Accompanied by doubts as to whether business ideas are well received or whether one's own perseverance is sufficient, some of these ideas disappear as quickly as they have come. Particularly paralyzing is often the thought of the complexity that independence can bring. Not to mention the immense financial, legal and organizational hurdles that spoil soup while cooking. Nevertheless, in the year 2016 more than 41´000 new companies were registered in Switzerland. This is far more than in the previous year. Is the achievement of self-employment really a book with a thousand seals? The answer is no. With the following tools and information we make you fit for the start of self-employment!
The business plan
Drawing up a business plan is demanding and time-consuming, that is true. But if you're afraid of doing it, it might be better to bury your project right away. Firstly, this is already a strong indication that the necessary commitment and perseverance for a successful business start-up are lacking. Secondly, a business plan is indispensable if you are looking for external investors or capital providers. Even those who do not need outside capital should urgently draw up a business plan (also called corporate plan).
This forces you to deal intensively with the future company, to put your idea to the test again, to recalculate the planned financing and to play through all possible scenarios for the future. It also protects a company founder from forgetting important aspects in the initial euphoria. This in turn minimizes the risk of making capital mistakes. Of course, this only happens if the business plan contains the most important elements.
“But even the creation of a small business must be carefully planned. The key to the idea is the unique selling proposition.”
The business idea
The decisive foundation is the business idea itself. Many rush into self-employment because they fear unemployment. But even the foundation of a small business must be carefully planned. The decisive factor in the idea is the unique selling proposition. If you want to set up your own business, first explain your idea to friends and colleagues. Only when there are no more questions does it have its final paper form.
The Founder
Banks or financiers want to be able to deduce from the business plan what qualifications the founder has, what insight he has into the industry and how he might acquire any missing know-how. It is advisable at this point to also deal with the psychological burdens of a start-up. Who wants to exist permanently as a self-employed person, needs an appropriate personality - and must be able to prove convincingly that he has it.
The legal framework
Theoretically, a shop quickly becomes a seminar room. But are the structural specifications fulfilled then? Are all the legal requirements fulfilled to be able to offer the service at all? Many founders completely ignore legal questions in the initial phase. It should therefore already be clear from the business plan that the founder knows all the basic conditions and has scrutinised them.
The customer benefit
Customer benefit is also an underestimated aspect. A business plan must always represent the customer's point of view, not the founder's: Why is the product/service not yet available? Why has the customer been able to cope without it so far?
Marketing and Sales
In order for the company to survive on the market, the potential customer must be made aware of the new business idea. It should be shown in detail where the market is, who the target group is and how they are planned to be made accessible. Is it about a product that is interesting for everyone and should therefore be made known to everyone? Or is it a niche product, such as a machine for making special tools? How the marketing and sales are structured depends on the answer to those questions.
The finances and the enterprise wages
It must be possible to explain exactly which investments are necessary and where the money comes from. The founder should also be able to explain what the cash flow looks like. That is why the business plan also contains a plan that lists when the first earnings are expected and how the company will be financed up to this point. This liquidity and profitability plan is the most important part of the business plan - and is often far too short. Many founders forget the issue of entrepreneurial pay in particular. This aspect is of elementary importance - and by no means only with regard to one's own livelihood.
“You have to show in your business plan that there will still be a market in ten years’ time, especially if you need outside capital for high investments.”
Future Prospects
What are the prospects for the business idea in the future? You have to show in your business plan that there will still be a market in ten years' time, especially if you need outside capital for high investments. Only then will the business idea be interesting for investors. However, one should also point out the risks. It must become apparent that a founder has dealt with all the negative aspects.
Social insurances
Unemployment insurance
If an employee loses his or her job, he or she is usually entitled to unemployment benefit (ALV) for a certain period of time. On the other hand, founders of a partnership and sole proprietors are not entitled to unemployment benefits because they are self-employed. All employees subject to AHV contributions and their employers must pay ALV contributions. Employers pay the ALV contributions together with the AHV contributions to their compensation fund.
Accident insurance
The accident insurance (UV, Unfallversicherung) is obligatory for all employees and employed persons. The insurance premium is paid by the employer. He can pass the premium for non-occupational accidents on to the employees. The UV pays the costs for the treatment of the consequences of accidents and occupational diseases. The founders of a partnership must insure themselves privately against accidents.
Health insurance
In Switzerland, health insurance (KV) is compulsory for the entire resident population. Persons in modest economic circumstances receive an individual premium reduction. Persons subject to compulsory insurance must take out insurance with a recognised health insurer. Self-employed persons must ensure that accident coverage is included in their health insurance. For the consequences of illness and accident, an additional loss of earnings insurance policy must be taken out. For self-employed people with pension obligations, it makes sense to take out a sufficiently large death risk insurance policy (private and business).
Family allowances
Family allowances are intended to partially compensate for the additional financial burden caused by children. Self-employed persons apply for family allowances from their family equalisation fund.
Maternity compensation
Erwerbstätige Frauen haben Anspruch auf vierzehn Wochen Mutterschaftsurlaub. Als Entschädigung für den Verdienstausfall erhalten sie achtzig Prozent des durchschnittlichen früheren Erwerbseinkommens, höchstens CHF 196.00 pro Tag. Die Mittel für die Mutterschaftsentschädigung stammen aus der Erwerbsersatzordnung (EO).
Compensation for loss of earnings
Anyone serving in the Swiss Armed Forces, Civil Defence, Red Cross or Civil Service is entitled to compensation for loss of earnings. The Income Compensation Ordinance (EO, Erwerbsersatzordnung) is based on the solidarity principle. Those who have compulsory AHV insurance also pay EO contributions.
Military insurance
Anyone who suffers an accident during a period of military service will be compensated by the military insurance (MV). The accident is financed from the federal budget.
Taxes
Taxation of corporations
When choosing the legal form of an entrepreneur, the focus is on risk and tax considerations. Stock corporations and limited liability companies (GmbH) are legal entities and are taxed separately from their owners. Corporations are taxed as companies, shareholders and partners pay taxes as private individuals. The profit is already taxed in the company. If companies distribute their profits or part of them as dividends to shareholders or partners, they count as income of these private individuals and are subject to income tax.
Mitigation of double taxation
The separation between private and business funds is clearer in the case of stock corporations (AG, Aktiengesellschaft) and limited liability companies (GmbH, Gesellschaft mit beschr’nkter Haftung) than in the case of partnerships. However, this separation leads to undesirable double taxation. In order to mitigate this effect, dividends are taxed at a reduced rate. Some cantons have already applied reduced rates for some time, and at federal level they have been enshrined in law with the Corporate Tax Reform II. However, only shareholders and partners with a qualified participation benefit from the reduced dividend taxation. A qualifying holding is defined as a share of at least 10 percent in a company. The reduction varies from canton to canton.
Additional taxes on equity
Double taxation does not only affect profits and dividends. A corporation also pays capital taxes on its equity. This is double taxation because the shareholders or partners have to declare their share in the company as assets and pay property taxes on it. As a rule, however, double taxation is much less important than double taxation of profits and dividends. In addition, the Confederation does not have a capital tax and some cantons take it into account for profit tax purposes. The tax authorities determine the value of the shares to be taxed as assets. It valuates the shares according to the so-called Praktiker method (see "Guide to the valuation of securities without a market value" of the Federal Tax Administration).
Tax-free capital gains
The sale of a corporation with a business activity is uncomplicated from a tax point of view. If a profit results, it is usually tax-free, because the sellers do not have to tax the proceeds from the sale of shares or master-shares in the share capital of a GmbH.
Tips for tax optimization
Dividends and salary comparisons
This question is probably burning under the nails of all companies. How can the company's profits be transferred into private assets at the lowest possible tax rate? Letting the profits accumulate in the company is not a long-term solution.
Basically, there are two options for the purchase:
The profits are paid out as wages and thus transferred to private assets or distributed as dividends.
wage remuneration
The payment of a higher salary reduces the company's profit, and income taxes are lower. However, social security contributions must be paid on the salary. This procedure increases the private tax burden, because the entire wage must be taxed as income. There is no infinite scope for the owner's wage: a completely excessive wage would put the relevant tax period on the agenda. It can classify part of the salary as a hidden distribution of profits, which causes the company's taxes on profits to rise again.
Social security contributions and income taxes speak in favour of dividends
The distribution of dividends has no impact on the company's profit and income taxes. However, owners of an AG or GmbH benefit from the reduced taxation of dividends. At the same time, dividends are not subject to social security contributions.
But even with the high dividend and low salary option, the company owner is not completely free. If the salary is too low, the AHV intervenes because it loses amounts. Whether the salary is appropriate can be deduced from cross-comparisons. If there is an obvious imbalance between work performance and remuneration, the authorities can order offsetting up to the amount of a salary customary in the industry.
For a good ending
So, it's almost done! All previously mentioned aspects have to be on the to-do-list, they are essential on the way to independence. Don't forget to clarify your liability in order to avoid unpleasant surprises. Otherwise, all you need now is the location, the choice of the right legal form, a pinch of branding and you're ready to go.
We wish you much success and above all, much fun in realizing your ideas!
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