Self-Employed vs SARL: Key Differences for Entrepreneurs in Switzerland

In Switzerland, entrepreneurs have the option of being self-employed or owning a SARL (Société à Responsabilité Limitée), which is a limited liability company. Each structure comes with its own set of advantages and disadvantages, making the decision an important one for aspiring business owners. This article will explore the key differences between being self-employed and owning a SARL in Switzerland, as well as factors to consider when making your choice.

Legal Structure

The legal structure of your business will have a significant impact on its operations and your personal liability. As a self-employed person, you are not considered a separate legal entity from your business. This means that you are personally responsible for the business itself, as well as its debts and liabilities.

On the other hand, a SARL is a distinct legal entity with its own rights and obligations. It is a limited liability company, which means that its owners are not personally liable for the company's debts and liabilities. Instead, their liability is limited to the amount of their investment in the company.

Liability

Liability is a critical factor to consider when choosing your business structure. As a self-employed person, you are personally liable for all debts and liabilities of the business. This means that your personal assets, such as your home and savings, could be at risk if your business runs into financial trouble.

In contrast, the owners of a SARL have limited liability, as they are only responsible for the amount of their investment in the company. This protection can be particularly important for entrepreneurs with significant personal assets, as it helps to shield them from potential business-related risks.

Taxation

The taxation of your business will also play a significant role in determining the best structure for you. Self-employed individuals are taxed on their personal income, which includes their business income. This means that your business profits will be taxed at your personal income tax rate.

SARLs, on the other hand, are taxed as corporations. This means that they are taxed on their profits, not on the personal income of the owners. Depending on your personal financial situation and tax rates, this could result in tax savings for some entrepreneurs.

Accounting

The accounting requirements for self-employed individuals and SARLs differ significantly. As a self-employed person, you are required to keep simple accounting records (an excel spreadsheet can be enough!). This can be an advantage for those who prefer to handle their own finances and are comfortable with basic bookkeeping.

SARLs, in contrast, are subject to more complex accounting requirements. They must maintain detailed financial records and submit annual financial statements. This may necessitate the hiring of an accountant or bookkeeper, which can be an additional expense for the business.

Capital

Starting a business typically requires capital, and the amount needed can vary depending on the structure you choose. Self-employed individuals often start their businesses with little or no capital, as they are not required to invest a specific amount in their venture.

SARLs, however, typically require more capital to start than self-employed businesses. This is because they must have a minimum share capital of CHF 20,000. While this can be a barrier for some entrepreneurs, it can also be seen as an investment in the long-term success and stability of the business.

Growth Potential

The growth potential of your business can be influenced by the structure you choose. Self-employed businesses can grow, but they are limited by the skills and resources of the individual owner. This can make it challenging to scale the business or attract outside investment.

SARLs have the potential to grow much larger than self-employed businesses due to their ability to raise capital and attract investors more easily. This flexibility can be particularly advantageous for businesses with ambitious growth plans or those looking to scale rapidly. Additionally, the corporate structure of a SARL can provide a higher level of credibility and professionalism, which may help attract customers and strategic partnerships.

Factors to Consider When Choosing Between Self-Employment and Owning a SARL

In addition to the key differences discussed above, there are several other factors that entrepreneurs should consider when deciding between self-employment and owning a SARL:

Personal Financial Situation

Your personal financial situation is an important consideration when choosing a business structure. If you have significant personal assets, owning a SARL may be a better option, as it can provide protection from business debts and liabilities. This limited liability can help safeguard your personal assets in the event of financial difficulties or legal disputes.

Size of Your Business

The size and growth potential of your business can also impact your decision. If you plan to grow your business significantly, incorporating as a SARL may be necessary to attract investors and raise capital. This structure can provide the flexibility and scalability needed to accommodate rapid growth and expansion.

Tax Situation

Your tax situation can also play a role in your choice of business structure. If you have a high personal income, incorporating as a SARL may result in tax savings, as the company is taxed on its profits rather than the personal income of the owners. It is essential to consult with a tax professional to determine the most advantageous structure for your specific circumstances.

Legal and Accounting Needs

Your comfort level with managing legal and accounting affairs can also influence your decision. If you prefer to focus on your core business operations and leave the complexities of legal and financial matters to professionals, incorporating as a SARL may be a better option. This structure will require more complex accounting records and legal documentation, which can be managed by an accountant or legal professional.

Conclusion

Ultimately, the decision to be self-employed or own a SARL is a personal one, and there is no one-size-fits-all answer. Each entrepreneur's individual circumstances, goals, and preferences will play a role in determining the best business structure for their venture.

By carefully considering the key differences between self-employment and SARLs, as well as additional factors such as personal finances, business size, tax implications, and legal and accounting needs, entrepreneurs can make a well-informed decision that best aligns with their unique needs and objectives.

Whether you choose to be self-employed or own a SARL, it is essential to remain informed about the regulations and requirements governing your chosen business structure in Switzerland. By staying up-to-date with relevant laws, tax codes, and best practices, you can ensure the success and longevity of your entrepreneurial endeavor.