What exactly is a sole proprietorship/individual enterprise/one-man business, respectively self-employment? A legal overview

Those who dare taking the step towards self-employment mostly chose to do so in form of a sole proprietorship (also known as one-man business, self-employed person or individual enterprise). This means, that a single person manages the business and does not create a company (such as a limited liability company, GmbH for instance) for this purpose. This person provides capital, represents the business to the outside and bears the entrepreneurial risk.

Creation: When creating a sole proprietorship, there are no cogent statutory provisions to consider (for instance minimum capital requirement), and no formal act of foundation is required. A sole proprietorship originates quasi automatically when a person begins an independent commercial activity. Therefore the costs of foundation are correspondingly low (with STARTUPS.CH approximately CHF 500 including consultation).

Liability: The sole proprietor is always liable without limitation. This means that he is personally liable for all of the business’s debts. This does not change even if private and business assets and liabilities are strictly separated in the accountancy. In some cases, even the entrepreneur’s spouse is liable for the business’s debts.

Commercial Registry: If a sole proprietorship generates a turnover of CHF 100′000 or more, it is subject to inscription in the Commercial Registry. For businesses staying below this threshold, an inscription on a voluntary basis is possible. Liberal professions (such as medics, lawyers etc.) are generally exempted from this registration duty.

Firm name: On the occasion of the application for the Commercial Registry inscription at the latest, one has to work  on a firm name. You will find more information in the corresponding topic.

Accountancy: A sole proprietorship which is obligated to register in the Commercial Registry is also subject to follow the commercial bookkeeping rules. This means that one has to keep double entry accounts with balance, inventory and profit and loss statement. However, this does not imply that self-employed people who are not obligated to register in the Commercial Registry do not have to keep any accounts. Especially taxation law (direct taxes and VAT) imposes so called documentation and storage duties. Furthermore, tax authorities require the business figures to be traceable. It is therefore a good idea to keep at least simple accounts.

Auditing: Self-employed people are not subject to any auditing duty.

Commutation: A sole proprietorship can be converted into a AG or GmbH at all times. Please check out the details in the specific topic.

Preferably you establish or convert your company with STARTUPS.CH. STARTUPS.CH will provide you with professional guidance before and after the foundation.

Here you will be able to apply for a counselling interview and to request free documentation.