Setting up a Sole Proprietorship in Switzerland: what you should watch out for
The registration of a sole proprietorship in the commercial register often represents the start of an independent business. In this blog post, we present you with a few points worth considering when setting up a sole proprietorship.
Setting up a sole proprietorship
The sole proprietorship, also known as a one-man business, is particularly suitable for low-risk activities where it is not yet possible to estimate whether the planned activity will generate a significant turnover. A sole proprietorship can only be registered in the commercial register by one person. If several people intend to run a business together, a different legal form should be chosen.
Establishment
The sole proprietorship is established with the start of the business activity. No specific founding act, such as a notarial deed or articles of association, is required. As soon as commercial activities are undertaken, the sole proprietorship is established. A sole proprietorship must be entered in the commercial register if its turnover exceeds CHF 100,000. If the turnover is lower, however, registration is possible and often recommended on a voluntary basis.
Liability
Since a sole proprietorship is a partnership and not a corporation, its owner is liable without limitation and with respect to his entire assets. It is not possible to separate the assets of the sole proprietorship from its private assets. The sole proprietorship is not a separate legal entity, which is why the assets of the sole proprietorship are always also the assets of the private individual. Even keeping separate accounts for the sole proprietorship cannot change this situation. If creditors assert claims against the sole proprietorship, the owner of the sole proprietorship is fully liable for the entirety of its private assets.
Name of the sole proprietorship
The founder is limited in the choice of the company name. The family name of the owner must be included in the company name. In addition to the family name, it is possible to add material or fancy designations.
Example: John Baker founds a painting company. A possible company name would be: “John Baker, painting company”.
Advantages and disadvantages
The advantages of the sole proprietorship include the fact that no minimum capital is required and that there are virtually no legal requirements. In particular, in contrast to corporations, no double bookkeeping is required if the annual turnover is less than CHF 500,000. The main disadvantage is the unlimited personal liability of the owner. Another negative point is that a sole proprietorship can only be operated on its own. The participation of partners in the business is not permitted.
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