Choosing Your Swiss Business Structure: A Complete Guide

This guide helps you understand each option, identify critical decision points, and plan your structure as your business evolves.

Why Your Business Structure Decision Matters

Your business structure determines:

• Personal liability exposure: Whether your private assets protect your business debts
• Tax burden: From progressive income tax to corporate taxation and double taxation
• Capital requirements: From zero to CHF 20,000 or more
• Administrative complexity: Simple accounting versus comprehensive reporting
• Growth flexibility: Your ability to bring on partners or raise capital

With approximately 25% of Switzerland's workforce now freelancing, understanding these structures isn't optional—it's essential for protecting yourself and maximizing opportunities.

Understanding Tax Implications

Sole Proprietorship Taxation

As a sole proprietor, you and your business are one tax entity:

• All business income taxed as personal income
• Progressive tax rates apply (varies by canton and municipality)
• Business expenses deduct from taxable income
• No double taxation—profits taxed once

Example: If you earn CHF 120,000 from freelancing in Zurich, this combines with any other personal income and gets taxed at your marginal rate—potentially 20-30% or higher depending on total income and deductions.

GmbH/AG Taxation

Limited companies face multi-level taxation:

Corporate level:

• 8.5% federal corporate income tax
• 3-13% cantonal/municipal tax
• Combined effective rate: 11.85% (Zug) to 21.6% (Basel)

Shareholder level:

• Dividends taxed as personal income
• Salaries taxed as employment income
• Social security contributions apply

The advantage: You control timing of personal income. Pay yourself a modest salary plus dividends, potentially reducing overall tax burden compared to high-earning sole proprietors.

The cost: Double taxation reduces profit available for personal use.

For Sole Proprietors

Essential steps:

1. AHV registration (social security)
   • Apply to your canton's compensation office
   • Demonstrate legitimate self-employment (multiple clients)
   • Receive self-employment decision (2-4 weeks)
2. Commercial register (if over CHF 100,000)
   • Submit registration at your canton's register office
   • Cost: CHF 150-600 depending on canton
   • Requires proof of AHV registration
3. VAT registration (if over CHF 100,000)
   • Register with Federal Tax Administration
   • Choose accounting method (effective or flat rate)
   • Begin collecting VAT on invoices

Timeline: 2-4 weeks if documents ready.

Documents needed:

• Valid ID or residence permit
• Proof of address
• Business concept description
• Client contracts (demonstrate multiple clients)
• Professional qualifications (if regulated profession)

For GmbH Establishment

Essential steps:

1. Articles of association
   • Draft founding documents (notary or lawyer recommended)
   • Define share structure and management
2. Capital deposit
   • Open bank account and deposit CHF 20,000
   • Bank confirms capital in blocked account
3. Notarization
   • All founders sign before notary public
   • Notary authenticates articles of association
4. Commercial register
   • Submit application with all documents
   • Pay registration fee (CHF 600-1,200)
5. Tax and VAT registration
   • Register for corporate tax
   • Register for VAT if applicable
   • Setup payroll if taking salary

Timeline: 4-8 weeks from start to operational business.

Total costs: CHF 22,000-25,000 including capital, fees, and professional services.

Work Permits and International Considerations

EU/EFTA Citizens

Self-employment access is relatively straightforward:

• Apply for B Permit (5-year validity)
• Demonstrate financial viability (business plan, contracts, CHF 30,000+ annual income potential)
• Must work for at least 3 different clients to prove genuine self-employment
• Permit usually approved within 2-3 months

Third-Country Nationals

Self-employment permits are extremely rare:

• Quota restrictions apply (very limited)
• Preference given to high-value businesses creating Swiss jobs
• Alternative: Establish GmbH or AG (more favorable permit consideration)
• Requires demonstrating significant economic benefit to Switzerland

Practical tip: If you're from outside EU/EFTA and want to freelance in Switzerland, establishing a limited company significantly improves permit prospects.

Managing Multiple Businesses or Dual Activity

Swiss law permits holding multiple jobs simultaneously—employed and self-employed.

Key Considerations for Dual Activity

Tax obligations:

• All income sources must be declared on tax return
• Employment and self-employment reported in separate sections
• Failure to declare all income risks retroactive taxes, penalties, and interest

Social insurance:

• AHV/IV/EO contributions calculated separately per income source
• Pension fund (BVG) contributions from employment
• Self-employed must make full AHV contributions
• Unemployment insurance typically only from employment

Employer relationship:

• Must not compete directly with your employer
• Self-employment should not compromise job performance or cause exhaustion
• Obtain written employer approval (especially if in same field)
• Some employment contracts prohibit side businesses

Managing Multiple Businesses

You can operate multiple sole proprietorships or combine structures:

Examples:

• Consulting sole proprietorship + separate product business GmbH
• Two unrelated freelance activities under separate sole proprietorships
• GmbH for main business + side projects as sole proprietor

Why separate:

• Liability isolation (protect profitable business from risky venture)
• Tax optimization (different structures may suit different activities)
• Clearer accounting and business evaluation
• Easier eventual sale of one business

Administrative reality: Each business requires separate registration, accounting, and tax filing. Tools like Magic Heidi help manage multi-business accounting from one platform.

Recommended Actions

If you're starting out:

1. Register with AHV as self-employed
2. Setup simple accounting system (Magic Heidi automates this)
3. Secure 2-3 initial clients
4. Create compliant invoices from day one

If you're approaching CHF 100,000 revenue:

1. Decide: stay sole proprietor or transition to GmbH
2. Register with commercial register if staying sole proprietor
3. Setup VAT accounting (Magic Heidi calculates automatically)
4. Begin planning GmbH transition if appropriate

If you're ready for GmbH:

1. Consult with fiduciary or lawyer on structure
2. Prepare articles of association
3. Arrange CHF 20,000 capital
4. Schedule notary appointment
5. Setup comprehensive accounting system

Whatever structure you choose, Magic Heidi grows with you. Our Swiss-made accounting platform handles invoicing, expenses, VAT, and bank integration—whether you're a new sole proprietor or an established GmbH managing multiple businesses.

This guide provides general information about Swiss business structures. Tax laws and requirements vary by canton and individual circumstances. Consult with qualified tax advisors and legal professionals for personalized advice.