Entrepreneurship vs employment

Freelancer and unemployment money? I thought it wasn’t possible.

You don’t need to have your own company to work as a freelancer. You can work with a payroll company. They don’t hire you with an Arbeitsvertrag, but with a Einsatzvertrag. I haven’t heard of this before and it’s not possible in Germany where freelancers usually have their own GmbH. As you are employed you can apply for unemployment benefits and there’s no risk for Scheinselbstständigkeit. If you didn’t apply for enough new positions at the last three months of your contract you might not get the money for the first one or two months but that’s the same with a perm position. I didn’t need unemployment benefits until today but I know freelancers who did and it reduces the risk of freelancing a lot. The negative aspect is that this prevented me from founding a startup for years and most customers won’t work with you directly but only with a payroll company. They cost about 5% if you come with an existing project or 20% if they find a project for you.

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The payroll company is a good transition solution, but in the long run it costs a lot more compared to having your own company. That said you don’t get unemployment benefits when you own a company.

I looked into the topic a while back and the best rate I could find was around 3% so with a turnover of CHF 100’000.– (4-month work full time) you have already paid more than what you would pay a notary to set up a limited liability company. Plus you get to know what is means to run a company, and maybe scale it up eventually :slight_smile:

With a limited company, you can’t have unemployement. You will be double taxed if you pay dividends, you need to managed the billing, taxes, ect.
I don’t find 3% outrageous.

That’s true, but you can do so much more with a company. It’s really not just about receiving money from it. Otherwise I agree that using a payroll company is a probably a no-brainer.

Like what? On which area? I would be interesting to know the main advantages.

You can use the money to invest, for instance in the 2nd pillar, in assets for the company, or hire people and grow, or use that as an investment vehicle or a holding. Dividends from one sub-company to a parent one are not taxed if I’m not mistaken.

Then regarding double taxation of dividends you have to put that in perspective, in Lausanne for 2020 the tax rate is around 16%, dividends are taxed on 70% of their amount as income tax, so if your marginal tax rate is not that high (you can adjust your income accordingly) and if you take into consideration the fact that this money is not subject to AVS/AI/AC/LPP/others the amount you get is not that different.

What I’m saying is while the money you get out of it is not that different whether you use a payroll company or your own, there is much more to learn owning your structure. If you go back to the meaning of FIRE, being independent could also mean not having to use returns of the market (other people’s companies) to live.

In the end, the best investment is in oneself, that’s my belief.

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Main advantage: you are your own boss. Period! I don’t do any payroll contracts, because it again means I’m working for someone else.

Other advantages:

  • I can decide if I pay myself salary or if I take out money via dividend. As @romzzz already said, you don’t have to pay AHV/ALV/EO on this amount.
  • yes, you have double taxation, but you don’t have to pay taxes on 100% of your dividends. Depending on the canton, you only have to tax 50% of your dividends (while you get the other 50% tax-free, after paying for the profit tax for the company of course)
  • much more flexible which pillar 2 provider and plans to choose

There’s one thing to keep in mind with dividends though: you have to pay yourself a market-equivalent salary first. Some years ago, that would have been 120k for a managing director (Nidwalder model). Nowadays, you have to use the Lohnsalarium and check how much someone with your age/profession/eduation is earning in your canton. Only then, you are able to pay out the rest as dividends.

I’d be really curious to hear more about that? Do you have any links?

I think that’s really a question of your perspective. I don’t have a boss as well. I can choose the project and don’t have to justify myself or discuss some stupid rating from a boss who doesn’t even work with me. What I do have is customers but that’s the same when you register your own company. The main reason why I’d like to have a company is because it can scale. I have side projects I can’t monetize for example.

Of course it’s always a question of perspective :slight_smile:
Ok, let’s put it another way: I’m not dependent on anyone else (payroll company) at all, aside from customers of course :wink:

The laws are Art. 69-70 LIFD/DBG and art. 28 LHID/StHG

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