Sole proprietorship
The sole proprietorship is the easiest, fastest and cheapest way to start a small business In Italy. A sole proprietorship does not have limited liability, meaning that the sole trader is personally liable with all his assets for the debts of its sole proprietorship.
The activity is carried out by a single person, i.e. the owner of the enterprise, who is solely responsible for the activity and management of the enterprise.
The sole proprietorship is therefore preferred if the entrepreneurial risks are quite limited and if the activity carried out does not require large investments. In fact, there is no minimum initial capital requirement.
What are the advantages of opening a sole proprietorship?
- There are several potential advantages linked to the choice of opening a sole proprietorship compared to other types of enterprises (e.g. limited liability companies, partnerships etc.).
- The structure of a sole proprietorship allows the entrepreneur to manage the entire decision-making process and to have maximum autonomy.
- A sole proprietorship is granted an Italian VAT number.
- Management costs are limited, no minimum capital is required, there is no need to prepare an annual balance sheet and you can also enjoy a simplified form of accounting and tax compliance.
- Tax benefits: the sole proprietorship is not subject to corporate tax but instead to personal income tax , varying between 23% to 43% of yearly profit, depending on the sole proprietorship revenues. However, a recent Italian law, aimed at facilitating access to the market for new entrepreneurs, introduced a special flat tax rate for the first 5 years of only 5% of the yearly revenues for sole traders whose annual revenues do not exceed EUR 65.000.
What are the requirements to open a sole proprietorship in Italy?
To open a sole proprietorship in Italy, the sole trader must meet specific requirements. Firstly, they must be a resident of Italy, having an official address where they live and conduct business. This Italian address is crucial for registering the business with local authorities and for tax purposes. Non-EU citizens need a valid work permit to legally operate the business in Italy. Once these requirements are met, the sole proprietorship must be registered with the Italian Business Register through the local Chamber of Commerce, and a VAT number (Partita IVA) must be obtained. Additionally, registration with the Italian social security institute (INPS) is required for contributing to social security and health insurance schemes. If these criteria are not met, an alternative is to establish an Italian limited liability company (SRL). This option provides more flexibility for non-residents and those without a valid work permit.
How to open a sole proprietorship in Italy?
The procedure of opening a sole proprietorship consists of the following steps:
- Obtaining a VAT number, which will be issued by the Italian Inland Revenue Agency (Agenzia delle Entrate) and will thus uniquely identify the sole proprietorship.
- Registering the sole proprietorship with the Italian Business Register of the local Chamber of Commerce and filing for the so-called “Communication of the start of business” within 30 days.
- Registering with INPS (National Social Insurance Agency) and with INAIL (National Institute for Insurance against Industrial injuries): these fulfilments are mandatory for the payment of the contributions for social security and protection against possible work accidents.
