Sole proprietorship guide: setup, management, and costs

Italy is a country made up of small and micro businesses, and although the data is not uniform, the most common business form is the ditta individuale (sole proprietorship). It is lean, quick to set up, and cheap to run. It is the first building block for anyone who wants to start a business.

In this guide we will look closely at every aspect of the sole proprietorship, from the legal details to employees, from setting it up to the costs (fixed and variable), from choosing a tax regime to the question of a business account.

Contents

What a sole proprietorship is

A sole proprietorship is an economic activity organised and carried out professionally to produce or trade goods and services, as established by Article 2082 of the Italian Civil Code. It is one of the simplest legal forms of business to start: it is owned by a single holder, it has light bureaucracy, and accounting costs are fairly low.

The business name (the trade name) of a sole proprietorship does not have its own suffix like companies do (e.g. s.n.c., s.r.l.), but it must include the first and last name of the holder. An example of a sole proprietorship might be a hairdressing shop called Colpi di Sole di Luisa Rossi.

Sole proprietorship and sole trader business

In everyday language, ditta individuale (sole proprietorship) and impresa individuale (sole trader business) are used as synonyms, and in practice they are, even if there is a slight difference in the terminology. Impresa is the term used to indicate the actual economic activity, while ditta is the commercial name under which a natural person operates on the market, which may not even be a business activity.

In other words, every impresa individuale is a ditta individuale, but not every ditta individuale is necessarily an impresa. In our guide, we will use the two terms interchangeably.

Natural person or legal entity?

The sole proprietorship does not have a legal personality separate from its holder. So an entrepreneur (with a Partita IVA (VAT number)) who opens a sole proprietorship remains, to all effects, a natural person with direct rights and obligations towards third parties.

A sole proprietorship does not provide for a separate set of assets, and so the debts of the activity can fall on the personal assets of the holder. Be careful, then, about choosing this legal form if you operate in sectors with high economic and financial risk: it is better to opt for a capital company (s.r.l., s.r.l.s., s.p.a., including single-member ones). The sole proprietorship is ideal for those who run small-scale activities, in low-risk or low-investment sectors and where simplified management can be an advantage, not a problem.

Can a sole proprietorship have employees?

Yes, nothing prevents a sole proprietorship from hiring employees or paying external collaborators (e.g. freelancers). The holder can also involve family collaborators, such as a spouse, relatives up to the third degree, or in-laws up to the second degree. In this case we talk about a family business, a legal form where the entrepreneur remains the responsible holder but profits can be distributed to the participants.

There is no limit to the number of employees a sole proprietorship can have, but you have to consider that as staff numbers grow, costs rise and the organisational structure has to become more complex. At a certain point, then, the simple sole proprietorship might feel tight and risky, and moving to a more structured legal form (e.g. a capital company) could be a smart move.

The choice of employees also influences the tax regime adopted. Sole proprietorships that adopt a flat-rate regime (regime forfettario), for example, cannot pay collaborators more than €20,000 gross per year, on pain of switching to the standard regime.

Pros and cons

The first advantage a sole proprietorship offers is the simplicity of setup. In 7–10 working days you can complete all the paperwork to be operational and launch the business. To open a sole proprietorship you do not need a notary, articles of association, or company regulations. There is not even any mandatory initial capital to pay in.

The second aspect is the speed in making decisions. In a sole proprietorship there is a single holder, all other figures are external, collaborators or employees, so to make choices you do not need bureaucracy or long internal steps.

Third, accounting costs are low. Compared to other legal forms, the sole proprietorship can use simplified accounting if it stays within certain revenue limits. This also means fewer bureaucratic obligations.

The main disadvantage, on the other hand, is the entrepreneur’s liability. In a sole proprietorship, the holder is liable without limit for the obligations of the business: it means that in case of failure, the business creditors can claim against the entrepreneur’s personal assets, such as the personal current account, property, and other assets. Business and entrepreneur are not clearly separated, as instead happens in capital companies.

The second downside can be access to credit. A sole proprietorship, with no partners and no complex accounting structure, might have some difficulty obtaining significant financing from banks, which effectively limits its growth options.

How to set up a sole proprietorship

Setting up a business is simple and inexpensive. The first step is to choose the business name (the name) of the sole proprietorship: it must be different from that of other existing businesses, relevant to the business, and with the potential to become a recognisable brand.

Then it is the turn of the Comunicazione Unica (Single Notification), a document that contains all the information needed to inform every authority about the launch of the activity. The notification is submitted electronically to the Registro delle Imprese (Business Register) and in one go lets you fulfil all the formalities for setting up:

To complete and send the Comunicazione Unica, an entrepreneur can use the Chambers of Commerce service DIRE, one of the suggested software tools from the Registro delle Imprese, or an intermediary (accountant or association).

After opening the sole proprietorship you also need to set up a certified business email box (PEC), which will be the electronic domicile of the business, and a device for the digital signature, which is used to validate legally binding documents.

Costs of a sole proprietorship

The costs a sole proprietorship has to bear are variable and depend on a number of factors, both at the time of setup and during management. In general, however, these are fairly low expenses compared with other business forms.

Setup costs

Opening a sole proprietorship involves fixed costs and variable costs. For the bureaucratic setup paperwork you always have to pay the stamp duty and the secretarial fees to the Chamber of Commerce, plus the annual chamber fee, whose amount depends on the municipality where the business is based.

If additional authorisations are needed, such as the Activity Start Certificate (AIA) or the SCIA and SUAP registration, other variable costs are added. And if you then ask an accountant for help, you also have to factor in the intermediary’s fee, usually between €50 and €200 extra.

Running costs

Running a sole proprietorship can cost more or less depending on the tax regime the business adopts, the size of the business, and more besides.

The mandatory costs are mostly taxes and contributions. The first group includes IRPEF (personal income tax), IVA (value added tax) on the goods and services sold, local taxes (e.g. IRAP, the regional tax on productive activities) and the annual chamber fee (between €20 and €100 per year).

In the second group we find social security contributions, to be paid to INPS for the pension, and welfare contributions. These grow as the business income rises, but if the holder of the Partita IVA also has an employed job they may not be required to pay them.

Then there are the incidental costs, those for ordinary management, which include the expenses of buying materials, equipment, and other goods for work, rent expenses, utilities, staff costs, investments in marketing and advertising, transport expenses, and more. Here the figures are extremely variable and depend on the type of business, the volume of business, and the entrepreneur’s choices.

And of course there are also the costs for the accountant and the accounting. For a sole proprietorship the spend can range between €500 and €2,000 per year depending on the complexity, the professional’s rates, and the services requested.

Tax regime

The tax a sole proprietorship pays depends on the tax regime it can or chooses to adopt. Most newly opened sole proprietorships opt for the flat-rate regime (regime forfettario), which offers a number of benefits; the others choose the standard regime.

Flat-rate regime

If the business adopts the flat-rate regime it benefits from a reduced tax rate of 5% for the first 5 years of activity and 15% thereafter. The rate is fixed, it does not change as income grows, and it is applied to a taxable base set by the profitability coefficient, which in turn varies according to the business’s ATECO code (the sector it operates in).

A sole proprietorship under the flat-rate regime is also not required to pay IVA, can use simplified accounting, and can request a 35% reduction on the social security contributions due to INPS.

The flat-rate regime also has some disadvantages. For example, the entrepreneur cannot deduct the actual expenses incurred, because they are calculated on a flat-rate basis and so already subtracted from the taxable base, according to the profitability coefficient of their ATECO code. For a business that has very high running costs it could be unfavourable.

To access the flat-rate regime the sole proprietorship must meet certain requirements. For example, total revenue must not exceed €85,000 per year and expenses for employees and collaborators must not exceed €20,000 gross per year.

Standard regime

If instead you opt for the standard regime you have to pay IRPEF, at a rate that increases in proportion to income (23% up to €28,000, 35% between €28,001 and €50,000, 43% above €50,000), IVA (5%, 10%, or 22% depending on the category of goods and services sold), and IRAP.

In addition the sole proprietorship has to use simplified accounting (up to €500,000 of revenue, in the case of services, or €800,000 in other cases) or ordinary accounting, which involve more bureaucracy and costs. However, the standard regime has no upper limits on revenue or on staff expenses and lets you deduct all the main expenses connected with the activity (utilities, premises rent, machinery, salaries, materials, software, training, etc.).

Sole proprietorship or freelancer

Sole proprietorship and freelance work are the two main options for those who carry out an activity on their own. Partita IVA holders fall into two groups based on the type of work done:

The first group includes those Partita IVA holders who carry out manual activities or buy and sell goods or services, such as the greengrocer, the carpenter, the electrician, or the hairdresser. They do not have a professional register and must register with the Registro delle Imprese of the Chamber of Commerce. Anyone who does this work is called an entrepreneur and their activity will be a sole proprietorship.

Freelancers, on the other hand, are those who carry out more intellectual work, such as the notary, the lawyer, the journalist, the doctor, or other freelance professions. They offer services exclusively and are enrolled in a professional register rather than the Registro delle Imprese.

Closing a sole proprietorship

Closing a sole proprietorship is almost as quick as opening one. To do it you need to send a new Comunicazione Unica to the Registro delle Imprese, requesting the closure of the Partita IVA with the Agenzia delle Entrate (Italian Revenue Agency) and the closure of the INPS and INAIL positions.

The request must be submitted within 30 days of the actual closure of the business activity, and the costs are around €35 of chamber fees, plus a possible accountant’s fee if you rely on an expert.

Important: any tax and contribution debts incurred by the sole proprietorship do not disappear on closure, but remain the entrepreneur’s responsibility, who will have to answer for them personally.

Sole proprietorships and business accounts

A sole proprietorship is not legally required to have a dedicated current account. This applies both to a sole proprietorship under the flat-rate regime and one under the standard regime. That said, an entrepreneur would do well to have two separate accounts, one personal and one for their business, because in the event of checks by the Agenzia delle Entrate the burden of proof falls on them.

For a sole proprietorship both a personal account and a business current account can work, the latter being preferable if you want to take advantage of a range of benefits dedicated to business customers. Today there are 100% online business accounts that offer business cards, access for collaborators, loans, saving and investment tools for businesses, and much more.

Vivid offers you a dual account, personal and business, perfect for your activity. Keep your private and business finances separate and switch from one account to the other in a moment.

Strongly discouraged, on the other hand, is having a joint current account, because in the event of the business defaulting the account could be frozen and seized. This means that it would not only be the entrepreneur who loses out, but also the spouse or the account co-holder.

Data as of June 2026. This guide is for information only and does not constitute legal or tax advice. Rules and amounts can change. Check with a professional or the official source before making any decisions.