LIMITED PARTNERSHIP (SOCIETÀ IN ACCOMANDITA SEMPLICE)

Limited partnership (S.a.s.)

A limited partnership (S.a.s.) belongs to the category of partnerships and may be set up by two or more natural and/or legal persons in order to carry on a commercial activity in Italy.

The limited partnership (S.a.s.) is characterised by the presence of two categories of partners:

    • the managing partners, who are exclusively responsible for the administration and management of the partnership and are jointly and severally liable for the fulfilment of the partnership’s obligations. Should any of these partners change, a variation of the memorandum of partnership must be completed;

    • limited partners, who are not responsible for the administration and management of the partnership and are jointly and severally liable for the fulfilment of the partnership’s obligations to the extent of the conferred quota, with certain exceptions regulated by law. The change of these partners does not entail a variation of the memorandum of partnership.

The partnership’s name must contain the name of at least one of the managing partners and an indication of the type of partnership. If the limited partner consents to his name being included in the partnership’s name, he shall also be liable without limitation and jointly and severally towards third parties for the partnership’s obligations.

Administration and representation

Limited partners may not carry out administration activities, nor deal with or conclude business in the name of the partnership, except by virtue of a conferred special power of attorney for individual affairs.

Regardless of the title given in the partnership’s contract (memorandum of partnership and articles of partnership), a partner is a managing partner if, according to stated agreements between all partners, he or she must intervene in the administration and management of the partnership and assume unlimited and joint liability towards third parties.

Limited partners may perform their work under the direction of the directors and, if the partnership’s contract so permit, may give authorisations and opinions for certain transactions and carry out acts of inspection and supervision. They are then entitled to receive the annual communication regarding the financial statements and to check its accuracy, to consult the partnership’s books and other documents.

It should be noted that, unless the partnership’s contract provide otherwise, the consent of the managing partners and the approval of as many limited partners that represent the majority of the capital subscribed by them are required for the appointment of directors and for their removal (if the director was not appointed by the partnership’s contract). Unanimity is therefore not required.

What are the advantages of a S.a.s.?

    • There is no minimum capital requirement;

    • It is not mandatory to file the financial statements;

    • The containment of management costs;

    • Partners can request the liquidation of their income even during the year, without having to wait for the approval of a financial statements.

Disadvantages of a S.a.s.?

    • If during the life of the partnership only one of the two categories of partners (managing partners or limited partners) remain, the partnership is dissolved after six months if the absent category is not re-established;

    • In the event of bankruptcy or liquidation, the assets of the managing partners can be seized and they are liable with their unlimited assets;

    • All managing partners are obliged to be registered with INPS if the activity carried out is commercial or artisan. It is not compulsory for limited partners;

    • The partner’s quote of profits is subject to proportional taxation.

Taxation of S.a.s.

The S.a.s. pays only IRAP (3.9%) on the net production value realised, whereas it does not pay corporate income tax as the income produced will be transparently taxed in favour of the partners in their country of residence. However, if the partner is resident in Italy, he will pay IRPEF tax as indicated in the table below:

Taxable income

Tax rate

Tax due on intermediate income (by brackets) included in the brackets

up to €15,000

23%

23% of income.

Nothing is due for incomes up to € 8.174,00 (no tax area).

from €15,001 to €28,000

27%

3.450,00 + 27% on the part over €15.000,00

from €28.001 to €55.000

38%

6.960,00 + 38% on the part over €28.000,00

from 55.001 to €75.000

41%

17.220,00 + 41% on the part over €55.000,00

Over €75.000

43%

25.420,00 + 43% on the part over €75.000,00

 

How to open and start a S.a.s.?

In order to set up a S.a.s., it is necessary to have a public deed or a private deed that must be authenticated by the notary.

The partnership’s contract must contain certain specific information, such as:

    • name of all managing and limited partners;

    • the services that each partner undertakes to perform and the contributions of each partner;

    • the partnership’s name, which must contain the name of at least one of the managing partners and the indication that it is a S.a.s. If the limited partner agrees that his name is included in the partnership’s name, he too shall be jointly and severally liable towards third parties for the partnership’s obligations;

    • the powers of representation and administration of each partner;

    • the manner of distribution of profits;

    • the corporate purpose;

    • the registered address of the partnership.

After obtaining the VAT number, the limited partnership must be registered with the Register of Companies of the competent Chamber of Commerce within 30 days.

GENERAL PARTNERSHIP

The general partnership (S.n.c.) is a partnership characterised by the joint and unlimited liability of all partners for corporate obligations. Any agreement to the contrary has no effect vis-à-vis third parties. The S.n.c. can be used for both commercial and non-commercial activities.

The S.n.c. can be established by natural persons, both Italian and foreign citizens, by companies, and by non-corporate legal entities and requires a public deed in front of a notary who draws up the partnership’s contract (memorandum of partnership and articles of partnership).

The liability of the partners for the partnership’s obligations towards third parties is joint and several, unlimited and subsidiary, in the sense that the partnership’s creditor must first claim against the partnership’s assets and, only in the event of insufficiency, may act on the personal assets of the partners.

The protection of the integrity of the partnership’s capital in the s.n.c. is implemented through (i) the prohibition of distributing fictitious profits (not corresponding to an active capital gain); (ii) the optional reduction of the partnership’s capital due to losses (in case of losses, profits are not distributed until the capital is correspondingly reintegrated or reduced); (iii) the obligation for the directors to keep accounting records regardless of the commercial or agricultural nature of the partnership; (iv) the obligation to draw up an annual inventory (pursuant to Art. 2302 of the Italian Civil Code); (v) the prohibition for directors to return contributions to partners or release them from the obligation to execute them, except after the reduction of the partnership’s capital.

What are the advantages of the S.n.c.?

    • The general partnership is the simplest model of a commercial partnership and its activity can also be non-commercial;

    • For the S.n.c., as well as for simple partnerships, there is the principle that “the contract is not subject to special formalities”, so the parties can freely determine the content of the memorandum and articles of partnership within the limits imposed by the law;

    • A minimum partnership’s capital is not required and management costs are reduced as the accounting regime is the simplified one that requires fewer accounting requirements.

What are the disadvantages of the S.n.c?

    • The S.n.c., not having legal personality, does not provide the partners with any kind of patrimonial protection for the obligations assumed by the partnership;

    • unlimited and joint liability of the partners;

    • the income declared by the partnership is imputed by transparency to the partners as business income regardless of the activity carried out;

    • unless otherwise provided for by the partnership’s contract, each partner is a director and can bind the partnership and the other partners in obligations and contracts in the name and on behalf of the S.n.c.;

    • the S.n.c. is subject to bankruptcy, which also entails the bankruptcy of all the partners.

How is a S.n.c. established?

A S.n.c. can be established by natural persons, both Italian and foreign citizens, by companies, and by non-corporate legal entities and requires a public deed in front of a notary who draws up the partnership’s contract.

The partnership’s contract must contain:

    • the names of the partners;

    • the partners who have the administration and representation of the partnership;

    • the registered office of the partnership and any secondary offices;

    • The contributions of each partner and the value attributed to them;

    • the criteria for the distribution of profits and losses;

    • the duration of the partnership;

    • the partnership‘s object.

After drawing up the partnership’s contract and obtaining the VAT number, the limited partnership must be registered with the Register of Companies of the competent Chamber of Commerce within 30 days.

Taxation of the S.n.c.

The S.n.c. is subject to the payment of the regional tax IRAP (3.9%) and the income produced by the partnership are allocated by transparency to the partners in proportion to the quotas owned by each in the place of residence of the partner. If the partner is resident in Italy, he will pay the IRPEF tax, the table of which is provided below.

In the S.n.c. each partner (resident in Italy) is a worker and a director and receives profits on the basis of the quote of capital subscribed and has the obligation to be registered with INPS if the activity carried out is commercial or artisan.

Taxable income

Tax rate

Tax due on intermediate income (by brackets) included in the brackets

up to €15,000

23%

23% of income.

Nothing is due for incomes up to € 8.174,00 (no tax area).

from €15,001 to €28,000

27%

3.450,00 + 27% on the part over €15.000,00

from €28.001 to €55.000

38%

6.960,00 + 38% on the part over €28.000,00

from 55.001 to €75.000

41%

17.220,00 + 41% on the part over €55.000,00

Over €75.000

43%

25.420,00 + 43% on the part over €75.000,00

 

Simple partnership

The simple partnership (S.s.) is the most basic form of partnership. The S.s. cannot have a commercial activity as its object and carries therefore usually out agricultural activities, legal auditing and property management.

For the establishment of a S.s., the presence of at least two partners is necessary. The partnership contract is not subject to any particular formalities, except for registration in the special section of the Register of Companies. The freedom of form meets a limit when “special formalities” are required by the nature of the assets transferred, thus the written form is necessary when the contribution relates to immovable property or real property rights.

There is no requirement for a minimum capital.

Characteristics

The simple partnership has no legal personality and has an imperfect patrimonial autonomy, therefore the partners have unlimited personal liability (in addition to the partnership, the partner is also liable for the partnership’s obligations) and joint and several liability (each creditor of the partnership can turn to any one of the partners and claim from him alone the fulfilment of the entire obligation) with respect to the obligations assumed by the partnership, with certain exceptions regulated by law.

Unlike companies with share capital, simple partnerships do not have a partners’ meeting. Thus, the partners’ resolutions (amendment of the partnership’s contract, appointment/revocation of the director, etc.) are only the sum of their individual wills freely expressed. It is possible to introduce the partners’ meeting method for all or only some resolutions by a clause in the partnership’s contract.

In partnerships, the contribution is essential to acquire the status of partner. However, unlike in the case of companies with share capital, there is no limitation on the negotiating autonomy for the contribution of assets. Any entities, goods or services, capable of economic evaluation and useful for the achievement of the corporate purpose, may be contributed.

In the S.s., the administration and representation of the partnership are generally vested in each partner. Administration is exercised individually unless otherwise provided for in the partnership’s contract.

A simple partnership is not subject to bankruptcy.

What are the advantages of opening a S.s.?

The structure of a S.s. is very lean and flexible compared to other types of partnerships: there is no need to apply for a VAT number at the Italian Inland Revenue Agency, the partnership’s contract is not subject to specific formalities and no minimum capital is required.

The S.s. is not subject to bankruptcy, there is no provision for a partners’ meeting and there is no obligation to keep accounting records and prepare financial statements.

How is a simple partnership opened?

A S.s. is formed by signing the partnership’s contract. The law does not lay down any particular formalities for the drawing up of the partnership’s contract, except for the formalities laid down for the contribution of certain assets.

The partnership’s contract must indicate:

    • the names of the partners;

    • the partnership’s name and registered office of the simple partnership;

    • the objects of the partnership;

    • the contribution of each partner and its value;

    • the partners who have the administration and representation of the partnership;

    • duration of the partnership;

    • the rules according to which profits are to be distributed and the quote of each partner.

A simple partnership must be registered with the competent commercial register within 30 days from the beginning of the conclusion of the partnership’s contract or the beginning of the business activity. This registration has no legal effects but has the function of certifying the partnership’s registration and publication (art. 8 para. 4 L. 580/93 and art. 2 para. 1 of Presidential Decree 558/99).

Taxation of simple partnerships

The income produced by the S.s. are allocated by transparency to the partners in proportion to the quotas owned by each in the place of residence of the partner. If the partner is resident in Italy, the resident partner will pay the IRPEF tax, the table of which is provided below.

As far as IRAP is concerned, simple partnerships are only obliged to pay it if they carry out artistic or agricultural professional activities.

Taxable income

Tax rate

Tax due on intermediate income (by brackets) included in the brackets

up to €15,000

23%

23% of income.

Nothing is due for incomes up to € 8.174,00 (no tax area).

from €15,001 to €28,000

27%

3.450,00 + 27% on the part over €15.000,00

from €28.001 to €55.000

38%

6.960,00 + 38% on the part over €28.000,00

from 55.001 to €75.000

41%

17.220,00 + 41% on the part over €55.000,00

Over €75.000

43%

25.420,00 + 43% on the part over €75.000,00

 

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