Choosing the legal form is one of the most important decisions when forming a company in Switzerland. It determines your level of personal liability, your taxation, your administrative obligations, your ability to raise funds and your company's image. A poor choice can be costly to correct later.
This guide offers a structured method for choosing the legal form suited to your project, with a decision tree, concrete criteria and examples drawn from our experience in Geneva.
The three main legal forms
In Switzerland, three legal forms account for more than 95% of company formations:
- Sole proprietorship: for solo entrepreneurs, no capital, with unlimited liability.
- LLC: capital company with limited liability, capital CHF 20,000, ideal for SMEs.
- Corporation: capital company with discreet shareholding, capital CHF 100,000, for ambitious projects.
Other forms exist (general partnership, limited partnership, association, cooperative), but they are much less common for standard commercial activities. This guide focuses on the three main forms.
Decision tree: which path to follow?
Answer the following questions to guide your choice:
Question 1: Are you alone or do you have partners?
- Alone: all three forms are possible (sole proprietorship, single-member LLC, single-shareholder corporation).
- With partners: sole proprietorship is excluded. Go directly to LLC or corporation.
Question 2: What is your start-up budget (excluding capital)?
- Less than CHF 25,000: sole proprietorship is the most accessible (no capital required).
- CHF 25,000 - 55,000: LLC is feasible (CHF 20,000 capital + ~CHF 4,000 in fees).
- More than CHF 55,000: corporation is accessible (CHF 50,000 minimum capital + ~CHF 5,000 in fees).
Question 3: Does your activity involve significant risks?
- Low risk (consulting, training, online services): sole proprietorship may suffice if profit is modest.
- Moderate to high risk (retail, hospitality, construction, significant mandates): opt for LLC or corporation to protect your personal assets.
Question 4: What is your projected annual profit?
- Less than CHF 80,000: sole proprietorship is generally the most tax-advantageous.
- CHF 80,000 - 200,000: LLC is optimal (salary/dividend mix).
- More than CHF 200,000: LLC or corporation, with advanced tax optimisation.
Question 5: Do you plan to raise funds?
- No: sole proprietorship or LLC will do.
- Yes: corporation is strongly recommended (ease of share issuance and transfer).
Question 6: Is shareholding discretion important?
- No: LLC is suitable (members public in CR).
- Yes: corporation is preferable (shareholders not public).
Summary decision matrix
| Profile | Recommended form | Main reason |
|---|---|---|
| Starting freelancer / consultant | Sole proprietorship | Simplicity, minimal costs, simple taxation |
| Self-employed with revenue > 100,000 | LLC | Tax optimisation, limited liability |
| Pair of partners (SME) | LLC | Accessible capital, structure suited to SMEs |
| Shop / restaurant | LLC | Asset protection, supplier credibility |
| Tech startup | Corporation | Fundraising, ESOP, investor credibility |
| Holding / wealth management | Corporation | Discretion, shareholding flexibility |
| Subsidiary of a foreign group | Corporation or LLC | Limited liability, professional image |
| Liberal profession (lawyer, doctor) | Sole proprietorship or LLC | Depending on applicable professional regulations |
| International e-commerce | Corporation | Foreign currency capital possible, strong image |
| Craftsperson / manual trade | Sole proprietorship or LLC | Sole proprietorship at start, LLC once risks or revenue increase |
Detailed decision criteria
1. Liability
This is often the most decisive criterion. In a sole proprietorship, the entrepreneur risks their personal assets (house, savings, vehicle). In an LLC or corporation, liability is limited to the invested capital. If your activity generates potential debts (loans, inventory, professional liability), the LLC or corporation is strongly recommended.
See our sole proprietorship vs LLC comparison for a detailed analysis of asset risk.
2. Taxation
The sole proprietorship is fiscally optimal for small profits (up to CHF 80,000). Beyond that, the combined taxation of LLC/corporation (corporate tax + partial dividend taxation) is generally more advantageous than the progressive income tax rate applied to sole proprietorships.
The exact threshold depends on your personal situation (marital status, children, deductions, municipality). For a precise analysis, our taxation experts perform comparative simulations.
3. Formation and operating costs
The sole proprietorship is by far the least expensive to form (~CHF 1,020) and manage (simplified accounting). The LLC costs approximately CHF 3,750-4,250 to form (excluding capital) and requires double-entry bookkeeping (higher accounting fees). The corporation is slightly more expensive still. See our detailed formation costs.
4. Credibility and image
The corporation is the most prestigious form (Credit Suisse SA, Nestle SA...). The LLC is well perceived in the SME business fabric. The sole proprietorship may be perceived as less professional by some partners, though this depends heavily on the industry.
5. Shareholding flexibility
If you plan to welcome partners, investors or set up an employee participation programme, the corporation offers the greatest flexibility. The LLC is more rigid (unit transfer by notarial deed). The sole proprietorship by nature excludes any shareholding. See our LLC vs Corporation comparison.
6. Pension provision
In an LLC/corporation, the manager/director is mandatorily covered by BVG (2nd pillar) if their salary exceeds CHF 22,680/year. This is a forced retirement savings, fiscally advantageous. In a sole proprietorship, BVG is optional, which can lead to insufficient retirement coverage.
Concrete examples
Example 1: Sarah, freelance graphic designer
Sarah starts her graphic design activity in Geneva. She works from home, with minimal investment (computer, software). Her projected revenue is CHF 70,000 in the first year. No employees. Low risk.
Recommendation: sole proprietorship. Minimal formation costs, simplified accounting, taxation suited to her income level. She can switch to an LLC when her profit regularly exceeds CHF 80,000-100,000.
Example 2: Marc and Julie, consulting firm
Marc and Julie partner to create a management consulting firm in Geneva. They aim for CHF 300,000 in first-year revenue, with significant mandates for large companies. They want to protect their personal assets.
Recommendation: LLC. Two partners (sole proprietorship excluded), limited liability, accessible capital (CHF 20,000), simple structure. The corporation would be oversized at this stage.
Example 3: Ahmed, fintech startup
Ahmed is developing a mobile payment application. He has secured CHF 200,000 in pre-funding from a business angel and plans a Series A in 18 months. He wants to attract talent with stock options.
Recommendation: corporation. Facilitated fundraising, participation programme (ESOP) possible, investor credibility, flexible share categories (preferred shares for investors).
Example 4: Paolo, restaurateur
Paolo is opening an Italian restaurant in the Eaux-Vives neighbourhood of Geneva. Investment budget of CHF 150,000 (lease, fit-out, equipment). Employees planned from opening. High risk (hospitality sector).
Recommendation: LLC. Personal asset protection essential in a high-risk sector. The CHF 20,000 capital is easily integrated into the investment budget. The LLC inspires confidence among landlords and suppliers.
Mistakes to avoid
- Choosing the sole proprietorship by default: many entrepreneurs choose the sole proprietorship for its simplicity, without evaluating the asset risks. A single accident, dispute or bad year can jeopardise personal assets.
- Choosing the corporation for prestige: the corporation is sometimes chosen for image, when an LLC would suffice. The tied-up capital (CHF 50,000+) could be better used in the business.
- Ignoring the tax dimension: the choice of legal form has a major tax impact. A comparative analysis before formation can save thousands of francs each year.
- Forgetting pension provision: retirement coverage differs radically between sole proprietorship and LLC/corporation. Factor this into your thinking.
- Not anticipating growth: if you plan a funding round in 2 years, form a corporation directly rather than paying for a conversion later.
AX-Fiduciaire advice: do not make this decision alone. A 30-minute meeting with one of our experts can save you costly mistakes. Request a free consultation and receive a personalised recommendation based on your specific situation.