Can I convert a sole proprietorship into a GmbH later?

Yes. You can transfer the business (assets and liabilities) to a newly founded GmbH. This is common when a business grows beyond the threshold where a sole proprietorship makes sense. Plan for notary fees and potential tax implications.

Do I need CHF 20,000 in cash for a GmbH?

Yes, the share capital must be paid in and confirmed by a bank before the GmbH can be registered. However, the money can be used for business operations immediately after founding — it doesn't just sit idle.

Sole proprietorship or LLC: which is right for you?

Sole proprietorship vs. GmbH in Switzerland — compare liability, taxes, social security, and setup costs to make the right choice for your business.

2 min read

The key difference: liability

As a sole proprietor, you are personally liable with all your private assets — unlimited. A GmbH (limited liability company) limits your liability to the company's assets. However, for small businesses without major liability risks, this difference is often less dramatic in practice: banks typically require personal guarantees from GmbH owners for business loans anyway.

Taxes

Sole proprietorships: income is taxed as personal income (with social security contributions on top). GmbH: the company pays profit tax (roughly 12–22% depending on canton), and distributions to the owner are taxed again as income. However, you can leave money in the GmbH and defer personal taxation — a significant advantage at higher income levels.

As a sole proprietor, you pay AHV/IV/EO contributions on your entire profit (roughly 10%). In a GmbH, you pay yourself a salary and pay AHV on that amount — any remaining profit in the company is not subject to AHV. This can save several thousand francs per year, which makes the GmbH attractive above a certain income level.

Setup costs

Starting a sole proprietorship is free (or costs a few hundred francs for voluntary commercial register entry). A GmbH requires CHF 20,000 in share capital, notary fees (around CHF 1,000–2,000), and a commercial register entry — far more paperwork and upfront investment.

Decision rule

Under roughly CHF 100,000 annual profit: sole proprietorship is usually the better choice. Above roughly CHF 150,000 profit: a GmbH is worth considering for tax and AHV savings. Between those thresholds: it depends on your liability exposure, growth plans, and personal situation. Talk to a fiduciary.

Accurate as of: The rates and amounts mentioned in this article reflect the state as of 7 August 2026. They are for information only and do not replace tax or legal advice. For binding information, contact the Swiss Federal Tax Administration (ESTV), your cantonal tax office, or a fiduciary.

Frequently asked questions

Can I convert a sole proprietorship into a GmbH later?: Yes. You can transfer the business (assets and liabilities) to a newly founded GmbH. This is common when a business grows beyond the threshold where a sole proprietorship makes sense. Plan for notary fees and potential tax implications.
Do I need CHF 20,000 in cash for a GmbH?: Yes, the share capital must be paid in and confirmed by a bank before the GmbH can be registered. However, the money can be used for business operations immediately after founding — it doesn't just sit idle.