A legal Overview of the Sole Proprietorship
The sole proprietorship is the most popular legal form for entrepreneurs in Switzerland. In this legal form, only one person manages the business and no corporation (SA OR Sàrl) is created. The owner provides the capital for his or her business activity, represents the company externally and bears the entrepreneurial risk alone.
Legal provisions for the sole proprietorship
In contrast to the company law which applies to the PLC, there is no “sole proprietorship law”. The provisions that apply are the same as for individual persons earning an income in another way. Therefore, the owner is relatively free in the organization of his business. In the course of his business activities, however, he must comply with various provisions in different areas. The main areas are summarized below.
1. Establishment
There are no binding legal provisions concerning the minimum capital contribution or formal documents for the establishment of a sole proprietorship. It is often said that the company starts as soon as the independent business activity starts. The business activity is considered to have started when the service or product is offered and a monetary compensation is received. After that, only a registration with the competent compensation fund is required; however, this registration usually takes place at a later date.
The costs for setting up a sole proprietorship are therefore low (from approx. CHF 139 at STARTUPS.CH).
2. Liability
The owner is personally liable for the company’s obligations with his/her private assets. This means that he/she is responsible for all debts of his/her sole proprietorship. Even a clear separation in the accounting between the company and the private assets does not change this. If the owner is married, it is possible that the spouse is also jointly responsible for the debts of the sole proprietorship.
3. Commercial register
If a sole proprietorship has a gross annual turnover of CHF 100,000 or more, it must be register in the commercial register. As long as the turnover is below this limit, registration is optional.
4. Name of the company
At the latest when registering in the commercial register, the question of the name of the sole proprietorship must also be considered.
5. Accounting Obligations
As soon as the gross annual turnover exceeds CHF 500’000, the company is required to present accounts in accordance with the article 957 and following of the Code of Obligations. Consequently, it must keep a double-entry bookkeeping with a balance sheet, inventory and profit and loss account.
For sole proprietorships with an annual turnover of less than CHF 500,000, only simplified accounting with income, expenses and assets are required.
Tax law (ordinary taxes and/or VAT) also imposes registration and retention obligations. For the tax return, the tax authorities require a certain traceability of the company’s figures. It is therefore important in any case to keep at least simple accounts.
6. Audit
The sole proprietorship does not have any organs and is therefore not subject to the auditing obligation – however, it can call on a trustee or an auditing body if it so wishes.
7. Conversion
A sole proprietorship can be converted into a corporation or a limited liability company at any time. Find out more about the conversion in this blog post.
Do you have any innovative business idea you would like to make come true? Use STARTUPS.CH experts to become self-employed.
Get started as Mompreneur: www.mom-preneur.ch/en/home
Get started as Dadpreneur: www.dad-preneur.ch/en/home
Get started as Seniorpreneur: www.senior-preneur.ch/en/home
Get started as Youngpreneur: www.young-preneur.ch/en/home
