S.r.l.: setup, structure, and benefits

The limited liability company (S.r.l.) is one of the most popular legal structures for starting a small or medium-sized business (SME) in Italy. It’s ideal for those looking to build a structured business, without necessarily setting up a large corporation like an S.p.A..

In short, it’s the middle ground. As a capital company, the S.r.l. offers personal asset protection for its shareholders–a major advantage.

But what does it cost? And when does it make sense to choose an S.r.l. over a sole proprietorship or a partnership? Let’s break it down.

Summary

1. What is an S.r.l.?
2. How to open an S.r.l.
3. How profits are withdrawn
4. Transfer of shares, capital increases, and changes to the statute
5. Costs of an S.r.l.
6. S.r.l. taxation
7. Deductible costs and claimable expenses
8. Advantages and disadvantages of an S.r.l.
9. FAQ

What is an S.r.l.?

The limited liability company (S.r.l.) is a capital company and has legal personality–meaning it is a separate legal entity, distinct from its shareholders (individuals). As such, the S.r.l. is an independent legal subject with its own assets, separate from those of its owners.

The key feature of an S.r.l. is this: in the event of bankruptcy, a shareholder only risks losing their invested capital, and their personal assets remain protected. This is known as “perfect asset separation”.

S.r.l. or S.r.l.s.?

There are different types of S.r.l. in Italy:

• the standard S.r.l.
• the S.r.l.s. (semplificata)
• and previously, the now-defunct S.r.l. with reduced capital

The main difference lies in the minimum share capital required and the formality level.

• A standard S.r.l. requires a minimum capital of €10,000. Upon formation, shareholders can pay just 25% up front (if there’s more than one shareholder), with the rest due over time.
• The S.r.l.s. (simplified) was created for those who want to start with minimal resources and simpler procedures. It can be set up with just €1 in capital, but this amount must be fully paid in at formation.

The S.r.l.s. was designed to lower entry barriers. It’s ideal for launching independent ventures or startups, testing a business model, and keeping initial costs low. However, the reduced capital can make it harder to access bank credit, and its governance is more rigid–you can’t freely customise the company statute.

A standard S.r.l., by contrast, is a better fit for those who:

• already have investors,
• want greater governance flexibility,
• plan to scale the business, or
• want easier access to funding

How to open an S.r.l.

To open an S.r.l., you need at least one shareholder, who can be either a natural person (over 18) or a legal entity (such as another company).

If there's only one founder, it becomes a single-member S.r.l. (S.r.l. unipersonale), which is nearly identical in practice.

If the company has multiple shareholders, it’s mandatory to appoint an administrator, responsible for day-to-day management and handling all legal and tax matters. This role can be filled by a shareholder or an external professional.

In certain cases, you’ll also need to appoint auditing bodies, which may consist of a single auditor (sindaco unico or statutory auditor) or a board of auditors (collegio sindacale).

This requirement applies if two out of the following three thresholds are exceeded for two consecutive years:

• Total assets above €4 million
• Revenues above €4 million
• More than 20 employees

Documents and requirements

The documents required may vary, but the essentials are:

• ID documents for all shareholders
• The articles of incorporation
• The company statute (bylaws)

You'll also need:

• A certified email address (PEC)
• Digital signatures for all shareholders
• E-invoicing software
• Optional but useful: SPID credentials

Share capital

To form a standard S.r.l., you must contribute a minimum share capital of €10,000.

You can pay it in full at once, or just 25% initially if there are multiple shareholders.

For an S.r.l.s., only €1 of capital is required–but it must be paid in full immediately.

The capital can be contributed in cash or in kind (such as equipment, assets, receivables, or even another business).

If the capital is not in cash, a valuation report may be required to confirm its real value.

Business bank account for an S.r.l.

Opening a dedicated business account is mandatory for an S.r.l.

The account must be active and ready to receive an instant transfer (if the capital is paid in cash). Ideally, it should have an Italian IBAN and features like:

• Business payment cards
• Interest on account balances
• Expense tracking tools
• Financing options
• Treasury management features

Choosing the right business account means having a reliable partner, keeping control over spending, and getting access to savings or investment tools. Discover the business account options Vivid Money offers.

Company registration and incorporation

Once you have your shareholders, administrator, share capital, and statute in place, it’s time to go to a notary.

The notary prepares the articles of incorporation and certifies the capital payment (via instant transfer or bank draft).

After the deed is signed, the company’s accountant must, within 10 days:

• Request a VAT number from the Tax Agency (Agenzia delle Entrate)
• Notify the Chamber of Commerce of the company’s formation
• Register the company with the local Business Register

Before launching any activity, the S.r.l. must also submit an online notice of commencement (SCIA) via the SUAP portal of the local municipality where the company is based.

Opening an S.r.l. online

Since 2021, following Legislative Decree no. 183/2021, you can also open an S.r.l. or S.r.l.s. entirely online through a simplified procedure.

If the capital is paid in cash and the company is based in Italy, the deed can be prepared as a digital public act.

The notary can collect signatures via video call using a platform provided by the National Notary Council.

Accounting regime and legal obligations

An S.r.l. is always required to use standard (ordinary) accounting–with no exceptions.

Unlike sole proprietorships or partnerships that meet certain thresholds, an S.r.l. cannot use simplified regimes like the flat-rate (forfettario) or simplified accounting.

Ordinary accounting includes:

• Keeping a general ledger (libro giornale)
• Maintaining inventory records
• Recording all VAT registers
• Preparing an annual financial statement

The law does, however, distinguish between different levels of financial reporting based on the size of the company:

• Micro-enterprises–those that, for two consecutive years, do not exceed €220,000 in assets, €440,000 in revenue, and 5 employees–can file a very simplified financial statement
• Small businesses with under €5.5 million in assets, €11 million in revenue, and 50 employees can use the abbreviated financial statement
• Once any of these limits are exceeded, the company is required to file a full ordinary financial statement

How to close an S.r.l.

Closing an S.r.l. involves a formal liquidation process: the company’s assets are sold, debts are paid, and any remaining funds are distributed among the shareholders.

The process concludes with the company being removed from the Business Register. The total cost typically ranges from €1,500 to €2,000, plus accountant fees and final administrative charges.

How profits are withdrawn

A shareholder in an S.r.l. cannot simply withdraw money from the company account at will.

The only way to access funds is through a profit distribution (dividend)–and this must follow a specific procedure:

1. The shareholders' meeting approves the financial statement and authorises the distribution
2. The minutes of the meeting are registered and filed with the Business Register
3. Payments are made
4. Withholding tax is applied

If the company has previous losses, these must first be covered, and 5% of the net profit must be allocated to a legal reserve, until it reaches 20% of the share capital.

Administrator compensation

Another way to extract value from the company is through administrator compensation.

The administrator of an S.r.l. can be paid a salary, either as set in the statute or decided by the shareholders' meeting.

This remuneration can be:

• Fixed,
• Variable,
• Or a combination of both

It’s typically paid on a monthly or periodic basis, via a standard payroll system.

Transfer of shares, capital increases, and changes to the statute

If a shareholder wishes to transfer their shares, a notarial deed is required–or in specific cases, the process can be managed by an accountant. The value of the shares is usually determined through a valuation report.

Bringing in new shareholders typically requires a capital increase, which must be:

• Approved by the shareholders' meeting
• Formalised through a notarial deed
• Documented via official minutes

Any changes to the company statute–such as updates to the business purpose, governance rules, shareholding structure, or management powers–must always be carried out via a formal statutory amendment.

This requires notarial intervention and official registration.

Costs of an S.r.l.

A limited liability company (S.r.l.) comes with moderate to high setup and management costs compared to sole proprietorships or partnerships.

Startup costs

Setting up an S.r.l. typically involves:

• Notary fees: between €1,600 and €2,000
• Chamber of Commerce fees: around €120–200
• Company register fees: approx. €300/year
• Initial setup and registration costs
• Annual financial statement filing fees: around €40
• Stamp duties and miscellaneous fees

On average, the annual cost for bureaucracy alone ranges from €500 to €700.

Ongoing costs

The main fixed cost of running an S.r.l. is accounting. A certified accountant is essential for capital companies, as they manage:

• Ordinary bookkeeping
• Tax declarations
• Financial statements
• Mandatory filings and compliance

The average monthly fee is around €300, but this can increase depending on the number of employees or transaction volume.

Banking costs

Traditional banks often charge high monthly fees for SME business accounts.

Choosing an online business account can significantly lower your banking costs–and fees are often tax-deductible.

You can check how Vivid Money compares here.

Business operating expenses

You’ll also need to factor in business-specific costs, which vary case by case:

• Employee salaries
• Rent and utilities
• Software and licensing fees
• Company vehicles
• Raw materials and supplies

S.r.l. taxation

Taxation for an S.r.l. affects both the company and its individual shareholders.

Taxes paid by the company

The company itself pays:

• A fixed 24% Corporate Income Tax (IRES) on taxable income
• An additional Regional Tax on Productive Activities (IRAP), which typically starts at 3.9%, but may vary depending on the region and type of business

Taxes on dividends

When a shareholder receives dividends, they are taxed again:

• A 26% withholding tax is applied to the amount distributed
• This tax is paid by the company using Form F24
• The shareholder receives a CUPE certificate (Certificazione Unica per i Percipienti di Redditi di Capitale)

Administrator compensation

If the administrator of the S.r.l. performs actual work for the company, their income is taxed differently:

• The company must apply IRPEF withholding tax, based on progressive income brackets, treating it as either employment income or self-employment
• The company must also pay INPS contributions to the separate management scheme, amounting to around 33% of gross pay

Deductible costs and claimable expenses

An S.r.l. can deduct all business-related expenses to reduce its taxable income for corporate tax (IRES) purposes. These include:

• Purchases of goods and raw materials
• Employee wages and salaries
• Rent and leasing fees
• Utility bills
• Advertising and marketing expenses
• Consulting and professional service fees
• Representation expenses (e.g. business meals)
• Bank charges
• Depreciation of tangible and intangible assets

The administrator’s compensation is also fully deductible for IRES purposes, lowering the company’s taxable base.

Tip: Not all expenses are 100% deductible–some are subject to specific limits or conditions.

Advantages and disadvantages of an S.r.l.

The S.r.l. legal structure offers several key advantages for small and medium-sized businesses:

• Personal asset protection for shareholders
• The ability to plan and optimise taxation
• The option to bring in new partners or investors
• Greater management flexibility compared to partnerships

Profits can be reinvested or distributed transparently, and each shareholder is free to transfer or reinvest their shares at any time.

What about the downsides?

The main drawbacks are:

• Higher administrative and management costs compared to simpler legal forms
• More bureaucracy: every transaction must be documented, annual financial statements must be drafted and filed, ordinary accounting is mandatory, and notes to the financial statements are required

Running an S.r.l. requires ongoing support from professionals, as there is full transparency with tax authorities and creditors.

Risks associated with an S.r.l.

Shareholders in an S.r.l. only risk the capital they have contributed, unless they’ve given personal guarantees to a bank or violated legal obligations.

Administrators, however, bear much broader responsibility. They are expected to manage all company affairs with diligence and may be held personally liable–toward shareholders, creditors, tax authorities, and even criminally–in cases of financial mismanagement or tax offences.