The sole proprietorship is a legal form where the individual carries on business in his own name and is personally liable in an unlimited manner. The owner may also be described as self-employed.
Simple to set up, it does not require any equity capital or formal creation. However, once gross annual sales of CHF 100,000 are exceeded, registration with the registre du commerce and VAT becomes compulsory.
This structure is ideal for entrepreneurs wishing to start up a small business or self-employed activity.
Table of contents
Opening a sole proprietorship
A sole proprietorship may be described as a natural person who carries on business in his or her own name and under his or her own responsibility.
The individual is personally and illimitatively liable for all his property and assets.
It is very simple to set up, as there is no formal act of incorporation; the sole proprietorship begins as soon as commercial operations are launched.
There are no capital requirements and no need to create a formal company or commercial contract.
Any individual can act as a self-employed person and set up an IR.
On the other hand, as soon as the sole trader achieves gross annual turnover of at least CHF100,000, he must register his sole trader in the Commercial Register (art. 36 para. 1 ORC).
How do you open a sole proprietorship?
Register with a compensation fund
The sole trader must be registered as a self-employed person with a compensation fund.
The compensation fund will check that the sole trader is self-employed and not employed by someone else.
A self-employed person may be employed by someone else for another activity, but not for the activity for which they wish to develop their self-employed activity.
On the one hand, the social costs paid by a self-employed person are completely different from those paid by an employee.
In addition, the compensation fund will ensure that an employer does not require an employee to register as self-employed in order to avoid paying social security contributions.
Registration with the Registre du Commerce
Entrepreneurs do not need to register in the Commercial Register as long as their annual sales do not reach CHF 100,000.
Below this amount, registration is optional but adds credibility.
If you run a business as a sole trader, you must include your surname, with or without your first name, in your company name (art. 945 para. 1 CO). No additions
suggesting a corporate link may not be added to the company name (art. 945 para. 3 CO).
The company name is protected by entry in the Commercial Register (art. 946 CO).
Domicile of the sole proprietorship
The registered office of the sole proprietorship does not necessarily have to be the same as the domicile of the sole proprietor.
Obligation to keep accounts
As a self-employed person, you will have to keep simplified accounts. However, if your turnover exceeds CHF 500,000, you will have to keep accounts in accordance with the Swiss Code of Obligations (art. 957 al. 1 CO).
VAT for sole traders
Sole traders are no exception in terms of VAT. Any natural or legal person whose annual turnover exceeds CHF 100,000 is obliged to withhold and remit VAT.
For further information: Swiss VAT: the essentials
Liability
On the one hand, the self-employed person has unlimited liability for all his private assets and his business assets, unlike the SA or the LLC.
On the other hand, with entry in the commercial register, the self-employed person is subject to bankruptcy proceedings (art. 39 para. 1 par. 1 of the Federal Law on Debt Collection and Bankruptcy).
Sole proprietorship Swiss cross-border commuter
If you are a cross-border commuter living in neighbouring France, you can create a sole proprietorship under the following conditions:
- Have a business address in Switzerland
- Applying for an independent G permit from the OCPM
- Have started self-employed activity
- Apply for affiliation to the OCAS compensation fund
- Complete the form received from OCAS
- Wait for a response from OCAS
Close a sole proprietorship
If you cease trading or transfer your business to another natural or legal person, you must apply to have the sole proprietorship deleted from the Commercial Register (Art. 39 para. 1 CRO).
If the proprietor dies, his heirs must apply for the sole proprietorship to be deregistered.
If the business continues, the new owner must apply to register the sole proprietorship (art. 39 para. 1 ORC).
Sole proprietorship (art. 39 par. 2 ORC).
Frequent use of the sole proprietorship
Benefits
The sole proprietorship is the second most common type of business.
The latter enjoys economic freedom, with a rapid decision-making process and no formal restrictions.
The sole proprietorship is often used to start up a small business or self-employed activity.
Disadvantages
One of the main disadvantages of sole proprietorship, apart from the fact that it is often difficult to find the means to finance and sell the business, is that it is difficult to obtain finance.
What's more, it is often difficult to find the means to finance the business and pass it on to a successor.
The IR will have to be dissolved, as it is entirely linked to its manager, who has unlimited liability for all its private property and professional assets.
Finally, the name of the company cannot be chosen freely, unlike in the case of a limited company.
Conclusion
Sole proprietorship is an attractive option for starting up a business, but it carries with it specific obligations. Faced with these challenges, expertise is essential.
Our fiduciary Fidulex is here for you. We'll guide you through all the steps involved in becoming self-employed and take care of the accounting management of your business. Navigate the entrepreneurial world with confidence and ensure lasting success.
FAQ - Sole proprietorship
The name must include the founder's surname (with or without a first name).
Supplements may be added, but they must be truthful and not misleading.
There is no minimum capital requirement for setting up a sole proprietorship.
They are taxable on both their professional and private income and wealth.
Fees vary between CHF 0 and 1,000 for advice on setting up a business, and CHF 120 for entry in the commercial register.
It cannot be transferred as such. It must be closed. The person who takes over the business in turn opens a new sole proprietorship if he or she so wishes.
