A Guide to Starting a Business in Italy: Main Types of Companies (Part 1 of 3)

Looking to establish your business in Italy? Who can establish a company in Italy? We break down the eligibility criteria for foreign investors. Navigate the complexities of company structures with this guide below.

Discover the key considerations for each type:

– Limited Liability Companies (S.r.l): Traditional vs. Simplified – which offers the flexibility you need?

– Public Limited Companies (S.p.a.): From share capital requirements to governance systems, make informed decisions.

– Partnerships: Assess the balance between unlimited and limited liability and ensure your business name reflects your partnership type.

 

What is a Branch of a Foreign Company?

As opposed to the establishment of an Italian company, a foreign branch is not a separate legal entity but a foreign “unit” of the mother company. For tax purposes, branches are considered as permanent establishments and are therefore subject to taxation in Italy. Thus, they shall keep their own books, submit VAT and income tax returns to tax authorities (Revenue Agency or Agenzia delle Entrate) each year, and file the annual report of their foreign company with the Italian Registrar of Companies. Discover more on branches in Italy.

What is a Representative Office of a Foreign Company?

A representative office is a registered office of a foreign company that carries out in Italy, merely exclusively, promotional and advertising activities, collection of information, scientific or market research. The representative office has only an auxiliary or preparatory function to facilitate the foreign company’s penetration in the Italian market. A representative office can open a bank account in Italy.

In summary, a representative office may only carry out promotional activities, not business activities (production, sales, or services), and its manager has no power to decide or to bind the foreign company. Discover more on representative offices in Italy.

The Main Types of Companies in Italy

Company formation in Italy is a broad topic, as there is a wide range of legal forms for setting up companies depending on the company’s organization model, its business objectives, the level of capital to be committed, the extent of liability of the founders as well as tax and accounting implications.

Italy’s corporate law primarily differentiates between limited liability companies and partnerships.

Limited Liability Companies

In Italy, there are two main types of limited liability companies:

– Private Limited Companies by Quotas (società a responsabilità limitata or S.r.l.) including “Traditional S.r.l. or “S.r.l.” and “Simplified S.r.l.” or “S.r.l.s.”);

– Public Limited Companies by Shares (società per azioni or S.p.A.).

Limited liability companies are generally characterized by:

– Limited liability for the company owners, i.e. each owner’s liability is limited to the cash or assets he/she has contributed to the company;

– Separation of ownership and managing powers; hence the owners of the company are not necessarily also the directors of the company, and directors are not necessarily company owners;

– Freely transferable shares;

– Need to have at least one shareholder and one director.

Partnerships

In Italy, there are two main types of partnerships:

– Società in nome collettivo or S.n.c.;

– Società in accomandita semplice or S.a.s.

Partnerships (società in nome collettivo or S.n.c. and società in accomandita semplice or S.a.s.) are generally characterized by:

– Unlimited joint and several liability of the partners for the company’s obligations;

– Each partner acts as a director of the company with managing powers;

– Non-transferability, either inter vivos or mortis causa of the partner status except whereby authorized by all other partners;

– Need to have at least two partners;

– Tax transparency.

Read more articles by Lexia Legal Services

Please keep in mind that it is important to consult with an Italian lawyer who can provide up-to-date information and guidance specific to your situation. Lexia offers expert legal assistance and has a team of experienced lawyers who are well-versed in the requirements for starting a business and can assist you during the process. Contact them using the form below for more information.

Featured image by Blake Wisz