Going Freelance in Switzerland: Sole Trader vs GmbH, Social Contributions, and the VAT Threshold

Three realistic options, one obvious default for most freelancers:

The Einzelfirma wins on simplicity: you can start trading immediately under your own name. Two formal triggers to know: once turnover exceeds CHF 100,000, entry in the commercial register becomes mandatory (below that it is optional but adds credibility), and at roughly the point where revenue or liability keeps you up at night, a GmbH is the natural upgrade — CHF 20,000 capital, limited liability, more bookkeeping.

This is the step newcomers miss, and it matters more than the legal form. In Switzerland you are not self-employed because you say so — your cantonal AHV compensation office (Ausgleichskasse) must formally recognise it. They look for the classic markers of independence:

• Multiple clients — one dominant client looks like disguised employment.
• Your own invoicing — your name, your letterhead, your payment terms.
• Your own business risk — your equipment, your workspace, your insurance, your chance of loss.

Until recognition comes through, you risk being treated as an employee — with back-dated employer contributions owed on your income. File the application before your first invoice, not after.

Employees see one deduction line and forget about it. Freelancers pay the whole machine themselves:

The two numbers that change behaviour: the ~10% top AHV rate with no employer half, and the CHF 100,000 VAT threshold — cross it and registration with the ESTV is mandatory (rates 8.1% standard, 2.6% reduced, 3.8% lodging). Below it you are exempt, though voluntary registration can be smart if your clients are VAT-registered businesses.

The weekly mechanics that keep a Swiss freelance business clean:

• Invoicing. Sequential invoice numbers, your AHV number once recognised, and your VAT number once registered. Keep copies of everything — the Ausgleichskasse and tax office can both ask.
• Provisional tax. The canton bills you on estimated income. A strong year means a painful catch-up bill later — move ~20–30% of every invoice into a separate account the day it is paid. Our tax calculator gives a rough canton-level number to target.
• Insurance. Health insurance is your own anyway, but now add accident insurance (mandatory to arrange yourself) and seriously consider daily-allowance and professional liability cover — remember there is no ALV safety net underneath you.
• Pension. A voluntary 2nd pillar plus the enlarged 3a deduction (20% of net income, ~CHF 36,000 cap) is the tax lever that makes freelancing competitive with employment — see our Pillar 3a expat guide and the three-pillar explainer.

• Cantonal AHV compensation offices (Ausgleichskassen) — self-employment recognition and contribution scale.
• Federal Tax Administration (ESTV) — VAT registration threshold (CHF 100,000) and rates 8.1% / 2.6% / 3.8%.
• Federal Social Insurance Office (BSV/OFAS) — degressive AHV/IV/EO scale and minimum contribution.
• Central Business Register (Zefix) / cantonal commercial registers — registration duty above CHF 100,000 turnover.

Apply for AHV self-employment recognition at your cantonal Ausgleichskasse before your first invoice, open a separate account for tax money, and run your expected revenue through the estimator above. If you are still employed, the salary calculator shows your current net for comparison — and the HowToSwiss canton checklist keeps the admin trail in order while you set up.