1. Basics check

There are a myriad reasons why people might consider becoming self-employed. What’s yours? Is it because you’ve got a great idea for a business? Or because you crave more independence? Querying what you want to get out of this move will be key to devising a strategy for getting you started.

Are you prepared to put in the work required to make your business a success and accept that you might not be earning much to start with? Is your business idea genuinely solid, do you know the industry and are your market expectations realistic? If so, you have a sound basis for setting up your own business or becoming self-employed.

However, it’s important to allow for the fact that it may be harder to establish yourself than initially anticipated. People also often underestimate the full extent of what it means to work for oneself and run a business.

So check the following three basic points before proceeding. Ask yourself if you are aware of these aspects and ready to invest in them long-term.

Employees  

If your business employs staff, you will need to comply with certain duties as their employer:

• Registering with the compensation office and paying social insurance contributions: AHV, IV, EO, unemployment insurance
• Pension fund
• Compulsory accident insurance
• Family allowances

It might also be worth taking out other insurance in addition to these compulsory ones. First and foremost of these is a daily sickness allowance insurance that will ensure that your staff will still be paid if they are ill.

Finding, recruiting and retaining suitable staff are also extremely important issues to address and to factor into your business plan.

Marketing 

Marketing is more than just advertising. Marketing is not just about alerting people to your business’ products or services. It should also provide information about the market in which you move and pinpoint how you are going to target it. It is about building lasting relationships with customers and is an important aspect of your business’ success. Hence, marketing should form an integral part of your strategy from the word go and shouldn’t be underestimated.

Finances 

Your income, expenditures and assets will be key and form the basis of all of your other business planning. A liquidity plan will ensure that your need for capital will be met at all times and that you’ll have some extra money put aside. This will protect you should there ever be a cashflow problem and avert the risk of bankruptcy, in which you will be liable for the company's debts.

2. Legal form

When becoming self-employed, you’ll have to choose a legal form for your business. The legal form you choose will determine the requirements you’ll have to fulfil in order to register your business.

One of the key differences between the different legal forms is their liability. Sole proprietors have unlimited liability and are personally responsible for all debts against the business. With limited and public limited companies, liability is limited to the shareholder contributions or the company's assets.

These legal forms also differ in terms of how these companies are taxed and, in particular, with respect to their occupational pension contribution requirements (BVG). While sole proprietors are not legally required to pay into an occupational pension, limited and public limited companies must do so for all employees.

The following table shows the how the different legal forms differ.

3. Business plan

Your business plan describes how your business is going to work. It covers your vision, strategy, what steps you will be taking, opportunities and risks, as well as the financial-side of things. Your business plan is key to ensuring you have a clear strategy for making your business a success. It can be used as a planning tool and for identifying factors important to success. It is also important for communicating within your company and with business partners.

Business plans can be written in a number of ways – from brief outlines jotted on notepads to detailed descriptions created with dedicated planning tools. The role of a business plan differs depending on whether you are setting up a business on your own or together with others.

Creating a business plan for yourself  

In this case, your business plan should set out your personal vision of your business idea. It also means that you’ll have complete freedom and flexibility regarding any decisions. Plus, there will only be your skillsets, assets and networks.

Creating a business plan when setting up a business with others

In this case, your business plan should set out your shared vision of what your business is going to be. Decisions will have to be made jointly and there will potentially be more than one set of skillsets, sources of funding and networks to consider. This means you’ll have a broader basis for creating your business.

Starting a business together with others has the advantage of shared responsibility and extra input when drawing up your business plan. In this case, taking a structured approach to creating a business plan might help to address relevant issues more effectively together. Templates or online tools can be of great help for doing so.

4. Starting capital

How much starting capital will you need to set up your business? While there are no minimum capital requirements for sole proprietorships, they are very specific for LTDs and PLCs. At a glance:

• Sole proprietorship: No minimum capital requirement. Sole proprietorships can optionally be funded with BVG and/or 3rd pillar capital payouts, where available. If you are thinking of getting a pension payout, you should also think about how you will be funding your pension in future.
• LTD: The minimum capital required for setting up a limited company is CHF 20,000. Depending on your specific plan, you might also need more starting capital.
• PLC: Setting up a public limited company requires a minimum of CHF 100,000 but may also require more.

All of the funds required in excess of the legal requirement depend on the nature of your business and business idea. Your business plan and budget should definitely cover your capital needs for the first couple of years. This should include salaries and operating costs, production costs, marketing, reserves and, if relevant, development costs. 

5. Government support 

There is no direct federal government support in Switzerland for people looking to become self-employed or starting up a business – with one exception, and that's if you are unemployed. In that case, you will be eligible for federal government and cantonal daily benefits during the planning stage. The indirect support available primarily comprises guarantees for loans.

There is a lot more support available for becoming self-employed and for start-ups at the canton level. For information on the support programmes and initiatives available, please visit the relevant canton’s website.

6. Business name

Got a business idea, plan and know how much capital you’ll need? Then it’s time to come up with a name for your business. The main requirements for business names are:

• Sole proprietorship: The sole proprietor's surname has to be part of the business or company’s name.
• LTD: The company’s name must include the acronym “LTD”.
• PLC: The company’s name must include the acronym “PLC”.

The company name has to be registered in the Commercial Register. It is also advisable to find out whether this company name has already been registered in the Commercial Register and whether it is valid.

7. Start-up costs

Key start-up costs include:

• Commercial Register registration. Registering a sole proprietorship will cost a few hundred francs, an LTD and PLC several thousand. The fees can be viewed on the SME portal.
• There are no other essential start-up costs for sole proprietorships. For the remainder, follow your business plan and budget.
• LTDs: Budget a few thousand francs for a fiduciary and notary.
• PLCs: Budget a few thousand francs for a notary for creating the founding documents and share certificates. If your share capital is or exceeds one million francs, you will need to pay a security issue tax of 1%.

These direct start-up costs do not include the starting capital.

Part-time self-employment

Starting to work for yourself part-time comes with a lot of benefits. This is because you’ll have the security of a regular income while simultaneously working on your business.

When doing so, it will be important to find out what you need to do about your insurance and pension. If you plan to become self-employed part-time, the following applies:

• If you earn more than CHF 2,300 per calendar year from your self-employment, you need to register with the compensation office with respect to your AHV/IV/EO contributions.
• Your AHV/IV/EO contributions will be calculated separately for each of your jobs and subject to different contribution rates.
• If you earn more than CHF 22,050 a year in your regular job, you will have reached the BVG entry threshold. In that case, your salary will be compulsorily insured under the occupational pension plan. If your salary is below this threshold, you should check what other BVG and pension options are available for protecting yourself.
• Taxes are very straightforward: your income from both jobs will be jointly taxed as per your tax return.

8. Registering

Got everything in place and ready to proceed? Then it’s time to register:

• You and your employees with the AHV compensation office.
• With the compulsory occupational pension scheme (BVG). If you are acting as a sole proprietor, this will be optional. If not, you and your employees will need to register with the BVG.
• Accident insurance. Taking out accident insurance for your employees and yourself is compulsory.

LTDs and PLCs have to be registered in the Commercial Register. Sole proprietorships also have to be registered in the Swiss Commercial Register if their turnover exceeds CHF 100,000 a year. You should also find out whether you will be liable to pay VAT and register with the Swiss Federal Tax Administration.

9. Taxes and accounting

Sole proprietorships, LTDs and PLCs are taxed differently:

• With sole proprietorships, you need to pay taxes on your entire income and all of your assets. You will be required to keep basic business records, i.e. track your income, expenses and assets.
• LTDs and PLCs: Both your profits and capital will be taxed. You will need to use double-entry accounting and have your accounts verified by an external auditor.

The taxation and accounting rules for sole proprietorships are a lot simpler. However, LTDs and PLCs have the advantage of being able to flexibly reinvest their profits in the company and hence have some leeway when it comes to tax optimisation. When setting up an LTD or PLC, it is advisable to get some advice from a fiduciary or tax expert.

10. Pensions and insurance

When becoming self-employed, it is important to make sure that you and your employees are properly protected.

Sole proprietors in particular need to look into their pensions. They are not required to pay BVG contributions. Hence, you should choose at least one of these options:

• Join a pension fund and pay BVG contributions
• Pay into a pillar 3a account

With LTDs and PLCs, you and your employees will be required to pay BVG contributions just like all other regular employees.

Sole proprietorships also have a special status when it comes to insurance matters. Being personally liable for any business debt involves a high level of risk. As such, a customised third-party liability insurance is a good way to protect yourself from those risks.

In addition to basic personal insurance, you should also look into other insurance for both yourself and your employees.

Insurance for yourself:

• Accident insurance
• Personal liability
• Loss of earning capacity

To explore other options for protecting your whole family, it might be worth talking to an insurance specialist.

Insurance for your employees:

• Accident insurance
• Public liability insurance
• Daily sickness allowance

Any other insurance for your inventory, buildings, vehicles and legal protection should always be tailored to your needs, so please don’t hesitate to contact us for advice on insurance solutions that will be a good fit for you and your goals.