Ask Albatross: Setting Up or Switching to a Limited Company

by Alex Clarke

April 23, 2024

Disclaimer: At Albatross, we're your expert accountants, demystifying the labyrinth of taxes without the jargon. But remember, the info here may not be a one-size-fits-all for your situation. Reach out to us for the latest tailored advice.

Thinking about diving into the business world? Buckle up because it's time to choose your legal form. Whether you're starting from scratch or switching lanes, options like sole proprietorship or the coveted limited company (SA or Sàrl) await.

Tip: In this article when we refer to limited company we mean SA or Sàrl structure.

At Albatross, we're all about guiding entrepreneurs through the maze of business structures. Today, we're skipping the legal and detailed social insurance jargon and diving straight into the tax perks and pitfalls of setting up or switching to a limited company

The Tax Adventure Begins

When it comes to tax planning, the sole proprietorship life keeps it pretty straightforward. But hold onto your hats, because a limited structure offers a whole new world of advantages:

  • More flexible in terms of distribution: Ever dreamed of paying yourself a juicy salary, bonus, or dividends? A limited structure lets you indulge in these perks, making it a tempting offer compared to flying solo.
  • Retirement planning flexibility: While self-employed folks can access the pension game voluntarily, it's the limited companies that take the prize for flexibility. Think of it as your golden ticket to retirement planning bliss.
  • Navigating the tax rollercoaster: With fluctuating incomes, tax planning can feel like riding a rollercoaster blindfolded. Limited structures offer more stability and flexibility, making tax planning a smoother ride.

Is Limited Life for You?

Sure, the grass might seem greener on the limited side, but it all boils down to your personal and professional situation. Depending on your long-term business strategy sticking to the solo route might still have its perks.

For example, are you thinking about selling your business or closing shop? Limited structures tend to offer more tax-efficient exits at a younger age. However, in some fields, it may be more attractive to exit as a sole trader at an older age.

Navigating the Legal Labyrinth

Setting up a new one:

Before you pop the champagne for your new limited company, remember, that there's more to it than just tax perks. Legal and social insurance hurdles like liquidation timelines and minimal capital requirements as well as retirement planning add complexity to the mix.

Simulations are your best friend here (and, guess what? We here at Albatross love simulations), helping you decide if you've picked the right structure for your business. If you are already active:

If you're already rocking the sole trader status, transforming into a limited company might be within reach and a possibility, especially if your balance sheet is looking sharp and you have been going for a few years already without needing to pay the minimal capital requirements of 20k CHF for example if you create a Sàrl

Summing it Up: Plotting Your Tax Journey

Launching into the limited company realm? Strap in for a 2-5 year tax planning adventure to make it worth your while. Every business and entrepreneur is unique, so a deep dive into your personal and professional landscape is essential.

Remember, the path to tax efficiency is paved with personalized strategies. Ready to set sail on your limited company voyage? Let's craft a tax plan that's tailor-made for your success!

Contact us, and get started on your adventure with Albatross.

Photographs by Hayley Hay Photography