Do you want to ensure your financial security even while self-employed? From startup capital to retirement – we answer your questions about the main financial hurdles.
When you become self-employed, it’s important to know if you will be able to support yourself financially. Do I have enough startup capital? How can I remain financially independent over the long term? How can I save for retirement? Whether you have questions about starting your company, insurance or securing your future retirement, here you will find the answers to the main questions on how to ensure your financially security while self-employed.
Sole proprietors and partners of a business partnership (general partnership or limited partnership) are considered to be self-employed persons. From the point of view of Swiss social insurance, anyone who works on their own behalf and for their own account and bears the financial risk of doing so is self-employed.
The owners and managing directors of a limited liability company (GmbH/Sàrl) or stock corporation (AG/SA) are employed by their own company. For this reason they are not considered to be self-employed.
Forming a sole proprietorship does not cost a lot. As with a general partnership, there is no minimum investment required to set up a sole proprietorship. You only need CHF 80 to make the necessary entry in the commercial register. If you’d like a consultation on the different options for setting up a company, then you should budget up to CHF 1,000.
In addition to the startup costs, you also need to consider the investment costs. Do you have too little cash to cover these costs and can’t get a loan to cover your startup costs? One option available to you within the first year is to use your Pillar 3a savings so you can save your equity.
Self-employed costs are made up of formation costs, investment costs and operating costs. The following example demonstrates the individual costs involved in setting up your own company.
The actual cost of becoming self-employed can vary enormously. Someone who starts up an online shop from their home office will need far less money than someone who opens a boutique downtown.
Still, we want to give you a rough idea of the actual costs involved in becoming self-employed. Our cost example is an estimate of the expenses for a sole proprietorship with a small furnished office. The estimate focuses on the startup year. Regarding salary and staff, we assume that the founder will work full-time in the beginning and has a part-time employee who works 20 hours a week.
Click here to download the cost overview to use as a checklist for self-employed persons in Switzerland free of charge. This way you can keep the expenses for your independent company under control and grow your financial independence at the same time.
Have you already entered your out-of-pocket expenses? Congratulations! You have completed the first step in your financial planning.
Financial planning is a key element in a business plan. It shows you the economic feasibility of your business idea: Is it good enough to finance your starting costs and to generate a profit long term?
A good financial plan will give you an idea of how much revenue your company will have to take in and how much profit will remain after taxes and fees. This means you have access to sufficient capital right from the start and are able to request funding in good time – regardless of whether you need a bank loan or other borrowed capital to finance your business idea.
Formation, financing a concept or growth: Whether it’s better to borrow or use your own money depends on the industry and the individual company. The optimum ratio for raising capital can change depending on what phase your company is in. There are also other options besides bank loans. The main financing options are:
Yes. You can use the money you’ve saved in your Pillar 2 (OPA occupational benefits) to help fund your self-employment. To do this, the following conditions need to be met:
Contact your pension fund for more information about withdrawals.
If you want to withdraw the savings from your Pillar 3a account (restricted individual retirement account) to fund your self-employment, you will have to pay out your entire savings into that account and pay tax on it.
There are no restrictions on withdrawals from your Pillar 3b account (unrestricted individual retirement account). You can withdraw your savings at any time.
Contact your occupational benefits institution for more information on using your Pillar 3 savings.
The earnings from your self-employment equal the taxable income of your sole proprietorship. Which in turn equals your company profit (also called net profit).
As the owner of a sole proprietorship, the company profit automatically becomes your salary. In accounting, it is declared as a personal withdrawal since you are not actually an employee.
Net income is equal to the annual earned income for self-employed persons. You will need it to calculate your taxes, for instance.
The amount of revenue you will need depends on many factors. Figure out what personal and business costs you have for each month. Incidentally, a rule of thumb you can use is that when you are self-employed, your turnover needs to be two to three times the net salary from your previous job.
How much is my work worth?
Finding the right number of working hours is a balancing act:
To calculate your profit, you need two figures, each covering the same period:
Now deduct your total business expenses from your total income, and this will give you your income from self-employment. This equals your profit for the relevant time period.
Yes. If the revenue of a sole proprietorship is less than CHF 500,000, you have to keep accounts of your income, expenditure and assets at the least.
If your sole proprietorship takes in over CHF 500,000, then you are required to keep accounts and make financial reports as per the rules defined under the Swiss Code of Obligations (SCO 957 et seq.).
Self-employed persons who must pay OASI but are not in a pension fund can pay up to 20 percent of their net earned income into a Pillar 3 restricted fund. The maximum contribution you can make to Pillar 3 for 2023 is CHF 35,280 . As you do not belong to a pension fund, then in addition to investing, you should also insure yourself against being unable to work due to sickness, accident and death.
If you are self-employed and have a side job as well, then you are considered to be an employee. This means you can contribute a maximum of CHF 7,056 (2023 limit) into your Pillar 3 account since you are enrolled in a pension fund.
Since you are self-employed, you are no longer required to pay into a Pillar 2 pension fund. However, you can voluntarily insure yourself so you can accumulate pension fund savings to insure against the risks of death, disability and old age (Art. 4 OPA). There are various options to choose from:
Their vested benefits can then be transferred to the new pension fund.
Does your business support your family? Then offer your loved ones some extra security by making OPA contributions into a Pillar 3 account in addition to your regular savings. This will allow you to maintain your whole family’s usual standard of living if you’re unfit for work due to sickness or an accident.
And paying into a pension fund is a means of saving money. You can deduct these contributions from your taxable income as well as any income that is subject to OASI contributions. So not only are you saving for retirement, you’re also paying less in OASI and taxes.
Admittedly, it will take some time for you to really understand your finances. But once you get started, you will quickly get a handle on your costs and revenue. These five financial tips for the self-employed will help you build up a financial safety net and financial independence.
We are here to support you along every step of your journey into self-employment. Good luck!