Self-Employed or SARL: Which Swiss Business Structure Is Right for You?

You've decided to start a business in Switzerland. Congratulations! Now comes the decision that will shape everything from your taxes to your personal liability: should you operate as self-employed (sole proprietorship) or establish a SARL (limited liability company)?

Swiss entrepreneur making business decisions

This isn't just administrative paperwork—it's a strategic choice that affects your finances, growth potential, and peace of mind. And with Switzerland's 2025/2026 regulatory updates, the landscape has shifted in important ways.

This guide breaks down everything you need to know, with real numbers, updated regulations, and a practical framework to help you decide.

Quick Overview

Self-Employed vs SARL: At a Glance

Understanding the fundamental differences between these two business structures.

Factor	Self-Employed	SARL (GmbH)
Setup Cost	CHF 80-100	CHF 23,000-26,000
Minimum Capital	None	CHF 20,000
Setup Time	Immediate	5-10 business days
Personal Liability	Unlimited	Limited to investment
Tax Rate	Up to 40%	12-25%
Accounting	Simple	Double-entry required
Credibility	Lower	Higher
Growth Potential	Limited	Scalable

Self-Employment

Understanding Self-Employment in Switzerland

As a self-employed person (Einzelfirma, raison individuelle), you and your business are legally one entity. You're the business, and the business is you.

Below CHF 100k Revenue

Above CHF 100k Revenue

Commercial register entry mandatory (CHF 80). VAT registration required.

Total Startup Cost

CHF 80-100 plus administrative time. Start invoicing immediately.

Quick Setup

No notaries, no capital requirements, no corporate formalities needed.

Tax Treatment for Self-Employed

Self-employed individuals pay taxes on personal income, which includes all business profits:

Income tax: Progressive rates up to 40% (canton dependent)
AHV/IV/EO contributions: 5.371-10% of net income
Minimum AHV contribution: CHF 530/year (2025)
VAT: Mandatory at 8.1% if revenue exceeds CHF 100,000

The tax advantage: You can deduct business expenses directly from your personal income, reducing your overall tax burden.

Here's where self-employment gets interesting:

No mandatory pension fund (LPP): You're not required to contribute to a second pillar pension
Pillar 3a limit: You can deduct up to CHF 36,288 annually (2025) if you don't have a pension fund—significantly more than the CHF 7,258 limit for salaried workers
No unemployment insurance: If business slows down, you won't receive unemployment benefits

Accounting Requirements

The paperwork is refreshingly simple:

Under CHF 500,000 revenue: Summary accounts acceptable (a well-organized spreadsheet works)
Above CHF 500,000 revenue: Full accounts required
Document retention: 10 years for all business records

Self-Employment

The Reality of Being Self-Employed

Understanding both the advantages and disadvantages before you commit.

Key Advantages

What makes self-employment attractive for many entrepreneurs starting out.

Speed and simplicity: Start invoicing clients today
Lower costs: Minimal setup fees and no mandatory pension
Tax flexibility: Direct expense deductions and higher Pillar 3a limits
Full control: Every decision is yours, no shareholders or board meetings
Easy exit: Simply stop operating, no liquidation process needed

Key Disadvantages

The challenges and risks you need to be aware of as self-employed.

Unlimited liability: Personal assets at risk if business debts pile up
Credibility concerns: Some large clients prefer registered companies
Growth limitations: Difficult to raise capital or attract investors
No social safety net: No unemployment insurance during slow periods
Higher tax rates at scale: Progressive rates can exceed corporate rates above CHF 150k

Perfect for Magic Heidi

Our platform is built specifically for Swiss self-employed professionals.

Track income and expenses on your phone instantly
Generate compliant QR invoices in 30 seconds
Automatically categorize transactions with AI
Simple accounting that keeps you tax-ready all year

SARL Structure

Understanding SARL (Société à Responsabilité Limitée)

A SARL (called GmbH in German-speaking cantons) is a separate legal entity from you personally. It can own assets, sign contracts, and incur debts independently.

Setup Requirements

What You Need to Establish a SARL

Creating a SARL involves several mandatory steps and costs.

Capital requirement: CHF 20,000 minimum, fully paid into blocked account
Notary authentication: Articles of association must be notarized
Commercial register: Company registration (approximately CHF 600)
Formation package: Legal and administrative setup (CHF 500-1,500)
Total startup cost: CHF 22,500-25,000 including locked capital
Timeline: Typically 5-10 business days from notarization to registration

SARL Tax Treatment

SARL taxation is more complex but potentially more favorable at higher income levels:

Corporate Level:

Federal corporate tax: 8.5% on net profits (~7.83% effective rate)
Cantonal/communal taxes: 3.5-16.5% (varies significantly)
Combined effective rate: 12-25% depending on canton
Swiss average: ~14.4%

Examples by Canton:

Zug: 11.85% (lowest)
Lucerne: 12.13%
Zurich: 14.6%
Geneva: 14%
Bern: 20.54% (higher)

Personal Level (when extracting profits):

Salary: Taxed as personal income (with AHV deductions)
Dividends: Taxed at reduced rate (typically 50-70% of normal rate)

The double taxation reality: The company pays tax on profits, then you pay tax on dividends. However, with strategic salary/dividend mix, total tax burden can be lower than self-employment at higher income levels.

As a SARL director/employee, you're treated differently:

Mandatory LPP (pension): Required once salary exceeds CHF 22,680 (2025)
Pillar 3a limit: Only CHF 7,258/year (lower than self-employed)
AHV contributions: Split employer/employee portions
Unemployment insurance: You contribute, but directors typically can't claim benefits

Accounting Requirements

The administrative burden increases significantly:

Double-entry bookkeeping: Required by Swiss Code of Obligations
Annual financial statements: Balance sheet, income statement, notes
Audit requirements: Can opt-out if under 10 employees and all shareholders approve
VAT filing: Monthly, quarterly, or annually (depending on turnover)
Professional support: Most SARLs use accountants or fiduciaries

From January 2025, SARLs with turnover under CHF 5,005,000 can choose annual VAT filing instead of quarterly—a welcome simplification.

SARL Analysis

The Reality of Operating a SARL

Understanding the benefits and challenges of the corporate structure.

Major Advantages

Why established businesses and growth-oriented entrepreneurs choose SARL.

Limited liability: Personal assets are protected from business debts
Credibility: Banks, investors, and large clients take SARLs seriously
Tax optimization: Strategic salary/dividend combinations reduce tax burden at CHF 150k+
Growth ready: Easier to attract investors, bring on partners, or sell
Better banking: Getting a mortgage is easier as a salaried SARL director
Succession planning: Shares can be transferred or inherited cleanly

Key Disadvantages

The costs and complexity that come with corporate structure.

Higher setup costs: CHF 22,500-25,000 upfront is substantial
Ongoing complexity: Monthly accounting, annual statements, corporate compliance
Double taxation: Company profits taxed, then dividends taxed again
Less flexibility: Can't just 'stop' - liquidation requires formal procedures
Reduced Pillar 3a: Lower deduction limits mean less tax-advantaged savings
No unemployment safety: Directors can't typically claim benefits despite paying

Magic Heidi Scales With You

When you incorporate, our platform adapts seamlessly to SARL requirements.

Double-entry accounting built-in when you need it
Comprehensive financial statements (balance sheet, P&L)
Multi-user access for accountant collaboration
Your historical data transfers automatically - no switching tools

Cost Analysis

The Real Cost Comparison: Three-Year Analysis

Let's compare total costs over three years at different revenue levels to see which structure makes financial sense.

Scenario 1: CHF 60,000 Annual Revenue

Self-Employed:

Year 1: CHF 100 (setup) + CHF 2,400 (AHV) + CHF 12,000 (income tax) = CHF 14,500
Years 2-3: CHF 14,400/year
3-year total: CHF 43,300

SARL:

Year 1: CHF 23,000 (setup + capital) + CHF 4,000 (accounting) + CHF 1,500 (AHV) + CHF 3,600 (corp tax) + CHF 6,000 (personal tax) = CHF 38,100
Years 2-3: CHF 15,100/year
3-year total: CHF 68,300

Verdict: Self-employed saves CHF 25,000 over three years at this revenue level.

Scenario 2: CHF 120,000 Annual Revenue

Self-Employed:

Year 1: CHF 100 + CHF 8,000 + CHF 1,200 (VAT admin) + CHF 28,000 (income tax) = CHF 37,300
Years 2-3: CHF 37,200/year
3-year total: CHF 111,700

SARL:

Year 1: CHF 23,000 + CHF 5,000 (accounting) + CHF 3,000 (AHV) + CHF 8,400 (corp tax) + CHF 15,000 (personal tax) = CHF 54,400
Years 2-3: CHF 31,400/year
3-year total: CHF 117,200

Verdict: Roughly even, with self-employed slightly ahead by CHF 5,500.

Scenario 3: CHF 200,000 Annual Revenue

Self-Employed:

Year 1: CHF 100 + CHF 16,000 (AHV) + CHF 2,000 (VAT admin) + CHF 60,000 (income tax) = CHF 78,100
Years 2-3: CHF 78,000/year
3-year total: CHF 234,100

SARL:

Year 1: CHF 23,000 + CHF 6,000 (accounting) + CHF 5,000 (AHV) + CHF 14,000 (corp tax) + CHF 28,000 (personal tax) = CHF 76,000
Years 2-3: CHF 53,000/year
3-year total: CHF 182,000

Verdict: SARL saves CHF 52,100 over three years—a significant advantage.

Note: These are simplified examples. Actual figures vary by canton, expenses, and tax optimization strategies. Always consult a tax professional.

Decision Guide

When to Choose Self-Employment

Self-employment makes sense in specific situations. Here's when it's the right choice.

Starting Out

Limited revenue under CHF 80,000 and testing the market.

Low Risk Business

Consulting, freelance writing, design with minimal liability.

Maximum Flexibility

Value simplicity over structure and formal processes.

Side Business

Running alongside employment to test viability.

Simple Admin

Administrative simplicity is a priority for you.

Few Personal Assets

Limited personal wealth to protect from liability.

Real Example: Marie, Freelance Graphic Designer

Marie left her agency job to freelance. First-year projected revenue: CHF 75,000.

Her reasoning:

Low liability risk (design work, professional insurance covers most concerns)
Wants to test if full-time freelancing suits her lifestyle
Prefers managing her own simple accounting
Plans to reassess at CHF 100,000 revenue

Her choice:

Self-employed. She's been operating for 18 months, revenue is now CHF 95,000, and she's planning to incorporate as a SARL this year.

Decision Guide

When to Choose SARL

SARL makes sense when your business reaches certain thresholds or has specific needs.

Higher Revenue

Earning CHF 150,000+ where tax optimization outweighs setup costs.

Liability Risks

Physical products, professional services, or employees increase risk.

Seeking Investment

Need to bring on partners or attract outside funding.

Credibility Matters

B2B, government contracts, or large clients require corporate structure.

Hiring Employees

Corporate structure facilitates proper employment relationships.

Asset Protection

Significant personal wealth that needs to be shielded.

Building to Sell

Plan to transfer or sell the business eventually.

Real Example: Thomas, IT Consultant

Thomas had been self-employed for three years, earning CHF 180,000 annually. He regularly worked with large enterprises.

His pain points:

Procurement departments preferred working with registered companies
Personal liability worried him as project complexity increased
Tax burden felt disproportionate to what corporations paid
Wanted to bring on a junior developer but hesitated without structure

His choice:

Converted to SARL. First year was more expensive, but by year two, tax savings exceeded the setup costs. He hired his first employee six months after incorporation.

Critical Milestone

The CHF 100,000 Decision Point

If there's a natural inflection point, it's CHF 100,000 in annual revenue. At this threshold, two mandatory changes occur that make it the logical moment to evaluate incorporation.

What Changes at CHF 100,000?

Two mandatory requirements kick in:

Commercial register entry becomes required
VAT registration becomes mandatory

You're already increasing administrative complexity. This is the logical moment to evaluate whether incorporating makes strategic sense—even if pure cost analysis doesn't yet favor SARL.

Ask Yourself:

Will I exceed CHF 150,000 within 18 months?
Do I have liability concerns?
Would corporate structure help me win larger clients?
Am I planning to hire?

If you answer "yes" to two or more, seriously consider SARL.

Transitioning

From Self-Employed to SARL

The good news: you can start simple and evolve. Here's how the transition works.

Common Triggers

When to Consider Switching

These situations often signal it's time to incorporate.

Revenue consistently exceeds CHF 120,000-150,000
You're hiring your first employee
A major client requires working with a registered company
You're bringing on a business partner
Personal asset protection becomes important (bought house, started family)
You're seeking outside investment

The Process

How the Transition Works

Step-by-step guide to converting your business structure.

Evaluate timing: Most transitions happen at year-end for cleaner accounting
Establish the SARL: Follow standard formation process (capital, notary, registration)
Transfer assets and liabilities: SARL acquires your business assets at book value
Close self-employment: Deregister from AVS as self-employed
Start operating as SARL: You become an employee/director
Timeline: 2-3 months for complete transition
Costs: CHF 5,000-11,000 total plus CHF 20,000 capital requirement

Tax Implications

Under Swiss law, the transfer can be fiscally neutral if conditions are met:

Both entities remain subject to Swiss taxation
Last balance sheet values are maintained
Actual business operations are transferred (not just shell assets)
Shares remain blocked for five years

This means you won't trigger capital gains tax on the transition itself—a significant advantage.

Real Example: Sophie, Café Owner

Sophie started her specialty coffee business self-employed, focusing on wholesale. When a prime retail location became available, she needed to transition.

Why she switched:

Taking on a commercial lease created significant liability
Hiring baristas required formal employment structure
Bank required corporate structure for equipment financing

She incorporated three months before signing the lease. The transition cost CHF 7,500 (excluding capital), but it enabled CHF 85,000 in equipment financing and protected her personal assets.

Canton-by-Canton Considerations

Switzerland's federalist structure means tax implications vary significantly by location. If you're location-flexible, canton choice can save 5-8% annually in taxes.

🇨🇭 Swiss Cantons

📊 Tax Rates

💰 Cost Savings

🎯 Strategic Planning

🏆

Best for Self-Employed

Zug, Schwyz, Nidwalden offer lower personal tax rates

🏢

Best for SARL

Zug (11.85%), Lucerne (12.13%), Appenzell Innerrhoden (12.16%)

⚠️

Highest Corporate Tax

Bern (20.54%), Basel-Stadt (20.5%), Geneva (14%)

💡

Strategy Tip

CHF 5,000-15,000/year potential savings with smart canton selection

FAQ

Frequently Asked Questions

Can foreigners choose either structure in Switzerland?

Foreigners not residing in Switzerland cannot directly register as self-employed sole traders. However, foreign residents with valid permits (B, C) can operate as self-employed. For SARL, at least one director must be a Swiss resident.

What happens to unemployment insurance?

Self-employed individuals don't pay into or receive unemployment benefits. SARL directors pay unemployment insurance but typically cannot claim benefits unless they permanently leave the company. This is a significant consideration if your business income is variable.

Can I have partners as self-employed?

No. Sole proprietorship means one owner. If you want partners, you need a legal entity like SARL, or consider a partnership structure (Kollektivgesellschaft), though this is rare due to unlimited liability for all partners.

How quickly can I start invoicing?

Self-employed: Immediately. You can send your first invoice today. SARL: 5-10 business days after starting the formation process (notarization, registration, bank account setup).

What about credibility with banks for mortgages?

Banks significantly prefer salaried SARL directors over self-employed individuals when approving mortgages. As a SARL director with regular salary, you're treated like any employee. Self-employed applicants face higher scrutiny and often need 3+ years of stable income documentation.

Can I deduct the same expenses in both structures?

Generally yes, but the mechanism differs. Self-employed individuals deduct business expenses directly from personal income. SARLs deduct expenses at the corporate level, reducing corporate tax, then directors may have separate personal deductions. In practice, legitimate business expenses are deductible in both structures.

What if I'm running a side business while employed?

Self-employment is ideal for side businesses. You maintain your employment benefits while building the business. Just ensure your employment contract doesn't prohibit it, and you comply with AVS registration once earning over CHF 2,300.

How do I know when I'm earning 'enough' to justify SARL?

There's no magic number, but CHF 150,000+ annual revenue is where tax savings typically outweigh SARL costs. However, strategic factors (liability, credibility, growth plans) may justify earlier incorporation.

Decision Framework

5 Questions to Ask

Work through these questions to clarify your choice and make the right decision for your business.

1. What's my realistic revenue projection for the next 2-3 years?

Under CHF 80,000 → Self-employed likely better
CHF 80,000-150,000 → Evaluate strategic factors
Over CHF 150,000 → SARL likely better

2. What's my liability exposure?

Low risk business (pure services, digital products) → Self-employed acceptable
Higher risk (physical products, professional advice, employees) → SARL safer

3. How important is external credibility?

Freelancing for small businesses, individuals → Self-employed fine
Working with corporations, seeking investment → SARL helps significantly

4. What are my growth plans?

Solo operation, steady state → Self-employed works
Hiring, scaling, seeking partners/investors → SARL necessary

5. What's my personal asset situation?

Limited personal assets → Self-employed risk acceptable
Significant assets (home, savings, investments) → SARL protection valuable

If you're still unsure, start self-employed. You can always transition to SARL later when the benefits clearly outweigh the costs.

What's Changed for 2025/2026

If you read older guides, here's what's been updated. These changes make accurate information crucial—outdated advice can cost you money.

🆕 2025 Updates

📅 2026 Rules

✅ Verified

🇨🇭 Swiss Law

💰

AVS Minimum

Now CHF 530/year (updated 2025)

🏦

LPP Threshold

CHF 22,680 salary threshold for mandatory pension (2025)

💼

Pillar 3a Limits

CHF 36,288 without pension fund, CHF 7,258 with (2025)

📊

VAT Simplification

SARLs under CHF 5M turnover can choose annual filing (Jan 2025)

Taking Action

Your Next Steps

You now have the information you need. Here's how to move forward based on your choice.

If Choosing Self-Employment

1. Register with cantonal AVS office 2. Set up simple accounting 3. Create your first invoice 4. Track expenses from day one 5. Plan for quarterly tax payments

If Choosing SARL

1. Consult with fiduciary or lawyer 2. Prepare CHF 20,000 capital 3. Draft articles of association 4. Complete notarization and registration 5. Set up double-entry accounting

If Still Undecided

1. Start self-employed (lowest barrier) 2. Set revenue milestones for review 3. Track liability exposure as business evolves 4. Reassess at year-end 5. Transition to SARL when benefits exceed costs

Magic Heidi

Simplify Your Accounting, Whatever You Choose

Whether you're starting as self-employed or incorporating as a SARL, you need accounting that works for Swiss entrepreneurs. Magic Heidi adapts to your structure seamlessly.

For Every Structure

Magic Heidi Adapts to Your Business

Built specifically for Swiss businesses, with Swiss VAT, Swiss regulations, and Swiss simplicity in mind.

For Self-Employed

Everything you need to stay organized and tax-ready without complexity.

Simple expense tracking with AI-powered categorization
Professional QR invoicing in 30 seconds
Automatic bank transaction imports
VAT management built-in for CHF 100k+ revenue

For SARL

When you incorporate, our platform scales with full corporate accounting features.

Double-entry bookkeeping automatically enabled
Complete financial statements (balance sheet, P&L)
Multi-user access for accountant collaboration
Your historical data transfers seamlessly - no switching tools

Built for Switzerland

Every feature designed specifically for Swiss tax law and business requirements.

Swiss QR invoice compliance built-in
Canton-specific tax rules and rates
Multi-language support (EN, DE, FR)
30-day free trial - no credit card required

Start Your Free 30-Day Trial

Whether you're self-employed or running a SARL, Magic Heidi adapts to your needs. No credit card required. Built specifically for Swiss entrepreneurs.

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Disclaimer: This article is for informational purposes only and does not constitute legal, tax, or financial advice. Business structures, tax rates, and regulations vary by canton and individual circumstances. Always consult with licensed tax advisors, fiduciaries, or legal professionals before making business structure decisions. Information is current as of January 2026 but subject to change.