How we use our LLC to save money in 2025
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In 2023, we created an LLC for the blog. The goal was to separate the assets of the blog from our own, and to separate liabilities as well. But a side effect of this change is that we can also optimize a little our finances by using our LLC.
In this article, I want to go over how we legally use our LLC to save money. Some of these tips are how to make better use of an LLC, but some are simply things that are better with an LLC than with a sole proprietorship.
Switching to an LLC
In 2023, we switched to a Limited Liability Company (LLC) for the blog. Before, we were operating as a sole proprietorship. We had two main reasons for switching:
- We wanted to separate our assets from the blog assets and have a clear separation of liability.
- We wanted to keep some money into the company, to save on taxes.
The reason number one was much more important for us than the second reason. Indeed, optimization was not the priority, but it was a good benefit.
I will not go into the details of LLC in this article. If you are interested, I have an article about creating an LLC.
In this article, I want to go over how people with an LLC can use it to optimize their finances. The goal is not that everybody creates an LLC. The goal of this article is to be transparent about how we use our LLC. Hopefully, with that, you will have a better idea of how people with a company have an advantage.
Finally, I want to insist that you do not abuse any of these tips. Some people use their companies in illegal ways to save money. It is not my intention to suggest any of you do that! On the contrary, I would strongly recommend you refrain from any abuse.
Keeping some money in the company
The first thing we do differently with an LLC is to keep some income into the company. This is very different from what we were doing with the sole proprietorship.
What is the difference? This makes a huge difference in our taxable income. Before, all the income from the blog was added to our personal income. Now, my wife gets a fixed salary from the blog. This salary is added to our taxable income. But the rest of the profits stay within the company. The difference is that the profits from a company are taxed much lower than the income of a person. As a result, we save on taxes.
Currently, we extract about a third of the income of the blog, and we want to reduce it in the future.
One question you may ask is what we are going to do with the money left in the blog. This is an excellent question because we cannot use this money for personal expenses. Since my plan is to retire early, we can later raise the salary from the blog once I have no salary from regular employment. So, we are basically delaying income to a future when we will have lower tax rates.
And another good question is: What are we doing with the cash? We are planning to invest that cash, following our usual portfolio. We have waited (procrastinated) too long, but after a year, we will soon start to invest. With that, we are not keeping too much cash and we will reduce our opportunity cost. In the future, this could also allow us to take a margin loan, if necessary.
Deducting some expenses from taxes
In our personal situation, there are not many things we can deduct from our personal taxes. However, in a business, all expenses can be deducted from the taxable income since we are taxed on our profits. Therefore, it makes sense to pay some things from the company expenses instead of paying them from our personal expenses.
Of course, and I want to emphasize this, this should only be done for expenses that are related to the business. If you start to expense everything to your business, you will be in trouble.
In our case, since the business is entirely done on a computer, we are expensing computer and laptop expenses. We are also expensing some office expenses like paper for the printer or pens (yes, we still use pens!). And our internet bill is now paid by the company as well. I also expense the coffee beans we use.
On the other hand, we do not pass all our meals as business expenses because that would be unrelated. But if I do a lunch with someone related to the blog, I will expense it. And we do a business meal once a year with my wife (we are the only two working on the blog). Other than these, I would rather not use the company for any other expenses.
Buying a car with the company
The last thing we are doing with the company is that we bought our car with the company instead of buying it ourselves. This is similar to the previous section, but also slightly different.
The main point is that car-related expenses are deductible from the company taxable income. And this is also valid for leasing. This is different from personal taxes where leasing cannot be deducted while car loan payments can be deducted. So, we can deduct the leasing, as well as the insurance, the fuel and all the maintenance.
There is one important difference with this expense. Since the company has a car and its employees can use them, this gives the employee an advantage. So, the income of these employees must be increased. This is not a real salary, but this will add up to the taxable income of the employees. And social deductions must be paid on this part of the salary. Therefore, the salary the company is paying to my wife has increased since we bought the car with the company. And there are laws on how much should be added to the salary for that.
Some people may argue that as an internet business, we do not need a car. It is not entirely true because I often meet people in other cities. Recently, I went to Bern and Zurich in the company’s car. And I frequently go to Fribourg for that as well.
Conclusion
I hesitated writing this article because it can cause some controversies about how people use LLCs (and other companies) to optimize their finances. But I felt I owed it to my readers to be more transparent.
Overall, we can move several of our expenses to the blog. As such, these expenses are deducted from the taxes of our LLC. Compared to what we were doing before, we are also keeping some cash in the company, so our salary is lower than the profits of the company. The goal is to delay that income to a point where our taxes are lower.
As such, we have an advantage over people without a company, since most people cannot deduct these expenses. And it also means our expenses (shared in our monthly updates) are lower than what they are. For instance, we used to pay internet ourselves, now we have a business internet plan, paid by the blog.
What do you think about this? If you have a company, how are you using it?
Recommended reading
- More articles about Business
- More articles about Earn
- How to create an LLC in Switzerland
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Hi Baptiste,
Thanks for this really interesting article !
You mentioned purchasing your car through your LLC in Switzerland. I’m curious to know how long you’ve had it and whether you’ve ever been audited regarding this expense. Did you deduct the entire cost of the vehicle through your LLC, or have you applied an allocation method to separate personal from business use? I’m asking because making only a few trips per year may not fully justify deducting the entire cost of the car as a business expense.
Thanks in advance for sharing your experience!
Hi Antonio
The car is only from this year and in leasing. I deduct the costs of the leasing from the company net income. The private part is covered through “virtual income” given to my wife, who is an employee of the LLC. I believe this is the correct way to deal with it.
What are the running costs for accounting?
How stock brokers see you now? As a professional trader?
Accounting is really cheap since I do it myself. I pay for Banana accouting which is about 100 CHF per year.
The LLC is separate from the personal entity, so my personal entity did not change. But if you want a corporate broker account, then you will have to pay capital gains tax on the stocks.
Thanks a lot fot the info. I plan to do some consulting in addition to my job (after declaring to my employer).
I want to start LLC for this reason. However, the one reason I am procrastinating to do so is that I heard that I will not be able to receive unemployment benifit if I loose my job from the main employer (that is not part of the LLC).
Is that true? If so is there any pointers on what are the causes around non elegible for unemployment benifits?
Hi Anand
I think this is true indeed. But I don’t think it always applies. I think that if you have a major main employment and a minor small LLC, it will not be acted upon. However, it’s true that it may make unemployment benefits much more complicated.
Great article thank you. Does it make sense to setup an LLC and buy property through it, instead of under your personal name?
I think it does, yes. But you have to consider your own taxes and whether you need the money or not now.
I also created an LLC. Bravo Baptiste, you have the ability to simplify and clarify subjects.
Thanks, Dror! I am glad my writing is simple! Good luck with your LLC!
Very nice!
May I ask how the blog is making money? Advertisement? Books?
Thanks
Hi TD
It’s mostly referral codes and links. Recently, the ebook is doing some income and I wish I could grow that further.
Hi,
Sorry if I’m asking a stupid question. But don’t you get double taxation in that case?
Let’s say you got 10K CHF into your company account.
With sole-proprietorship, this goes directly to your personal income, and tax is paid.
With LLC, let’s say you keep that 10K on the company account (to pay yourself in later years when income would be lower). Since it is a profit now – you have to pay company profit tax. In my understanding it is at least 11.5%.
Now, many years later, you will pay this 10K CHF to yourself as a salary. Now, you have to pay personal income tax on this money.
As a result, with
When you pay sole-proprietorship you pay X% tax (depending on your total income).
With LLC you pay 11.5% + Y% (depending on your total income in later years).
The idea is that Y is smaller than X. But is it 11.5% smaller?
What am I missing?
Best regards,
Artem
Hi Artem,
It’s not a stupid question. This only makes sense if the gap between X and Y are larger. For me, in Fribourg, with a high income, it makes sense. My marginal tax rate is above 40%, so significantly higher than 11.5%.
But it’s probably more complicated. We could get some of the income as dividneds. And on top of that, we also have to factor the fees for the income from the company.
I think it’s worth it in our case, but I may be wrong :)
You are right Artem, it’s not so easy as there is double-taxation. It’s not that everybody could set up a LLC and only pay 15% tax vs 40% personal marginal income tax.
With the LLC, you pay tax on the net earnings, and later when you want to move the funds to your personal bank account, you have to pay income tax on those funds again. But then you could save on AVS (if paid as dividend) and there are other things to consider.
I don’t think it saves a ton of taxes and it’s probably a bad idea if you consider the opportunity cost (investing the profit from the company into stocks in your private account where you don’t pay capital gains taxes).
What about investing the rest of your money into crypto? Are you planning to do that? If yes I would be very interested to read on the details of how you plan to do that.
I am not planning to gamble anything in crypto :)
Does it make sense to hold a big amount of cash in the LLC? For example, 50k CHF.
It could make sense to cash this out early, and to invest it privately where you don’t pay capital gains taxes…
Hi Marco,
I don’t think it makes sense. It’s a fair point that a company has the disadvantage of capital gains taxes. However, individuals have the disadvantage of much higher taxes (I pay about 40% marginal tax rate, the company less than 15%). So I think that keeping the money invested in the company makes sense.
You pay 15% tax for the company on net income plus you pay the 15% on the capital gains.
But what happens when you distribute the earnings after taxes / proceeds from stock sales to yourself as a dividend or as a wage to your wife? You have to pay income tax on that (double taxation of income).
I think in the end the effect (withholding net income vs payouts) is roughly the same (unless your net income varies a lot), and if you plan on investing the net income from the GmbH into stocks, it’s better to move those funds into your private possession early to avoid corporate CGT.
Interesting, I will need to do some more math on that! Thanks for the details.
What about rent Baptiste?
Your LLC takes office space in your home, if 20% of the floor space (office, kitchen, restroom) is used to run the business, then I’d argue that you should be able to pay yourself a rent for that or, alternatively, deduct some expenses to the company (electricity, water, furniture, heating, etc.).
It probably doesn’t make sense for the LLC to pay you rent directly, as that rental income would be taxable on your personal side, which defeats the purpose. However, an interesting approach might be for the LLC to rent your flat and for you to only pay 80% of the rent back privately, leaving 20% optimised within the LLC. I’m not sure how the tax office would view that, though – it might be worth exploring carefully! 😅
That’s a good point. If the company was to own the place, it could be more interesting. But it’s a bit late, I am not going to pay land register and notary fees to transfer it :)
It’s a zero sum game at first glance. The company has expenses (eg 500 CHF per month for rent), but Baptiste has income (CHF 500 from rent).
With an “Einzelfirma”, you reduce net income of the company and therefore you reduce the AHV payments, so you save approc CHF 50/month.
And you can have the company pay a bit of Nebenkosten for electricity/water.
Hi ILS
Yes, in theory you could. But I don’t think it’s a positive change. If I rent some of my home to my company, I have to declare this as income, increasing my income tax and decreating the company income tax. Since I pay more taxes than the company, it’s not looking. It may be compensated by reducing the imputed rental value, but I don’t think it helps enough.
I think the alternative of paying for some of the heating/electricity makes more sense but it seems complicated for too little difference.