Einzelfirma or GmbH in Switzerland: Which Legal Form Fits Your Business?

Choosing between an Einzelfirma and a GmbH affects liability, financing, bookkeeping and tax—not just the name on your invoices. This practical comparison can help Swiss founders choose a structure that fits their plans.

How the two legal forms are set up

An Einzelfirma is run by one natural person and is not a separate legal entity. It can start with few formalities and no minimum capital. The federal SME Portal explains its registration rules.

A GmbH is a separate legal entity formed by one or more people or companies. It comes into existence when entered in the commercial register. Its share capital must be at least CHF 20,000, fully paid in cash or through permitted contributions in kind.

An Einzelfirma’s registered name must include the owner’s family name; an added description cannot make it look like a separate company. A GmbH uses GmbH or Sàrl and can have multiple shareholders with clearly defined ownership stakes.

A GmbH must be registered. An Einzelfirma generally must register when it operates commercially and annual revenue exceeds CHF 100,000; below that, registration may be optional. Check the rules for your activity and canton.

Liability, capital and administration

With an Einzelfirma, you and the business are not separate debtors. You are personally and without limit liable for business obligations, so private assets may be at risk if the business cannot pay.

A GmbH’s creditors generally claim against company assets, not shareholders’ private assets. The CHF 20,000 capital belongs to the company, not a fee. Personal guarantees or breaches of your own legal duties can still expose you personally.

A GmbH can make it easier to add a co-founder, investor or transfer an ownership stake. An Einzelfirma has one owner and cannot issue shares; funding usually comes from the owner or loans. Transferring it means handling assets, obligations and contracts.

An Einzelfirma with annual turnover below CHF 500,000 may keep simplified accounts of income, expenses and assets; at or above that, full accounting rules apply. A GmbH must keep accounts as a legal entity, usually bringing more administration and fiduciary costs.

Taxes and social insurance are not the same

An Einzelfirma’s profit is generally included in the owner’s personal income, and business assets form part of their tax position. The Ausgleichskasse assesses self-employed status and collects applicable AHV/IV/EO contributions on self-employment income.

A GmbH pays tax on its profit. Salary it pays you is a company expense, taxed as your personal income and subject to payroll social-insurance obligations. A later dividend is treated separately and may receive partial taxation under applicable rules.

There is no universal profit level at which a GmbH is automatically cheaper. Combined tax and social-insurance costs depend on canton, municipality, salary, retained profits and personal circumstances. Compare the total household and company picture, not just corporate tax.

MWST registration is separate from legal form. Both an Einzelfirma and a GmbH can have VAT obligations when conditions are met. Switching to a GmbH does not remove those duties or automatically change the rate for a service.

Choose for your risk and next stage

An Einzelfirma often suits a solo freelancer testing a low-risk service without outside shareholders. Its simpler setup can help while revenue is modest, but does not remove personal liability or record-keeping obligations.

A GmbH may suit a business with significant contractual or operating risks, planned hires, a co-founder, clearer ownership needs or profits to reinvest. It can reassure some clients, but does not guarantee contracts, financing or lower taxes.

Compare expected profit, the salary you need, setup and accounting costs, claim exposure, financing plans and your canton’s taxes. Ask your Ausgleichskasse about status and contributions, and have a fiduciary model both tax outcomes.

You can later move from an Einzelfirma to a GmbH, but it is not just a name change: assets, contracts, staff, registrations and possible tax effects need attention. Read the SECO SME Portal’s GmbH guidance and get advice before transferring the business.