Sole proprietorship or GmbH? The most important differences

Sole proprietorship or GmbH?

In Switzerland, founders are usually faced with the question: Sole proprietorship or GmbH? Both legal forms are popular - but differ greatly in terms of liability, costs, growth opportunities and reputation.

Comparison Table: Sole Proprietorship vs. GmbH

Criterion	Sole Proprietorship	GmbH
Formation costs	Low (CHF 0–200)	CHF 2,000–5,000 + share capital
Minimum capital	None	CHF 20,000 (fully paid in)
Liability	Unlimited — personal assets at risk	Limited to company assets
Commercial register	Required from CHF 100,000 annual revenue	Always — mandatory registration
Taxes	Income tax (personal)	Corporate profit tax + income tax on salary
Accounting	Simple income/expense statement possible	Double-entry bookkeeping required by law
Social insurance	AHV as self-employed	AHV as employee (salary) + AHV as employer
Market perception	Personal, sometimes seen as a hobby business	Professional, legal entity
Investors / equity	Barely possible	Shares transferable
Administrative effort	Low	Medium to high

What is a Sole Proprietorship in Switzerland?

A sole proprietorship belongs to a single natural person and is established in Switzerland simply by taking up self-employed activity. No notarisation is required - registration in the Swiss commercial register only becomes mandatory from CHF 100,000 in annual revenue.

Ideal for: Freelancers, consultants, and small trading or service businesses that want to get started in Switzerland quickly and with minimal bureaucracy.

The biggest downside: Unlimited personal liability. Business debts can be enforced directly against your private assets - regardless of how large they are.

What is a Limited Liability Company in Switzerland?

A GmbH (Gesellschaft mit beschränkter Haftung - limited liability company) is a legal entity under Swiss OR. It requires a minimum share capital of CHF 20,000, notarisation, and registration in the cantonal commercial register.

Ideal for: Growing companies, teams with multiple founders, businesses with liability exposure, or those looking to bring on investors.

The biggest advantage: Liability is capped at the company's assets - your personal wealth stays protected.

Example

A small trading company starts as a sole proprietorship - quickly and without major costs. As it grows, it wants to attract investors and reduce personal risks → Transformation into a GmbH becomes useful.

When Does a Conversion Make Sense?

Those who start as a sole proprietorship and grow will eventually ask: when is the right time to convert to a GmbH?

Typical triggers include:

Revenue exceeds CHF 100,000–150,000

Employees are being hired

Contracts with larger companies are being pursued

Personal liability exposure is increasing

Our Article explains the process in detail: Converting a Sole Proprietorship to a GmbH - Process & Tips

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Which shape suits me?

Sole proprietorshipif you want to get started quickly and have small risks.

Limited liability company (GmbH), if you want to appear professional, grow, or not risk your private assets.

Tip: The GmbH is often the better choice for long-term growth and security. Some companies do not hire sole proprietorships because they have the image of hobby businesses in certain circles.

Conclusion

Both legal forms have their place - the decision depends on your budget, growth plans and appetite for risk. For most businesses that want to grow seriously, the GmbH is the safer and more professional choice in the long run.

Next step: Start your company Whether sole proprietorship or GmbH - we guide you from choosing the right legal form through to full registration. Start your business in Switzerland →

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