The sole proprietorship (RI) and the LLC are the two most popular legal forms for entrepreneurs in Switzerland. The sole proprietorship attracts with its simplicity and low start-up costs. The LLC appeals with its limited liability and tax advantages once profits increase. But at what precise point should you make the switch? And what are the real day-to-day differences?
This guide compares these two options in depth, with detailed figures adapted to the canton of Geneva in 2026, and incorporates the implications of the bankruptcy law reform that came into force in 2025.
Comparison table: sole proprietorship vs LLC
| Criterion | Sole proprietorship | LLC |
|---|---|---|
| Legal personality | No (merged with the entrepreneur) | Yes (separate entity) |
| Minimum capital | None | CHF 20,000 (100% paid up) |
| Liability | Unlimited (personal assets) | Limited to capital |
| Number of persons | 1 only (natural person) | 1 or more |
| Business name | Must contain the surname | Fantasy name possible + "Sarl"/"LLC" |
| CR inscription | Mandatory from CHF 100,000 revenue | Mandatory in all cases |
| Notary | No | Yes (authentic deed) |
| Accounting | Simplified (income/expenses if revenue < 500,000) | Double-entry mandatory |
| Profit taxation | Personal income (progressive rate, up to ~44%) | Corporate tax (~13.99%) + dividends (partial taxation) |
| AHV contributions | ~10.6% on net income (self-employed) | ~12.8% on salary (employer/employee split) |
| Dividends and AHV | Not applicable | No AHV contributions on dividends (if reasonable ratio) |
| BVG (2nd pillar) | Optional | Mandatory if salary > CHF 22,680/year |
| Pillar 3a (max. deduction) | CHF 36,288/year (without BVG) | CHF 7,258/year (with BVG) |
| Formation costs AX-Fiduciaire | From CHF 900.- | From CHF 2,500.- |
| Typical annual costs | Simplified accounting + tax return | Double-entry accounting + annual closing + company and personal tax returns |
Comparative tax analysis: worked examples
To illustrate the tax differences concretely, let us compare three scenarios with a single entrepreneur, domiciled in the City of Geneva, no children, in 2026.
Scenario 1: annual profit of CHF 60,000
| Item | Sole proprietorship | LLC (salary 50,000 + div. 10,000) |
|---|---|---|
| Gross profit | CHF 60,000 | CHF 60,000 |
| AHV/IV/APG contributions | ~CHF 5,730 (9.55%) | ~CHF 6,400 (total salary charges) |
| Taxable income (approx.) | ~CHF 54,270 | ~CHF 50,000 (salary) + ~CHF 7,000 (70% div.) |
| Income tax (approx.) | ~CHF 9,500 | ~CHF 8,200 (income) + ~CHF 560 (corporate tax) |
| Annual accounting cost | ~CHF 1,500 | ~CHF 3,000 |
| Estimated total burden | ~CHF 16,730 | ~CHF 18,160 |
Verdict: at CHF 60,000 in profit, the sole proprietorship is more advantageous. The additional fixed costs of the LLC (accounting, annual closing) are not offset by the tax saving.
Scenario 2: annual profit of CHF 100,000
| Item | Sole proprietorship | LLC (salary 70,000 + div. 30,000) |
|---|---|---|
| Gross profit | CHF 100,000 | CHF 100,000 |
| AHV/IV/APG contributions | ~CHF 10,600 | ~CHF 8,960 (on salary only) |
| Income + corporate tax | ~CHF 22,000 | ~CHF 14,500 (income) + ~CHF 2,800 (corporate) |
| Annual accounting cost | ~CHF 2,000 | ~CHF 3,500 |
| Estimated total burden | ~CHF 34,600 | ~CHF 29,760 |
Verdict: at CHF 100,000, the LLC saves approximately CHF 4,800 per year. The break-even point is clearly passed.
Scenario 3: annual profit of CHF 200,000
| Item | Sole proprietorship | LLC (salary 100,000 + div. 100,000) |
|---|---|---|
| AHV/IV/APG contributions | ~CHF 21,200 (10.6%) | ~CHF 12,800 (on salary) |
| Income + corporate tax | ~CHF 62,000 | ~CHF 28,000 (income) + ~CHF 11,200 (corporate) |
| Annual accounting cost | ~CHF 3,000 | ~CHF 4,500 |
| Estimated total burden | ~CHF 75,600 | ~CHF 56,500 |
Verdict: at CHF 200,000, the annual saving with the LLC reaches approximately CHF 19,000. The gap widens rapidly as profit increases.
Important: these figures are simplified estimates for illustrative purposes. Every situation is unique (family situation, deductions, municipality of residence). Contact us for a precise simulation based on your case.
Impact of the 2025 bankruptcy law reform
The reform of debt enforcement and bankruptcy law, which came into force on 1 January 2025, has direct implications for self-employed persons operating as sole proprietors:
- Expanded bankruptcy proceedings: self-employed persons inscribed in the CR remain subject to bankruptcy proceedings (art. 39 DEBA), but the new provisions simplify the handling of small-amount bankruptcies.
- Facilitated composition: composition procedures (moratorium) have been relaxed to allow small businesses to restructure before bankruptcy. This is a safety net for self-employed persons in difficulty.
- Adjusted subsistence minimum: the non-seizable amounts have been revised, offering better protection of the subsistence minimum for the self-employed person and their family.
- Liability unchanged: the reform does not change the principle of unlimited liability. Creditors continue to have access to the self-employed person's private assets.
In summary: the 2025 reform brings some improvements for self-employed persons in difficulty, but does not fundamentally change the asset risk of the sole proprietorship. The LLC remains the best protection if your activity involves significant risks.
Other decision criteria
Commercial credibility
The LLC inspires greater confidence among commercial partners, banks and clients. The "Sarl" or "LLC" in the business name signals a professional structure with deposited capital. Some public tenders and large companies require a capital company to work with them.
Remuneration flexibility
In an LLC, you can adjust the split between salary and dividends to optimise your tax and social charges burden. In a sole proprietorship, all profit is taxed as self-employment income, with no possibility of optimisation.
Occupational pension provision
In an LLC, BVG is mandatory for the salaried manager (if salary > CHF 22,680/year), which constitutes a forced retirement savings, fiscally advantageous (tax-deductible contributions). In a sole proprietorship, BVG is optional, which can lead to insufficient retirement coverage.
Succession and continuity
The LLC, as a legal entity, survives the death or incapacity of the founder. Units are transferable to heirs. The sole proprietorship, tied to the person, ends with the entrepreneur's death (unless previously transformed).
When to transform your sole proprietorship into an LLC?
Here are the signals indicating it is time to switch to an LLC:
- Net profit above CHF 80,000-100,000 on a recurring basis
- High-risk activity: significant mandates, merchandise inventory, employees
- Desire to bring in a partner or prepare for succession
- Need for credibility with clients or banks
- Real estate investment project: protecting private assets
- Pension optimisation: benefiting from mandatory BVG and deductible contributions
The transformation is done through a contribution in kind of the sole proprietorship to the LLC. AX-Fiduciaire manages the entire process (asset valuation, incorporation report, formation, CR inscription) for a package starting at CHF 2,500.-. Contact us to evaluate your situation.