The limited liability company (S.r.l., società a responsabilità limitata) is one of the most chosen legal forms for starting a small or medium-sized business (SME) in Italy. It is the legal type that suits a structured business, without necessarily being a large company like an S.p.A.
The middle ground, in short. As a capital company, the S.r.l. protects the personal assets of its shareholders, and that is a big advantage. But what does it cost? And when does it make sense to open a company of this type instead of a sole proprietorship or a partnership? Let us find out.
Contents
What an S.r.l. is
The limited liability company is a capital company and a legal person, that is, an entity distinct and separate from the shareholders (individuals) who form part of it. This means that the S.r.l. is also an independent legal subject and has assets separate from those of the shareholders.
That is the key point of the S.r.l.: in the event of bankruptcy, the shareholder loses only what was invested as share capital and runs no risk on personal assets. The S.r.l. is said to have perfect asset separation.
S.r.l. or S.r.l.s.?
In Italy there are several types of S.r.l.: the standard S.r.l., the S.r.l.s. (simplified), and until a few years ago the reduced-capital S.r.l., which is no longer available today. The main difference between the variants lies in the minimum share capital and the formalities required.
The standard S.r.l. requires at least 10,000 euros of share capital, and at the time of opening you can pay in just 25% of it if there is more than one shareholder, with the rest over the years. The S.r.l.s., on the other hand, was created for those who prefer to start with few resources and leaner procedures, and it can be set up with share capital of even 1 euro. But it must be paid in full immediately.
The S.r.l.s. was created to lower entry barriers. It is the ideal form for those who want to start independent activities or start-ups, test a business without tying up capital, and keep costs to a minimum. The reduced capital, however, can make access to bank credit difficult. Governance is also less flexible: you cannot freely change the statute.
A standard S.r.l., by contrast, suits those who already have investors, are looking for more structured governance, want to grow, or want easier access to financing.
How to open an S.r.l.
To open an S.r.l. you need at least one shareholder, an individual (of legal age) but also a legal person (other companies). If there is only one founder, this is called a single-member S.r.l. or sole-shareholder S.r.l., and in practical terms almost nothing changes.
If there is more than one shareholder, it is mandatory to appoint an administrator, who is responsible for day-to-day management and is the point of reference for all tax and legal obligations, and who can be one of the shareholders or an external figure.
Where they are required, you must also identify the auditing bodies, which can be a single professional (sole auditor, statutory auditor) or a group (board of auditors). The obligation is triggered if, for two consecutive financial years, at least two of these events occur:
Documents and requirements
The documents required vary depending on the case, but the ones always needed are:
You also need a certified email account (PEC), a digital signature for all shareholders, electronic invoicing software, and any SPID credentials.
The share capital
When incorporating a standard S.r.l., you must contribute a minimum share capital of 10,000 euros. The amount can be paid in full immediately or just 25%, if there is more than one shareholder. In the case of the S.r.l.s., 1 euro of capital is enough, but it must be paid in full.
The capital can be contributed in cash or in kind, in the form of materials, receivables, or businesses. If the share capital is contributed in assets other than cash, a valuation report is usually required to confirm its actual value.
Bank account for an S.r.l.
To open an S.r.l., the company must have a dedicated business bank account. The account must already be open and ready to receive the instant transfer (in the case of a cash contribution), ideally with an Italian IBAN and plenty of features (payment cards, interest on balances, tools for managing finances, loans, and so on).
Choosing the account for your S.r.l. carefully means selecting a reliable partner, managing your treasury at its best, keeping control over spending, accessing savings or investment products, and more. Discover the solutions Vivid Money offers.
Incorporation and registration of the company
The shareholders are in place, and so is the administrator. The share capital and the statute are ready: it is time to turn to a notary. The professional prepares the deed of incorporation and certifies the payment of the initial capital (instant transfer or banker’s draft).
After the shareholders sign the notarial deed, the accountant appointed by the new S.r.l. has ten days to:
Before starting any activity, the S.r.l. must also submit online the notice of commencement of activity called SCIA (Segnalazione Certificata di Inizio Attività, certified notice of commencement of activity) to the SUAP desk of the municipality where it is based.
Opening an S.r.l. online
Since 2021, with Legislative Decree no. 183/2021, it is also possible to open an S.r.l. or an S.r.l.s. online, through a simplified procedure. The deed of incorporation, where contributions are in cash and the registered office is in Italy, can be drawn up as a digital public deed.
The notary can collect the parties’ signatures via video conference, thanks to the platform provided by the National Notary Council (Consiglio Nazionale del Notariato).
Accounting regime and obligations
The S.r.l. is always required to keep ordinary accounting, with no exceptions: it cannot adopt simplified regimes such as the flat-rate regime (regime forfettario) (for sole proprietorships) or the simplified regime (for partnerships that meet certain limits). Ordinary accounting requires keeping the general journal, inventories, and VAT registers, and drawing up the annual financial statements.
Italian law, however, distinguishes between different forms of financial statements. Micro-enterprises, that is, businesses that for two consecutive financial years do not simultaneously exceed 220,000 euros in assets, 440,000 euros in revenue, and 5 employees, can draw up very simplified financial statements.
Companies that, on the other hand, stay below 5.5 million euros in assets, 11 million in revenue, and 50 employees can prepare abbreviated financial statements. Once these thresholds are exceeded, the obligation to keep full ordinary financial statements applies automatically.
How to close an S.r.l.
Closing an S.r.l. requires a liquidation procedure: the assets are sold, the debts are paid, and any remaining funds are distributed among the shareholders. The process ends with removal from the Business Register and a cost that can range from 1,500 to 2,000 euros, plus the accountant’s fees and the closing charges.
How profits are withdrawn
A shareholder in an S.r.l. cannot withdraw a sum from the company account at will. The only way is the distribution of profit, or dividend. The distribution follows a precise procedure:
In the case of prior losses, you must cover the gap and set aside 5% as a legal reserve, up to 20% of the capital.
Administrator’s remuneration
Another way to withdraw profits from the company is through the administrator’s remuneration. The administrator of the S.r.l. can be paid remuneration set by the statute or by the shareholders’ meeting. It can be paid on a fixed, variable, or mixed basis, and is normally paid on a monthly or periodic basis through a payslip.
Transfer of shares, capital increase, and changes to the statute
If a shareholder wants to transfer their shares, a notarial deed is needed, or the involvement of an accountant in specific cases. The value of the shares is often established through a valuation report. Bringing in new shareholders requires, in most cases, a capital increase with a resolution of the shareholders’ meeting, a notarial deed, and minutes.
Changes to the statute to alter the corporate purpose, governance rules, shares, or administrators’ powers always require an official amendment of the statute, carried out with the involvement of the notary and subsequent registration.
Costs of an S.r.l.
The limited liability company has medium-to-high setup and running costs compared to sole proprietorships or partnerships.
Setup costs
Starting up an S.r.l. involves on average a notary fee of between 1,600 and 2,000 euros, to which are added the chamber-of-commerce fees (about 120 to 200 euros), the company-register tax (about 300 euros a year), the costs of handling the initial paperwork, and the charges for the filing of the financial statements (about 40 euros). Between stamp duties and other small expenses, the annual total for the bureaucratic part alone comes to between 500 and 700 euros.
Running costs
The main fixed cost of the S.r.l. is accounting. The accountant is an essential figure for a capital company, because they handle ordinary accounting, tax returns, financial statements, and mandatory obligations. A professional charges on average 300 euros a month, but the figure can rise in proportion to the number of employees and the increase in operations.
Then there are the banking costs. Traditional banks charge a very high monthly fee for SMEs; if you choose an online business account, the costs can be considerably lower (and also claimable). Here you can see how cost-effective Vivid Money can be.
Finally, you have to consider the business expenses, which clearly vary from case to case: salaries, rent and utilities, software and licences, company vehicles, raw materials, and more.
S.r.l. taxation
The taxation applied to S.r.l.s affects both the company and the shareholder (individual). The company pays a fixed rate of 24% IRES (Imposta sul reddito delle società, corporate income tax) on taxable income, to which is added IRAP (Imposta Regionale sulle Attività Produttive, regional tax on productive activities), which starts at 3.9% and rises, depending on the region and the activity.
The shareholder who withdraws profits (dividends) is taxed further: a withholding tax of 26% is applied to the amount received. The company must pay this withholding tax via the F24 form, and the shareholder receives a Single Certification (Cupe).
The administrator who carries out actual activity is taxed differently. In this case the S.r.l. is required to apply:
Deductible costs and claimable expenses
The S.r.l. can claim all costs arising from the business to reduce its taxable income for IRES purposes, for example:
The administrator’s remuneration is also deductible for IRES purposes, and therefore reduces the company’s taxable base. Not all expenses are 100% claimable; some are subject to specific limits or conditions.
Advantages and disadvantages of an S.r.l.
The S.r.l. is a legal form that offers quite a few advantages to small and medium-sized businesses:
Profits can be reinvested or distributed under transparent rules, and each shareholder is free to transfer their shares and to invest again whenever they want.
And the downsides? First of all, the administrative and running costs are high compared to other models. And then there is plenty of bureaucracy: every activity must be documented, the financial statements must be drawn up and filed annually, and there is the obligation of ordinary accounting and explanatory notes.
You need the constant support of several professionals, because transparency towards the tax authorities and creditors is total.
The risks of an S.r.l.
The shareholders of an S.r.l. risk only the capital they have contributed, except where personal guarantees have been given to the bank or legal obligations have been breached.
Administrators, on the other hand, have a much broader liability: they must manage every aspect of the company with diligence and are answerable to the shareholders, the creditors, the tax authorities, and even in criminal terms in the event of tax or management offences.
FAQ
What is the difference between an S.r.l. and an S.r.l.s.?
The main difference between an S.r.l. and an S.r.l.s. lies in costs, governance, and access to credit. The S.r.l.s. requires fewer resources at the start, but it allows less room for customisation and may have more difficulty obtaining significant financing. A standard S.r.l. is more expensive to open, but from the point of view of growth and management it is more versatile.
Which should I choose, an S.r.l. or a sole proprietorship?
The sole proprietorship is the simplest form for starting a new business. The setup costs are low and management is largely simplified. The disadvantage, however, is that the owner is liable with all their present and future assets for the debts incurred by the business. The S.r.l., by contrast, separates personal assets from business assets and offers protection that makes the difference for those who want to do business. From a tax point of view, the S.r.l. allows optimised tax planning for SMEs, while the sole proprietorship can access the flat-rate regime under certain requirements but becomes uneconomical above a certain turnover.
What is the difference between an S.r.l. and an S.n.c.?
The S.r.l. is a capital company, with its own legal personality and perfect asset separation. The S.n.c. (società in nome collettivo, general partnership) is a partnership where each partner is liable without limit and jointly for the company’s obligations. To open an S.r.l. you must contribute a minimum capital, whereas an S.n.c. does not require one. The S.r.l. is subject to IRES and IRAP taxation, while the S.n.c. pays IRAP and follows the transparency regime, so it is the partners who pay IRPEF on their share of profit. The S.r.l. is required to file its financial statements every year with the Business Register, while the S.n.c. is a private company and has fewer accounting obligations. In addition, the S.r.l. has the obligation to hold a business bank account, while the S.n.c. is required to have a dedicated account only for turnover above 400,000 euros.
What is a real estate S.r.l. (S.r.l. immobiliare)?
A real estate S.r.l. is a company that operates in the property sector by buying, managing, renting, or selling real estate. It often offers more structured management of assets and makes it possible to separate personal risks from those tied to property. This corporate form has higher costs than managing property as a private individual, but it can be worthwhile when the properties are numerous or when the activity is ongoing.
How can I pay less tax with an S.r.l.?
S.r.l.s can adopt tax-planning strategies, such as creating a holding company to lower the tax burden, accessing deductions and tax credits more easily, optimising the distribution of dividends, and structuring generational succession and asset growth efficiently. Various tools allow those who invest in capital goods to access bonuses, incentives, and tax credits, but you should always consult an up-to-date accountant.
Is there a minimum turnover for an S.r.l.?
No, Italian law does not provide for any mandatory minimum turnover to set up, maintain, or continue running an S.r.l. Working without turnover is theoretically possible, and no law requires a threshold of annual revenue for the company to survive.
What happens if the S.r.l. closes at a loss?
If a limited liability company closes at a loss, the shareholders are only at risk for the capital subscribed and the sums paid in. If debts emerge during liquidation and profits have been distributed to the shareholders, creditors can pursue those sums. Otherwise, there is no personal risk for any shareholder.
