Sole Proprietorship vs LLC: Which Legal Form for Your Business?
Choosing legal status is a strategic decision impacting your taxation, liability and administrative obligations.
Sole Proprietorship: Simplicity to Start
Advantages
- Quick and inexpensive creation
- No minimum capital required
- Simplified accounting (if TO < CHF 500,000)
- CR registration optional (unless TO > CHF 100,000)
- Total flexibility in management
Disadvantages
- Unlimited liability (personal assets at risk)
- No legal separation between person and business
- Lower credibility with large clients
- Progressive tax scale (disadvantageous with high income)
Ideal for: freelancers, consultants, craftsmen, liberal professions with low financial risk.
LLC: Protection and Professionalization
Advantages
- Liability limited to share capital
- Separation of personal/professional assets
- Increased credibility (especially internationally)
- Potentially advantageous taxation (profit tax + dividends)
- Facilitates fundraising
Disadvantages
- Minimum capital: CHF 20,000
- More expensive creation (CHF 1,500-3,000)
- Double-entry bookkeeping mandatory
- Annual accounts audit (if thresholds exceeded)
- Heavier administrative formalism
Ideal for: projects with partners, risky activity, brand development, growth ambitions.
Tax Comparison
Sole Proprietorship
- Income tax (progressive scale up to ~40%)
- AVS contributions on net income (~10%)
- Flat-rate or actual expense deduction
LLC
- Profit tax (~12-21% depending on canton)
- Tax on distributed dividends (~30-35% with tax privilege)
- Manager salary: social contributions (AVS/LPP)
Simulation: from ~CHF 150,000 net income, LLC often becomes more tax-advantageous.
How to Decide?
Choose sole proprietorship if:
- You start with little capital
- Your activity presents low risks
- You favor administrative simplicity
- Your projected TO < CHF 200,000
Choose LLC if:
- You have partners
- Your activity involves financial risks
- You aim for strong growth
- You want to optimize taxation
- You want to separate business/personal assets
ToBill Adapts to Your Status
Whether sole proprietorship or LLC:
- Compliant accounting for both statuses
- Automatic VAT calculation
- Export to your fiduciary
- Optimized invoicing
The tool that grows with you, from first invoice to 100 employees.