The sole proprietorship is a legal form chosen by many entrepreneurs, especially in the start-up phase, because of its flexibility and the absence of special formalities for incorporation and management. From a legal point of view, this form is suitable for small business activities managed by a single natural person.
A sole proprietorship consists of a commercial activity carried out by a single natural person. The owner of a sole proprietorship is always and only a single natural person, who may not formally involve several persons as partners. This legal form has no legal personality of its own. This means that there is no legal distinction between the sole proprietorship and its owner. It is always the owner, i.e. the natural person, who exercises rights and obligations relating to his company. Since it does not have legal personality, the assets of the sole proprietorship are merged with those of the proprietor who is a natural person: the proprietor is therefore personally and unlimitedly liable for the debts and obligations of the sole proprietorship, and the creditors of the sole proprietorship can therefore act directly against the proprietor. Consequently, when the business reaches a certain size, it is often advisable to resort to other forms of company that are more secure and protected by law.
The sole proprietorship is in principle not subject to the provisions of company law and the requirements in terms of bureaucracy and formalities are very low (no organs, no shareholders’ meetings, etc.). The establishment of a sole proprietorship does not require a capital contribution as for an Ltd./LLC. The owner manages and runs the sole proprietorship independently and without formalities and bureaucracy, which makes the sole proprietorship very flexible and easy to manage.
The way in which the company’s accounts and bookkeeping are kept depends on its turnover (Art. 957 para. 1 and 2 CO). If the latter exceeds CHF 500’000, the obligation is complete and the sole proprietorship must comply with the specific provisions (Art. 957a ff. CO). Below CHF 500’000, the firm must comply with a reduced obligation, i.e. keep only income and expenditure accounts and asset accounts.
In a sole proprietorship, the company owner will be entered in the Registry of Commerce when his company is registered. At the same time, authorised signatories, i.e. employees of the sole proprietorship who are authorised to sign, must be registered in the Registry of Commerce as authorised signatories of the proprietor.
From an insurance point of view, the owner of a sole proprietorship needs to be clear about which insurances are compulsory and which are optional. Below you can find an overview of the insurances that have to be taken into account by the self-employed.
Insurance of a sole proprietorship
Mandatory insurances:
- Old age and survivors’insurance (OASI)
- Invalidity insurance (IV)
- Loss of earnings compensation insurance (EOI)
- Family allowances (AF)
Optional insurances:
- Pension fund (second pillar)
- Accidents at work (UVG)
- Non-occupational accidents
Insurances that cannot be taken out:
- Unemployment insurance (UI)
This blog article does not constitute legal advice, it is made available “as is” and makes no claim to completeness or accuracy. Hoop makes no warranty or liability as to its content. This is excluded to the extent permitted by law. Use is at your own risk. Legal advice is recommended if necessary.
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