# Choosing a legal form in Switzerland: sole proprietorship, GmbH or AG – innoVorsorge AG

> Sole proprietorship, limited liability company (GmbH) or company limited by shares (AG) compared: liability, minimum capital, set-up effort, taxes, salary and dividends, social insurance and changing the legal form later. As of 2026.

Adresse: https://www.innovorsorge.ch/en/business/blog/choosing-a-legal-form-sole-proprietorship-gmbh-ag

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10 Oct 2026 , written by Lukas Bachmann

# Choosing a legal form: sole proprietorship, GmbH or AG
Around 50,000 companies are entered in the Swiss commercial register every year, a large share of them as a GmbH. Sole proprietorships only partly show up in that figure, because they only have to register once turnover reaches CHF 100,000. There is no formula for choosing a legal form that works for everyone. There are, however, a few questions that almost always decide the matter: how much risk do you carry personally, how much profit do you expect, and how clearly should the business be separated from you as a person?

This article walks through the three most common forms for founders in Switzerland: the sole proprietorship (Einzelfirma), the limited liability company (GmbH) and the company limited by shares (AG). Figures refer to 2026.

![Person signing documents at a wooden table](https://www.innovorsorge.ch/bilder/blog-firmen/vertrag-unterschreiben-schreibtisch.jpg)

## Liability: who pays if things go wrong

With a **sole proprietorship** there is no separation between you and the business. You are liable for business debts with all your private assets, including your savings or your share in a property. If you are married, your spouse's assets are generally not affected, but the household budget certainly is.

A **GmbH** and an **AG** are legal entities. Creditors can only claim the company's assets. This separation has limits: if you personally guarantee a business loan, you remain personally liable for that loan. And anyone managing the company can be held personally responsible for breaches of duty, for example if social security contributions are not paid (Art. 52 of the Federal Act on Old-Age and Survivors' Insurance, AHVG). This point is often underestimated when setting up a company.

## Capital and set-up effort

A **sole proprietorship** needs no minimum capital. You register with the compensation office (Ausgleichskasse) as self-employed, and once turnover reaches CHF 100,000 a year, you must register in the commercial register. The cost is in the low hundreds of francs.

A **GmbH** requires share capital of at least CHF 20,000, which must be fully paid in at incorporation. The money does not sit idle: you may use it to run the business, but it belongs to the company. Incorporation requires a public deed from a notary and registration in the commercial register. Notary, register and bank together usually cost a low four-digit amount, depending on the canton and the effort involved; online incorporation services are at the lower end, an individually advised set-up with bespoke articles at the upper end.

An **AG** requires share capital of at least CHF 100,000. At least 20 percent, and no less than CHF 50,000, must be paid in at incorporation. The process and costs are comparable to a GmbH, but the capital tied up is two and a half to five times higher.

One difference that matters in practice: in a GmbH, the partners are listed by name in the public commercial register. In an AG they are not; shareholders are only recorded in the internal share register. If discretion matters to you, or if you plan to give shares to employees or investors later, an AG is usually easier.

Both a GmbH and an AG generally need an auditor. With fewer than ten full-time positions on annual average and the consent of all partners or shareholders, you can opt out of the audit. This saves several thousand francs a year and is commonly used by small companies.

## Taxes: income or profit

This is where the biggest difference lies, and it depends heavily on how much the business earns.

With a **sole proprietorship**, profit is taxed as income together with your other income. There is one tax return, no separate corporate tax filing, and you can offset losses against other income, such as a part-time salary. For low to moderate profits this is often the cheapest solution. As profit rises, however, you move up the progressive scale: every additional franc is taxed at your marginal rate, which depending on where you live and how much you earn can be well above 30 percent.

A **GmbH** and an **AG** pay profit tax on their earnings and capital tax on their equity. The effective profit tax rate ranges from around 12 to 21 percent depending on canton and municipality (federal, cantonal and municipal combined, as of 2025). What you take out of the company is taxed again privately. There are two ways to do this:

- **Salary:** for the company it is an expense that reduces profit. For you it is income, and social security contributions apply.

- **Dividend:** it is paid out of profit that has already been taxed. If you hold at least 10 percent of the capital, it is taxed at 70 percent of its value at federal level and at no less than 50 percent in the cantons (partial taxation). No AHV contributions are due on dividends.

Combining salary and dividends leaves some room for manoeuvre, but not unlimited room. The compensation offices check whether your salary is appropriate for the work you do. If it is conspicuously low and the dividend high, part of the dividend may be reclassified as salary after the fact, with contributions and interest on arrears. Conversely, the tax authorities make sure the salary is not excessive.

As a rough guide: as long as profit is in the range of a normal salary, a company brings few tax advantages, and the ongoing cost of bookkeeping, annual accounts and two tax returns often cancels them out. A GmbH or AG becomes interesting when profit is regularly meant to stay in the business, for example for investment, or when liability is a real concern.

## Social insurance and pensions

Your choice of legal form also determines your status for social insurance.

As the **owner of a sole proprietorship** you are self-employed. You pay AHV/IV/EO contributions (old-age, disability and income compensation insurance) on your own, in 2026 at most 10 percent of your earned income; on incomes below CHF 60,500 a reduced rate applies. You have no unemployment insurance, and occupational pension cover (BVG) is voluntary. You are not automatically insured against accidents under the Accident Insurance Act (UVG). What this means for your pension planning is covered in the article [Pension planning for the self-employed](https://www.innovorsorge.ch/en/business/blog/pension-planning-for-the-self-employed).

In a **GmbH or AG** you are an employee of your own company. The usual contributions apply to your salary, split equally between the company and you. If your annual salary exceeds CHF 22,680 (as of 2026), you are compulsorily insured in the occupational pension scheme, and the company must join a pension fund. This usually gives you much better cover against disability and death than in a sole proprietorship, and you can make voluntary buy-ins. Accident insurance under the UVG is compulsory for employees.

One point many people only discover when they need it: if you hold an employer-like position in your own GmbH or AG, you pay unemployment insurance contributions but generally do not receive unemployment benefits as long as you have not definitively given up that position. You should not count on this benefit in your planning.

## VAT: independent of the legal form

VAT liability depends on turnover, not on the legal form. From worldwide turnover of CHF 100,000 a year from taxable supplies you must register, whether as a sole proprietorship or a GmbH. Below that threshold you can register voluntarily, which pays off if you make large investments and want to reclaim input tax.

## Switching later: conversion

The legal form is not a decision for life. Many start as a sole proprietorship, test their business model and switch once profit or risk increases.

The Mergers Act (Fusionsgesetz) provides orderly ways to do this. A sole proprietorship registered in the commercial register can transfer its business, with assets and liabilities, to a new GmbH or AG (transfer of assets). A GmbH can later be converted directly into an AG without dissolving the company.

For tax purposes, moving from a sole proprietorship into a company can be tax-neutral if the business continues and the book values are carried over. The condition: you must not sell the shares within five years of the restructuring. If you do, the hidden reserves are taxed retrospectively. So if you already know you want to sell the business in three years, take that into account when choosing the timing.

The reverse route, from a GmbH back to a sole proprietorship, is more involved: the company is liquidated, and the reserves you receive in the process are taxed as income.

## Which form suits whom

Experience shows a few patterns that work as a starting point:

- You are starting alongside a job or with little capital, the liability risk is manageable, and profit will be modest in the first years: a sole proprietorship is usually the simplest and cheapest solution.

- You work with client contracts that could lead to large claims, you are hiring staff, or profit is well above what you need to live on: a GmbH is the right framework for most small businesses.

- You plan to bring in investors, give employees a stake, or anonymity of ownership matters to you: then an AG is worth a look, despite the higher capital.

These patterns do not replace a calculation with your own numbers. Ask yourself two further questions: how do you want to protect yourself against disability and in old age? And how much money do you need privately from the business each month? The answers often shift the calculation more than the tax rates.

## How we can help

Our [legal form test](https://www.innovorsorge.ch/en/business/legal-form-test) gives you a first idea of which legal form fits your situation in a few minutes. If you want to work through the decision with your own figures, including the consequences for pensions and finances for each legal form, the [Starter package](https://www.innovorsorge.ch/en/business/starter-package) is designed for that.

[NextPension planning for the self-employed: AHV, pension fund, pillar 3a and risk cover](https://www.innovorsorge.ch/en/business/blog/pension-planning-for-the-self-employed)