When deciding to start a business, one of the first and most important decisions involves choosing the legal structure of your company. This step is crucial because it affects multiple aspects of your business, including personal liability, taxation, management, and access to financing. Carefully examining the available options is therefore essential to maximize benefits and minimize risks.
In this guide, we will explore the main types of business structures in Italy and the key factors to consider when selecting the one that best suits your entrepreneurial needs.
What does “company” mean?
First, it is important to clarify what we mean by a “company.” A company is a legal entity created by one or more individuals to carry out an economic, commercial, or productive activity. Companies in Italy can take various forms, depending on the number of partners, the type of business activity, and the level of liability each partner is willing to assume.
In Italy, the main categories of companies are partnerships (società di persone) and capital companies (società di capitali). Additionally, there are other specific legal forms, such as cooperatives and European companies (Societas Europaea).
Partnerships (società di persone)
Partnerships are characterized by the absence of a separate legal personality. This means that the partners are personally and jointly liable for the company’s obligations. There are three main types of partnerships in Italy:
Società Semplice (Ss) – Simple Partnership
Mainly used for non-commercial activities such as managing family assets or agricultural businesses. There are no specific capital requirements, but partners have unlimited liability with their personal assets for the company’s debts.
Società in Nome Collettivo (Snc) – General Partnership
In this structure, all partners are jointly and unlimitedly liable for the company’s obligations. This type of company is ideal for small commercial businesses where mutual trust among partners is crucial.
Società in Accomandita Semplice (Sas) – Limited Partnership
A Sas has two categories of partners:
- General partners (accomandatari): They have unlimited liability and manage the company.
- Limited partners (accomandanti): They are liable only up to the amount of their investment and do not participate in management.
Partnerships offer several advantages, such as relatively low management costs and a simple organizational structure. However, unlimited liability of partners can pose a significant risk, especially in case of financial difficulties.
Capital companies (società di capitali)
Unlike partnerships, capital companies have a separate legal personality distinct from their partners. This means that the company itself is liable for its obligations, and partners’ liability is limited to the capital invested. The main types of capital companies in Italy include:
Società a Responsabilità Limitata (Srl) – Limited Liability Company
One of the most common forms for small and medium-sized enterprises (SMEs). It requires a minimum capital of €10,000, and partners’ liability is limited to their investment. This structure is flexible, allowing for streamlined management and moderate operating costs.
Società a Responsabilità Limitata Semplificata (Srls) – Simplified Limited Liability Company
Designed to facilitate business creation, especially for young entrepreneurs. It can be established with a minimum capital of €1 and does not require notary fees for the articles of incorporation. However, its simplicity can sometimes affect credibility in the eyes of investors or creditors.
Società per Azioni (Spa) – Joint-Stock Company
Typical for large enterprises. Requires a minimum capital of €50,000, divided into shares that can be freely transferred. Spas are subject to strict regulatory and transparency requirements, making them suitable for businesses operating on a large scale or seeking access to financial markets.
Società in Accomandita per Azioni (Sapa) – Partnership Limited by Shares
Similar to a Sas, but the capital is divided into shares. General partners manage the company and have unlimited liability, while limited partners are only liable up to their investment.
Capital companies provide several benefits, such as limited liability that protects personal assets, easier access to financing and investment, and a professional, scalable structure. The main disadvantage is a more complex management process with higher administrative costs compared to partnerships.
Factors to consider when choosing a legal structure
Capital and investment needs
If you plan to make significant investments, it is advisable to choose a capital company, such as an Srl, which allows easier access to credit and alternative financing methods like equity crowdfunding. Sole proprietorships and partnerships may face challenges in securing large-scale financing.
Personal liability
Liability is a critical factor. If your goal is to limit personal risk, a capital company such as an Srl or Srls is the most suitable choice, as liability is limited to the company’s share capital. Partnerships, on the other hand, expose partners to unlimited liability, meaning personal assets are at risk if the company faces debts.
Taxation
Tax considerations are essential in choosing the right structure. Sole proprietorships and partnerships are taxed personally through IRPEF (personal income tax), which can be burdensome for high incomes. Capital companies are subject to IRES (corporate income tax), allowing more flexibility in tax planning and potentially reducing the overall tax burden.
Management and bureaucracy
Sole proprietorships and partnerships have simpler management and fewer bureaucratic obligations, with straightforward accounting requirements. Capital companies, however, require more complex management, including preparing annual financial statements and maintaining detailed accounting records. Modern business management software can significantly simplify these tasks.
Conclusion: which legal structure to choose?
Choosing the right legal structure depends on multiple factors, including the level of investment, risk tolerance, tax considerations, and management complexity.
For entrepreneurs looking to grow rapidly, make larger investments, and protect personal assets, an Srl or Srls is often the best choice. Partnerships such as Snc and Sas are more suitable for small family businesses or for those seeking direct and shared management of their business operations.
Consulting an experienced legal and business advisor before making a final decision is highly recommended. A professional can guide you in selecting the structure that best aligns with your goals, financial situation, and growth strategy.
