Already operating as a sole proprietor? Here's how the transition works:
Consider converting when:
- Annual revenue exceeds CHF 100,000 consistently and VAT registration is required
- You're signing larger contracts with liability exposure exceeding your personal assets
- Clients request incorporation for vendor approval or professional requirements
- You're planning to hire employees or bring in partners in the near future
- Tax optimization would save more than the additional CHF 5-10k annual costs
- You want stronger retirement planning through second pillar BVG enrollment
The CHF 90,000–130,000 revenue band is a gray zone: at this level tax savings often barely cover the added compliance cost. Run the numbers, and only convert when at least two of the criteria above clearly apply.
You don't technically "convert"—you form a new GmbH and transfer operations:
- Form the Solo GmbH following the standard 2-3 week formation process
- Transfer assets and contracts from sole proprietorship to the new GmbH entity
- Close the sole proprietorship by de-registering from Commercial Register (if registered)
- Update clients and suppliers with new company details and banking information
- Transfer banking and accounts to the new corporate entity
Transferring assets can trigger tax events:
- Inventory and equipment: May need to be valued and transferred at fair market value
- Goodwill and intangibles: Could create taxable gains if business value exceeds book value
- Timing: Strategic timing can minimize tax impact by spreading across fiscal years
Work with a tax advisor to structure the transition tax-efficiently. Sometimes phasing the transition helps.
Hidden-reserves transfer (Art. 19 DBG): Transfer business assets at tax book value rather than market value, provided the activity continues in essentially the same form and you accept a 5-year share lock-up. This avoids capital-gains tax on accumulated goodwill, client base, and equipment appreciation — usually the largest one-time cost of converting.
VAT transfer notification (Art. 38 VAT Act): If you're VAT-registered, file the notification with the Federal Tax Administration at least 30 days before the transfer. Assets move without VAT being charged and your VAT history carries over to the GmbH.
Done right, the conversion typically unlocks CHF 10,000–15,000 in annual tax savings via salary–dividend optimization once the new entity is operating.
Expect 4-6 weeks total:
- 2-3 weeks for GmbH formation
- 1-2 weeks for asset transfer and account updates
- 1 week for final sole proprietorship closure
Costs include standard GmbH formation (CHF 10-15k) plus potential tax advisory fees (CHF 2-5k) for proper transition structure.
