Sole proprietorship guide: setup, management, and costs

Italy is a country built on small and micro enterprises. While data may vary, the sole proprietorship remains the most common business structure. It’s simple, quick to set up, and cost-effective to run–often the first step for anyone looking to launch a business.

In this guide, we’ll walk through everything related to sole proprietorships–from legal details and employee rules, to setup, costs (both fixed and variable), tax regimes, and whether a business account is required.

Summary

1. What is a sole proprietorship?
2. Pros and cons
3. How to set up a sole proprietorship
4. Costs of running a sole proprietorship
5. Tax regimes
6. Sole proprietorship vs. freelancer
7. How to close a sole proprietorship
8. Sole proprietorships and business accounts

What is a sole proprietorship?

A sole proprietorship is a business activity set up and operated professionally to produce or trade goods and services, as defined in Article 2082 of the Italian Civil Code. It’s one of the simplest legal forms of business to start: it’s owned by a single person, has minimal bureaucratic requirements, and low accounting costs.

The business name of a sole proprietorship does not include a legal suffix like companies do (e.g. s.n.c., s.r.l.). Instead, it must include the full name of the owner. For example, a sole proprietorship might be a hair salon called Colpi di Sole di Luisa Rossi.

Sole proprietorship vs. sole trader

In everyday language, “sole proprietorship” (ditta individuale) and “sole trader business” (impresa individuale) are used interchangeably. Technically, there is a subtle distinction:

• Impresa refers to the actual business activity.
• Ditta refers to the commercial name under which a natural person operates on the market–even if that activity isn't fully entrepreneurial.

In other words: every impresa individuale is a ditta individuale, but not every ditta individuale is a full-fledged business. For simplicity, we’ll use both terms interchangeably in this guide.

Natural person or legal entity?

A sole proprietorship does not have a separate legal personality from its owner. This means an entrepreneur (with a VAT number) remains a natural person, with full personal liability towards third parties.

There is no legal separation between personal and business assets. As a result, debts incurred by the business may affect the owner’s personal assets. If you’re operating in a high-risk financial sector, it’s worth considering a limited liability company (e.g. s.r.l., s.r.l.s., or a one-person s.p.a.) instead.

A sole proprietorship is ideal for low-risk sectors, small operations, and businesses where simplicity is an advantage, not a constraint.

Can a sole proprietorship have employees?

Yes. Sole proprietors can hire employees or work with external collaborators (e.g. freelancers). They can also involve family members–such as a spouse or relatives up to the third degree–in the business. In this case, it becomes a family business (impresa familiare), where the owner remains legally responsible, but profits can be distributed among participants.

There’s no official limit on how many employees a sole proprietorship can have. However, as the team grows, so do costs and the need for a more structured organisation. At a certain point, transitioning to a more robust legal form (e.g. a limited company) might be a smarter move.

Employee choices also impact the tax regime. For example, businesses under the flat-rate tax scheme (regime forfettario) cannot pay collaborators more than €20,000 gross per year. Exceeding this limit requires switching to the standard tax regime.

Pros and cons

The main advantage of a sole proprietorship is its simple setup. Within 7–10 business days, all registration steps can be completed and the business can be up and running. You don’t need a notary, articles of association, or internal regulations to get started. There’s also no legal requirement for initial capital.

Another major benefit is the speed of decision-making. With a sole proprietorship, there’s only one owner–everyone else is an employee or collaborator. This means no internal bureaucracy, board meetings, or formal processes when making business decisions.

Third, accounting costs are low. As long as the business stays within certain revenue thresholds, it can operate under simplified accounting rules. That also means fewer administrative obligations compared to more complex legal structures.

On the downside, the biggest risk is personal liability. In a sole proprietorship, the owner is personally and fully liable for any business debts. In the event of bankruptcy, business creditors can pursue the owner's personal assets–such as personal bank accounts, property, or valuables. The business and the individual are not legally separate, unlike in limited liability companies.

Another potential drawback is access to credit. Since a sole proprietorship has no shareholders and typically no formal accounting structure, banks may be more cautious when granting large loans–limiting potential growth opportunities.

How to set up a sole proprietorship

Setting up a sole proprietorship in Italy is simple and affordable. The first step is choosing the business name, which must be unique (not already in use by another company), relevant to your activity, and ideally capable of becoming a recognisable brand.

Next comes the Comunicazione Unica (Single Notification), a digital document that includes all the details required to inform public authorities about your business launch. This notification is submitted electronically to the Business Register (Registro delle Imprese) and covers all the following formalities at once:

• Opening a VAT number
• Registering with the Business Register
• Registering with INPS (social security)
• Registering with INAIL (if insurance is required)
• Submitting the SCIA (Certified Notice of Commencement of Activity) to the local SUAP (municipal business desk)

Costs of running a sole proprietorship

The costs associated with a sole proprietorship can vary based on several factors–both at the time of registration and during ongoing operations. Overall, however, these expenses are relatively low compared to other business structures.

Setup costs

Starting a sole proprietorship involves both fixed and variable costs.

Fixed fees include:

• Stamp duty and administrative fees paid to the Chamber of Commerce
• The annual chamber fee, which varies depending on the municipality where the business is registered

If your business activity requires special authorisations–such as an AIA (Activity Start Certificate), SCIA, or SUAP registration–additional fees may apply.

If you rely on a tax advisor (commercialista) to handle the registration, you should budget an additional €50 to €200 for their services.

Ongoing management costs

Ongoing costs depend largely on the tax regime, the size of the business, and its activity level.

Tax regimes

The taxes a sole proprietorship pays depend on the tax regime it adopts–or qualifies for. Most new businesses opt for the flat-rate scheme (regime forfettario) due to its simplified rules and benefits, while others use the standard regime (regime ordinario).

Sole proprietorship vs. freelancer

If you’re starting your own business, you’ll typically fall into one of two categories: sole proprietorship or freelance profession. The difference depends on the type of work you do–and it affects how your VAT registration (Partita IVA) is classified.

How to close a sole proprietorship

Closing a sole proprietorship is almost as straightforward as opening one. The process involves submitting a new Comunicazione Unica (Single Notification) to the Business Register. This request simultaneously initiates:

• The cancellation of the VAT number with the Italian Revenue Agency (Agenzia delle Entrate)
• The closure of social security (INPS) and insurance (INAIL) registrations

This request must be submitted within 30 days from the actual closure of the business activity.

Sole proprietorships and business accounts

There is no legal obligation for a sole proprietorship to have a dedicated business account. This applies whether the business operates under the flat-rate scheme or the standard tax regime.

That said, having two separate accounts–one personal and one for business–is strongly recommended. In the event of a tax audit, the burden of proof lies with the entrepreneur, so having clean separation between personal and business transactions is essential.

A sole proprietorship can use either a personal account or a business account, but business accounts are generally preferable due to their tailored benefits. Today’s digital business accounts offer features such as:

• Business cards
• Access for collaborators
• Lending options
• Saving and investment tools
• Expense management features

– all fully online.

With Vivid, you get a dual account setup–personal and business–ideal for keeping your finances organised. Easily switch between accounts and keep your private and business expenses fully separate.

Tip: Avoid using a joint account. In the event of business insolvency, a joint account could be frozen or seized–impacting not just the business owner, but also the co-holder, such as a spouse.