Self-employment or limited liability company (GmbH)? It depends!

Self-employment and taxes: a tedious topic explained in 3 minutes.

There are many reasons why you should start your own business. Being a boss is usually better than having one - and, if successful, more lucrative. Which brings us to the vexed subject of taxes. Because out of the money you earn, the government wants a cut of it.

"How much?" you're now asking yourself. "It depends," we can only answer. Because tax law is complicated and boring. Here's the simple summary:

• As a self-employed person with a sole proprietorship, you pay tax on personal and business income and assets as a whole. Your income is the net profit. You pay value added tax on sales of CHF 100,000 or more. 
• If, on the other hand, you have a corporation (GmbH or AG), there is a clear separation between private and business finances. You pay yourself a salary, which you tax like "normal" employees. At the same time, your company pays taxes on profits.

So far, so simple. It gets complicated again when it comes to the question of which legal form is better from a tax point of view. Both types of companies offer advantages:

• As a sole proprietorship you do not have a double burden and your accounting is easier to keep. The lower your turnover, the more likely it is to pay off positively. 
• With a GmbH or AG, on the other hand, not all of the profit is automatically considered a salary. You can determine this yourself - with a certain amount of leeway. In many cantons, you are better off paying out part of the profit as a tax-privileged dividend. You can also break the tax progression by leaving part of the profit in the company. In addition, above a certain income you have more leeway with the pension fund and can thus also save taxes.

To make it simple again: The more you earn, the more reasons there are to choose a corporation. We will be happy to provide you with an initial assessment of whether this step is worthwhile for you, free of charge and without obligation. We know the subject well, after all, we are an owner-managed AG that also pays taxes. Just write to us at broker@caveo.ch