Using a practical case, the advantages of converting a sole proprietorship or partnership into a legal person are presented. The optimization possibilities of taxes, social security and personal liability are shown. In addition, the advantages in the event of a persistently tense economic situation due to COVID-19 are explained.
The self-employed are exposed to a high tax burden due to the reported annual profit. In addition, social security contributions must be paid on this basis. Compared to corporations, there is little room for improvement. In the case of legal entities, the basic salary can be determined more flexibly. In addition, a bonus or a tax-privileged dividend can be determined individually when preparing the annual financial statements. With the retention of profits, the dividend payment can be postponed to a later date, so that the private tax burden can be planned. The tense economic situation caused by COVID-19 should enable taxpayers to lower taxes whenever possible, combined with increasing reserves and substance.
A conversion is tax-neutral, ie all hidden reserves of the balance sheet items are taken over by the legal entity by means of a transfer of assets. There are no emissions taxes. It should be noted that the sole proprietorship or partnership has existed for five years and the amount of the initial capital does not exceed one million francs. There is an additional benefit of tax-free capital gain if the converted company is sold at a later date. In addition, it should be added that with the conversion, the company succession is in a first step. For this purpose, the five-year lock-up period after the conversion must be observed. The possible solutions for occupational pension schemes can be individually designed for the overall concept.
Also worth mentioning are the elimination of joint and several liability for sole proprietorships and partnerships and the elimination of levies on liquidation profits.
We would be happy to show you one In practice, a comparison calculation. We are happy to advise you on a tailor-made solution.