Incorporation Guide 2026

From Freelancer to GmbH: When and How to Incorporate in Switzerland

Should you incorporate your freelance business? Complete guide to costs, tax strategy, and the real decision criteria for Swiss freelancers in 2026.

You've built a successful freelance business in Switzerland. Clients are steady, revenue is growing, and you're starting to wonder: should I incorporate as a GmbH?

It's the right question—but most guides jump straight to "how" without helping you answer "if" and "when."

Here's the reality: incorporating costs CHF 23,000-26,000 upfront plus CHF 5,000-15,000 annually in ongoing compliance. For some freelancers, it's a strategic investment that pays for itself within 18 months. For others, it's an expensive structure they don't yet need.

This guide helps you make the right decision for your business, then shows you exactly how to execute if incorporation makes sense.

Decision Framework

Should You Incorporate? The Real Decision Criteria

The CHF 100,000 revenue threshold triggers mandatory Commercial Register entry for sole proprietors—but that's a legal requirement, not a strategic signal.

Liability Exposure Growing

You work with clients where errors could cost CHF 50,000+. Your contracts involve data security, financial advice, or legal compliance. Personal assets need protection from business risks.

Professional Positioning Matters

Larger clients require corporate vendors (common in finance, pharma, enterprise). You're losing opportunities because freelancers seem 'less stable'. International clients prefer incorporated entities.

Tax Optimization Significant

Annual profit exceeds CHF 150,000 after all business expenses. You have other income sources taxed as personal income. Strategic salary-dividend mix could save CHF 10,000+ annually.

Growth Plans Concrete

You're ready to hire employees within 12 months. Multiple partners or investors want equity stakes. You need business loans or lines of credit.

Revenue Stable & Recurring

70%+ of income comes from repeat clients. You can project 24+ months of financial runway. Monthly revenue variance is under 30%.

When NOT to Incorporate

Annual revenue under CHF 120,000. You work primarily with one client. Business model is still experimental. You plan to close or pivot within 2 years.

The 90K-130K Gray Zone

Revenue in this range requires careful analysis. Run the numbers—calculate potential tax savings against guaranteed compliance costs before deciding.

Consider incorporation when you match 2+ of the criteria above.

True Costs

The True Cost: Beyond the CHF 20,000 Everyone Mentions

Most guides focus on the CHF 20,000 minimum share capital. That's misleading—it's your money, held in the company. The actual costs come from formation and ongoing compliance.

One-Time Formation Costs (2026)

CHF 22,900-28,200 Total First Year

Including capital + all formation costs

Minimum Capital: CHF 20,000 (your money, stays in business account)
Notary Fees: CHF 1,000-2,000 (required for articles of association)
Commercial Register: CHF 600-1,200 (federal registration fee)
Legal Address (annual): CHF 500-2,000 (required Swiss domicile)
Bank Account Setup: CHF 300-1,000 (for blocked capital account)
Professional Support: CHF 500-2,000 (articles drafting, VAT setup, advice)

Annual Ongoing Costs (Reality Check)

CHF 15,000-20,000 Annual Operating Costs

For a CHF 100,000 annual salary scenario

Bookkeeping & Tax Compliance: CHF 5,000-15,000 (required by law)
Social Security (AHV/IV/EO): 10.6% of salary (mandatory when employed)
Pension Contributions (BVG): 7-18% of salary (required above CHF 22,680 salary)
Unemployment Insurance (ALV): 2.2% of salary (up to CHF 148,200)
Commercial Registry Updates: CHF 600-1,200 each (for any structural changes)
Annual Governance: CHF 2,000-5,000 (shareholder meetings, resolutions)

Timeline: 2-3 weeks from documentation to active GmbH status using digital platforms. Add 2-4 weeks if you handle everything manually with traditional notaries.

Structure Comparison

GmbH vs Sole Proprietorship vs AG

The complete comparison for Swiss freelancers

Factor	Sole Proprietorship	GmbH	AG
Setup Cost	CHF 0	CHF 3K-6K + CHF 20K capital	CHF 5K-10K + CHF 50K capital
Minimum Capital	None	CHF 20,000 (fully paid)	CHF 100,000 (50% paid min)
Liability	Unlimited personal	✓ Limited to company assets	✓ Limited to company assets
Privacy	Personal name public	Shareholders public	Shareholders anonymous
Tax Structure	Personal income tax only	Corporate + dividend tax	Corporate + dividend tax
Annual Compliance	CHF 1,000-3,000	CHF 5,000-15,000	CHF 8,000-20,000
Formation Time	Immediate	2-3 weeks	3-4 weeks
Best For	Early stage, under CHF 120K	✓ Established SMEs, CHF 120-500K	Scale-ups, CHF 500K+

Tax Optimization

Understanding the Double Taxation Reality

Everyone warns about double taxation with a GmbH. Here's what it actually means—and how to minimize it.

How Double Taxation Works

Your GmbH pays 12-25% corporate tax on profits. You pay 35% withholding tax on dividends when distributing profits. You claim back the withholding tax on your personal return. But you still pay personal income tax on those dividends.

The Suboptimal Approach (All Dividend)

For CHF 180,000 profit: Corporate tax CHF 25,200 + dividend distribution taxed again at personal rates. No deductible pension contributions. Estimated total tax burden: CHF 55,000-70,000 (30-39%).

The Salary-Dividend Optimization Strategy

For a GmbH generating CHF 180,000 annual profit:

Optimized approach (strategic salary):

Pay yourself CHF 120,000 salary (market rate for your role)
Remaining CHF 60,000 as profit/dividend
Salary is tax-deductible for the company
Mandatory pension contributions (CHF 12,000-15,000) further reduce taxable profit
Build tax-advantaged retirement savings
Estimated total tax burden: CHF 45,000-55,000 (25-31%)

Tax savings: CHF 10,000-15,000 annually

The sweet spot formula:

Set salary at 60-70% of total drawings for most scenarios
Keep salary within "market reasonable" for your industry and role
Time dividend distributions strategically (often year-end)
Maximize pension contributions within legal limits

Canton Comparison

Canton-by-Canton Tax Rates: Where You Incorporate Matters

Combined effective corporate tax rates (federal + cantonal, 2026)

Canton	Effective Tax Rate	Annual Tax on CHF 100K Profit
Zug	11.85%	CHF 11,850
Nidwalden	12.20%	CHF 12,200
Lucerne	12.30%	CHF 12,300
Appenzell IR	12.40%	CHF 12,400
Uri	12.60%	CHF 12,600
Obwalden	12.70%	CHF 12,700
Schwyz	14.60%	CHF 14,600
Swiss Average	14.40%	CHF 14,400
Zürich	14.60%	CHF 14,600
Basel-Stadt	13.20%	CHF 13,200
Geneva	14.00%	CHF 14,000
Vaud	14.00%	CHF 14,000
Bern	15.60%	CHF 15,600

The 4% difference between Zug and Bern means CHF 3,800 annually on CHF 100,000 profit. Over 10 years: CHF 38,000 in tax savings.

But don't incorporate in Zug just for taxes. Cantonal authorities examine economic substance—you need genuine business operations (office, meetings, staff) in your registered canton. "Letterbox entities" lose preferential treatment and credibility.

Formation Process

The Step-by-Step Formation Process

Once you've decided to incorporate, here's the exact process

Phase 1 - Pre-Formation (2-4 weeks before)

Business Structure & Financial Preparation

Week 1-4: Critical decisions and setup

Choose company name (check availability in Commercial Register)
Define shareholder structure (single owner or partners?)
Draft articles of association (work with fiduciary or lawyer)
Open blocked capital deposit account at Swiss bank
Deposit CHF 20,000 minimum capital
Gather shareholder identification documents
Choose registered address (office or legal domicile service)

Phase 2 - Formation (1-2 weeks)

Notarization & Registration

Official company formation process

Step 1: All shareholders attend notary appointment (or via power of attorney)
Notary authenticates articles of association - Cost: CHF 1,000-2,000
Step 2: Notary submits application to Commercial Register
Register reviews and approves (typically 3-5 business days) - Cost: CHF 600-1,200
Step 3: After register entry, bank releases blocked capital to company account
Digital option: Several platforms now offer fully remote notarization via video

Phase 3 - Post-Formation Setup (First 30 days)

Registrations & Operations

Getting your GmbH operational

Register for VAT if turnover exceeds CHF 100,000 (or voluntary registration)
Register with cantonal tax authority for corporate tax
Set up payroll tax withholding if paying yourself salary
Register with AHV compensation office for social security
Set up BVG pension scheme with provider
Open full business account (no longer blocked)
Update payment processor accounts (Stripe, PayPal, etc.)
Arrange bookkeeping system or accountant

Client Transition

Managing Client Contracts During Transition

Your existing clients need to continue working with you seamlessly—but under a new legal entity.

30 Days Before Formation: Notify Key Clients

Frame it positively: 'I'm incorporating as [Company Name] GmbH to better serve growing client needs. This strengthens our partnership—nothing about our working relationship changes except the entity name on invoices.'

Option 1: Novation Agreement (Cleanest)

Draft brief novation transferring contract from you personally to GmbH. Original contract terms remain identical. Both parties sign to acknowledge entity change. Keeps everything documented and clear.

Option 2: Simple Assignment (Pragmatic)

Email notification that contract is assigned to GmbH effective [date]. Note that all terms remain unchanged. Request confirmation email (creates paper trail). Works for most standard service agreements.

Option 3: Natural Renewal (Easiest)

Let current contracts complete under personal name. Issue new contracts/proposals under GmbH for next projects. Works when contracts are project-based or short-term.

Invoicing Transition

On formation date: Final invoice from sole proprietorship for work through [formation date]. First GmbH invoice for work from [formation date + 1 day]. Clear date separation prevents confusion.

Update Invoice Details

New company name and GmbH designation. Same VAT number transfers (notify tax authority). New bank account for payments. Consider 'Formerly [Your Personal Name]' note for first 2-3 invoices.

Case Studies

Three Freelancers, Three Decisions

Real scenarios from Swiss freelancers making the incorporation decision

Case 1 - Sarah, IT Consultant (CHF 220,000 revenue)

Decision: Incorporated as GmbH

Web development and cloud architecture consulting with 8 regular enterprise clients

Situation: Contracts up to CHF 150,000, working from home office in Zürich, concerned about liability exposure from security work
Formation cost: CHF 24,500 (including capital)
Annual compliance: CHF 9,500
Salary set at CHF 130,000, CHF 40,000 dividend
Tax savings vs sole proprietor: CHF 12,000 annually
Result: 'The liability protection gives me peace of mind on large contracts. Enterprise clients take me more seriously. The incorporation paid for itself in 18 months.'

Case 2 - Marcus, Marketing Consultant (CHF 95,000 revenue)

Decision: Stayed as Sole Proprietor

Brand strategy and content marketing with 3 retainer clients

Situation: 2-3 project clients monthly, working from coworking space in Basel, revenue growing 15% annually but still under CHF 100K
Annual profit only CHF 65,000 after expenses
Incorporation costs would consume 40% of first-year profit
No significant liability concerns in marketing work
Clients don't require corporate status
Plan: 'I'll revisit when revenue consistently exceeds CHF 120,000 for 6+ months. For now, the administrative simplicity and cost savings make sense.'

Case 3 - Linda, Finance Advisor (CHF 180,000 revenue)

Decision: Incorporated as GmbH Immediately

Investment advisory and financial planning for 12 high-net-worth private clients

Critical factors: Financial advisory carries significant liability risk. Clients expected corporate structure for credibility. Already past CHF 100,000 mandatory registration point.
Set salary at CHF 110,000 (market rate for Geneva)
Remaining CHF 30,000 as dividend after corporate tax
Structured pension contributions (second pillar)
Tax optimization saved CHF 8,500 vs sole proprietor
Result: 'I should have incorporated 6 months earlier. The credibility boost with HNW clients was immediate. Several prospects who were hesitant signed on after seeing the GmbH structure.'

Tax-Free Transfer: Converting Existing Business Assets

When you incorporate, you're technically transferring assets from yourself (sole proprietor) to a new legal entity (your GmbH). This can trigger taxes—unless you structure it correctly.

The Hidden Reserves Transfer (Art. 19 DBG)

Swiss law allows tax-neutral transfer of business assets if you meet these conditions:

Requirements:

Assets transferred at tax book value (not market value)
Business continues in essentially the same form
You commit to 5-year lock-up period (no immediate sale of shares)
Assets remain in Switzerland

What you can transfer tax-free:

Business equipment and furniture
Client lists and contracts
Software licenses
Domain names and websites
Existing receivables
Work-in-progress

The benefit: Avoid capital gains tax on asset appreciation. If your client base and business goodwill have grown significantly, this saves thousands.

VAT Transfer Notification (Art. 38 VAT Act)

For VAT-registered freelancers:

Notify Federal Tax Administration of entity change
Transfer VAT registration from personal to GmbH
Assets transfer without VAT charge (using notification procedure)
Maintain same VAT number or get new one assigned

Timing: File notification 30 days before intended transfer date.

Ongoing Compliance

Your First-Year Calendar: What Actually Happens

Many freelancers underestimate ongoing GmbH obligations. Here's the complete first-year timeline.

Month 1-3 - Initial Setup Period

Payroll setup, pension enrollment, first salary payment, first VAT return (due 60 days after quarter-end), accounting system setup, categorize expenses correctly.

Month 4-6 - Operational Phase

Board meeting minutes for major business decisions, contract updates using GmbH entity, quarterly VAT filing, AHV quarterly payments due.

Month 7-9 - Mid-Year Review

Tax planning review, check salary vs dividend optimization, expense documentation verification, banking review (maintain clear separation), compliance check for all registrations.

Month 10-12 - Year-End Preparation

Annual financial statements (balance sheet, income statement, notes), shareholder meeting to approve statements, dividend declaration, corporate tax return due 3-4 months after year-end, Commercial Register updates.

Audit requirement: GmbHs under CHF 20 million revenue, 50 employees, and CHF 40 million balance sheet total can opt out of statutory audit—most freelancer-originated GmbHs qualify.

Common Mistakes

Common Mistakes (And How to Avoid Them)

Learn from others' errors before making your incorporation decision

Mistake 1 - Incorporating Too Early

Scenario: CHF 85,000 revenue, unstable income, one main client

Why it fails & better approach

Why it fails: Formation costs consume 30% of profit. One-client dependency creates self-employment scrutiny. Revenue doesn't justify compliance burden.
Better approach: Build to CHF 120,000+ with multiple clients, then incorporate.

Mistake 2 - All-Dividend Distribution

Scenario: Take CHF 0 salary, distribute all profits as dividends

Tax optimization gone wrong

Why it fails: No pension contributions, higher total tax burden, raises red flags with tax authorities, no salary documentation for mortgage/credit.
Better approach: Pay market-rate salary (60-70% of drawings), distribute remainder as dividend.

Mistake 3 - Wrong Canton Choice

Scenario: Register in Zug for tax savings while living/working in Zürich

Economic substance matters

Why it fails: No economic substance in Zug. Zürich tax authorities may challenge tax residence. Clients see mismatch between location and registration.
Better approach: Register where you genuinely operate. Tax savings mean nothing if authorities challenge your structure.

Mistake 4 - Inadequate Bookkeeping

Scenario: DIY bookkeeping with Excel, missing documentation

Penny-wise, pound-foolish

Why it fails: Corporate accounting requirements exceed sole proprietor standards. Audit risk increases. Tax optimization opportunities missed. Year-end scramble costs more than proper bookkeeping.
Better approach: Invest in professional accounting from month one. Cost: CHF 500-1,000 monthly for most freelancer-sized GmbHs.

Mistake 5 - Ignoring Substance Requirements

Scenario: Minimal business activity, working mainly abroad, Swiss GmbH as vehicle

Letterbox entities face scrutiny

Why it fails: 'Letterbox entity' scrutiny from tax authorities. Potential loss of tax benefits. Banking relationship problems. Clients question legitimacy.
Better approach: Maintain genuine Swiss operations—office/address, board meetings in Switzerland, banking activity, local supplier relationships.

Professional Help

When to Get Professional Help (And What It Costs)

DIY is risky for GmbH formation. Swiss corporate law is precise—small errors create expensive problems later.

Essential Professional Services

Articles of association drafting (CHF 500-1,500), fiduciary/formation service (CHF 800-2,000), first-year accounting (CHF 6,000-12,000), tax planning consultation (CHF 1,000-2,500). Total: CHF 8,300-18,000.

Manageable DIY Tasks

Business name selection and availability check, bank account opening (after formation), client communication and contract transitions, basic expense documentation, invoice template updates.

Red Flags - Get Expert Help Immediately

You have business partners, transferring significant assets (real estate, IP, contracts over CHF 500K), non-Swiss resident or third-country national, revenue exceeds CHF 300K, existing employees or immediate hiring plans, regulated activities (finance, healthcare, legal).

Decision Framework

Making Your Decision: A Final Framework

Use this checklist to determine if GmbH incorporation makes sense for your business now

Incorporate as GmbH if you answer YES to 3+ questions

✓ Annual profit consistently above CHF 120,000 for 6+ months? ✓ 3+ clients (no single-client dependency)? ✓ Business liability claim could exceed CHF 50,000? ✓ Clients/partners require corporate structure? ✓ Planning to hire employees within 12 months? ✓ Can commit CHF 25,000 upfront + CHF 10,000 annually? ✓ Tax optimization saves CHF 8,000+ annually? ✓ Business model stable and proven? ✓ Plan to continue this business for 3+ years?

Stay as sole proprietor if

You answered YES to fewer than 3 questions above. Revenue is under CHF 100,000 with uncertain growth. You're testing a business idea or pivoting frequently. Administrative complexity feels overwhelming. Building financial runway before major investment.

Next Steps: From Decision to Incorporated

If you're ready to incorporate:

Run the numbers: Calculate your specific tax savings and break-even point
Choose your canton: Register where you genuinely operate your business
Select professional support: Get quotes from 2-3 fiduciary services
Prepare documentation: Business plan, shareholder structure, articles draft
Open capital deposit account: Allow 2-3 weeks for Swiss banking process
Schedule notary appointment: Coordinate with all shareholders
Plan client communication: Draft transition notifications 30 days ahead

If you're staying as sole proprietor:

Set a review trigger: Revenue milestone or time-based (6 months, 1 year)
Document why you're waiting (helps future decision)
Build relationships with fiduciary services for when you're ready
Monitor liability exposure as business grows
Keep gathering questions for eventual incorporation

Need Help Managing Your Freelance Business in Switzerland?

Magic Heidi helps hundreds of Swiss freelancers with invoicing, expenses, and tax-ready accounting—whether you're a sole proprietor today or planning to incorporate tomorrow.

Try Magic Heidi Free Learn more about our features

App Store Google Play Microsoft Store Web App

Last updated: February 2026 | Next review: August 2026

Disclaimer: This guide provides general information about Swiss business structures and is not legal, tax, or financial advice. Corporate law, tax regulations, and requirements vary by canton and individual circumstances. Consult with qualified Swiss professionals—fiduciary, tax advisor, lawyer—before making incorporation decisions.