraising, investors, potential IPOs |
Result: with available capital below CHF 50,000, the Sàrl often becomes the default choice. Above CHF 100,000 and with ambitions for sustained growth, the corporation becomes the most logical form, especially if the shareholder base is likely to diversify or change frequently.
Other forms: partnerships, branches, cooperatives, associations
Even though sole proprietorship, Sàrl, and corporation dominate commercial business creation, other forms may be relevant in certain cases.
Partnerships: general partnership and limited partnership
The general partnership (SNC) brings together at least two natural persons who jointly operate a business under a common company name. No capital requirement exists, and incorporation is by contract between the partners, followed by mandatory registration in the commercial register.
Each partner is jointly and severally liable without limit for the company’s debts with their private assets. In practice, this type of structure is mainly suitable for certain liberal profession firms or very specific projects, and is used much less than the Sàrl when it comes to limiting risk.
The limited partnership, which combines general partners (with unlimited liability) and limited partners (liability limited to their contribution), remains rare in practice.
Branch of a foreign company
For a company already established abroad that wishes to set up in Switzerland without creating a new legal entity, the branch is an option. It is a permanent establishment in Switzerland, registered in the commercial register, but remains legally and economically dependent on the parent company. No equity requirement exists, but the parent company remains liable without limit for the branch’s obligations.
This formula is often chosen to test the Swiss market or for international groups that want to maintain a unified legal structure while having a local presence.
Cooperatives, associations, foundations
Alongside purely commercial forms, Swiss law provides for structures oriented toward collective interests or non-profit objectives:
Here are three distinct legal structures: the cooperative, which requires at least seven members and operates on the principle of ‘one person, one vote’ with no minimum capital imposed; the association, suitable for non-profit activities such as sports or culture, which can be created by two people and is required to register in the commercial register only if it carries out a commercial activity; and the foundation, which has assets dedicated to a lasting purpose, often charitable or of public utility.
These forms are chosen when the purpose of the project goes beyond the simple logic of individual profit.
Beyond purely legal aspects, the chosen form heavily influences the entrepreneur’s taxation and pension planning.
Taxation: sole proprietorship vs. capital company
For a sole proprietorship, the net profit of the activity is considered personal income. It is added to other income (salary, investment income, etc.) and taxed at progressive rates. There is no way to play with a salary/dividend split, nor to defer taxation by leaving profits in a legal entity.
The profit tax rate for Sàrls and SA (corporations) in Switzerland can go as low as around 12% in the most advantageous cantons such as Zug or Nidwalden.
Then, if profits are distributed to the owner as dividends, they are subject to an additional tax at the shareholder level. This double taxation is partially mitigated when the entrepreneur holds a qualified participation (more than 10% of the capital), as dividends are only partially taxed.
Social contributions and pension planning
On the social side, the paths also diverge.
In a sole proprietorship, contributions to OASI/AI/EO (old age, survivors’, disability insurance) are based on net profit (rate up to 10%), with no mandatory pension fund (BVG) or unemployment insurance, requiring personal retirement planning (pillar 3a). In an Sàrl or corporation (SA), the salaried director is required to contribute to a pension fund from a certain salary threshold, improving disability/death protection, and unemployment insurance is due on the payroll, but coverage in the event of job loss is not always effective.
This dimension can tip the balance, especially for an entrepreneur who wants to build a stronger retirement or improve their family’s security.
Credibility and access to financing
Banks and investors look at the legal form before granting credit or investing capital.
– A sole proprietorship is intimately tied to the founder’s private wealth. Access to credit therefore depends directly on their personal assets, and the structure often inspires less confidence than a capital company, especially for large amounts.
– An Sàrl or corporation (SA) projects a more institutionalized image. The accounting and governance obligations, limited liability, and clarity of equity reassure lenders. The corporation, in particular, is perceived as more prestigious and better suited for bringing in investors.
Start-up costs: practical comparison
To better visualize the financial steps required for incorporation, we can compare the main items among sole proprietorship, Sàrl, and corporation (SA), keeping in mind that share capital is not a cost, but a contribution to the company.
| Element | Sole proprietorship | Sàrl (LLC) | SA (Corporation) |
|---|---|---|---|
| Minimum capital | None | CHF 20,000 (100% paid up) | CHF 100,000 (min. 50,000 paid up) |
| Notarial deed | No | Yes | Yes |
| Commercial register entry | Mandatory if turnover > CHF 100,000 | Mandatory from incorporation | Mandatory from incorporation |
| Notary fees | 0 | 500 – 2,000 | 800 – 2,500 (often more) |
| Commercial register fees | 120 – 200 (if registered) | 600 – 800 | 600 – 800 |
| Blocked capital account | No | 150 – 500 | 150 – 500 |
| Advice & drafting | Optional (0–1,000) | 1,500 – 5,000 | 1,500 – 5,000 or more |
| Total third-party cost (excluding capital) | < 1,000 CHF | approx. 2,000 – 4,000 | often 5,000 – 10,000 |
For an individual project, the difference in entry ticket between a sole proprietorship (a few hundred francs at most) and an Sàrl (CHF 20,000 in capital plus a few thousand in fees) is therefore significant. The trade-off will depend on the level of risk, financing needs, and desired credibility.
The cheapest form is not the cheapest decision.
A sole proprietorship costs nothing to create and exposes everything you own; an SA costs more and changes how you raise money.
How to choose your legal form in Switzerland?
Ultimately, there is no “ideal” form that works for everyone. The best choice depends on a set of criteria: risks, expected income level, growth ambition, need for partners, personal and family situation, and even canton of establishment.
A pragmatic thinking framework can help:
For a solo project with no capital or high risks, the sole proprietorship is most suitable. With needs for equipment, premises, or staff, an Sàrl protects private assets. In the event of major fundraising or a stock exchange listing, the corporation (SA) is the preferred structure.
In any case, it is crucial to keep in mind that this choice is not set in stone. A sole proprietorship can be converted into an Sàrl or corporation when the activity grows, and an Sàrl can be converted into a corporation to facilitate investor entry or international expansion. What matters is to start with a structure suited to your stage of development, your risks, and your resources, while anticipating, as much as possible, the future trajectory of your business.
This page compares the Swiss legal forms. For the real first-year cost, the corporate tax treatment and the banking step, start from the parent guide on Swiss company formation, then see taxation and the bank account.
BEFORE YOU INCORPORATE
A wrong legal form can lock in your capital.
An independent review looks at who will own, fund and eventually sell the business, and how much capital you can realistically put in at incorporation — before a wrong form locks money in a structure you cannot easily change.
Check the legal form that fits your capitalFAQ
IN SUMMARY
- Switzerland offers two limited-liability forms (Sàrl/GmbH and SA/AG) plus a sole proprietorship that does not limit liability.
- The Sàrl needs CHF 20,000 fully paid; the SA needs CHF 100,000 nominal with at least CHF 50,000 paid in.
- The sole proprietorship requires no capital and no commercial-register entry until turnover exceeds CHF 100,000.
- Simplified accounting (income/expense record) is allowed below CHF 500,000 turnover.
- For most solo founders the Sàrl is the standard; the SA matters when you expect to raise capital.
1.What is the minimum capital for a Swiss GmbH (Sàrl)?
CHF 20,000, and it must be fully paid in at incorporation.
2.What is the minimum capital for a Swiss AG (SA)?
CHF 100,000 nominal, of which at least CHF 50,000 must be paid in at incorporation; the balance can be paid later.
3.Do I have to register a sole proprietorship?
Only if annual turnover exceeds CHF 100,000. Below that, registration is optional but improves credibility and protects the business name.
4.Which legal form should a solo founder choose?
For a single owner who wants limited liability with modest capital, the Sàrl (GmbH) is the standard choice. The sole proprietorship is simpler but exposes personal assets.
5.Does the legal form change the tax treatment?
Yes. Capital companies are taxed as separate entities and dividends are taxed again on distribution; a sole proprietorship is taxed at the owner’s personal rate. The form and the tax outcome are linked.
Your legal form decides your tax, your liability and your exit.
Changing form later means a new registration, new accounts and a new bank file.
Sources
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
