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* Fulfillment of the request will be subject to appropriate and necessary verifications in accordance with anti-money laundering regulations.
** The price quoted is inclusive of professional fee and VAT, net of withholding tax.
*** The contents of this package are intended to be exclusively those detailed in the "INCLUDED SERVICES" section. Any other requests or variations in the terms and benefits of the package will be subject to separate quantification. It is always possible to add to the all-inclusive package the "EXTRA SERVICES" indicated in the appropriate section, if not already included in the identified package.
**** Share capital is required by law for incorporation and is to be excluded from the price shown for the identified all inclusive package.
***** The disbursement of the "BONUS CONSTITUTION" is subject to the signing of a regular annual engagement letter with Studio Locatelli Sani Ravani & Associati for the entrustment of the ordinary accounting, tax and corporate management of the newly formed company (to be quantified separately). The voucher is intended to be spendable only against the amount of the first invoice received under the annual assignment itself.
If you are about to read this article, it is because you are thinking about setting up an LLC to run your business. Surely you have already read lots of articles on the subject and that you may have even contacted some consultants for more information. However, if you are still here, it means that you probably still do not have a clear idea. If you do business in addition to clear ideas, you must also have the right consultant beside you who can direct you toward the best choices for your business.
The S.r.l. (LCC) is the most common type of company in Italy. In legal terms it falls under the category of corporations. It has legal personality and is liable for corporate obligations only with its assets (within the limits of the shares paid by each shareholder). The characteristics that, today, lead to the establishment of this type of company depend, above all, on these elements:
Asset separation: the assets of the company are totally separated from the personal assets of the partner(s). This aspect allows the entrepreneur to limit his or her business risk;
Organizational flexibility: in internal relations between members, flexibility and a structure sewn around the needs of the members can be achieved (withdrawal, pre-emption or approval clauses on the transfer of shares, profit sharing, exclusion of the member, entry of heirs, etc.);
Ability to scale the business: the LLC then allows the entrepreneur to think about scaling the business perhaps through the formation of a corporate group, with the establishment of a holding company. Aspect of this, useful to still improve asset separation and business risk, but also to improve group liquidity management, take advantage of tax consolidation, or PEX in the case of the sale of holdings.
In many cases, aspiring entrepreneurs who contact me to consider the best legal form for their business start with the idea that the LLC is a useful tool to enrich the tax advisor, but that it is not useful for a new business. Incorporation costs are high and management costs may end up limiting the profitability of the business. Well, if you have these doubts, my advice is to:
Consider opening a VAT number under the flat-rate scheme. This is because your business idea probably does not currently allow you to consider better options, such as an LLC;
Consider totally revising your business idea. Today an LLC can be formed with really low costs, especially if it is an innovative LLC. Moreover, if well managed, the company is able to take advantage of benefits that largely cover annual operating costs.
For this reason, before evaluating the legal form, aspiring entrepreneurs would do well to assess the profitability of their business perhaps through a simple business plan useful in understanding the profitability and ability to incur useful costs to grow their business.
I know very well what you are thinking, especially if you are one of those entrepreneurs who opened a partnership instead of an LLC: "a partnership is much easier and cheaper to run than a limited liability company." What you are saying is true; I have no interest in lying to you. However, the price to pay is very high. The benefits exist, but they are very little compared to the risks you might take if something goes wrong. If you have a small business, a local business, or are a professional firm, the partnership is the tool for you. In all other cases I would think twice before opening a partnership. That's why I want to explain clearly what an LLC is, how an LLC works, and who is liable for the debts of an LLC.
The minimum share capital is 10,000 euros. Unless exceptions are established in the articles of incorporation, contributions are made in cash, and 25% of these, as a minimum, must be paid at the time of incorporation. Then, from year to year, a minimum amount corresponding to 5 percent of the profit made must be set aside until the threshold of 1/5 of the share capital is reached. In essence, this is a reversion to be adopted in the event of covering possible losses.
The minimum share capital, again, ranges from 1 euro to 9,999 euro. Contributions are made in cash and must be paid in full during incorporation. A share corresponding to at least 20 percent of the profits obtained must be set aside annually and adopted as a mandatory legal reserve, so as to cover possible losses. The simplified limited liability company, therefore, differs from the other two forms of limited liability companies both in the need for the typified memorandum of incorporation (the latter provides for the Ministry of Justice decree) and in the absence of bylaws. This constitutes a considerable limitation, especially if there should be different views among the partners.
Wanting to schematize, we can identify in the following, the advantages associated with the establishment of an LLC.
The first aspect to think about in your business vision is this. How much do I want to be protected as an entrepreneur in my personal assets? Well, forming an SRL allows you the clear separation of business risk and the entrepreneur's assets. The asset liability of the partners in an LLC is limited to only the assets contributed to the company. This is definitely the most important aspect to take into consideration. No creditor of the LLC will ever be able to go so far as to demand that a partner's assets be affected in order to make good on his claim. This, in essence, is what the Civil Code provides, and this is what makes it better than any type of partnership. Of course, it costs more to set up such an SRL and involves meeting more demanding obligations and constraints than a partnership. About this there is no doubt, as said I do not want to lie to you. However, the separation of business risk and your personal assets is something you cannot give up. Your risk as a partner is limited to the value of the partnership shares, unless you make some trivial mistakes, which we will tell you about in a moment.
A limited liability company must file a complete set of financial statements including an income statement, balance sheet, and notes, even if it is very small. There are no exclusions from this. The financial statements vary depending on the size of the company, but they are mandatory for all LLCs. The requirement for the SRL to submit annual financial statements obliges the accountant, to maintain a certain rigor in recording accounting entries to monitor the performance of your company. And this will greatly improve your level of control over the company. The greater the accounting rigor, the better your business management will be. But for this you have to rely on experienced consultants. You can contact us if you want. Control you could not have with a partnership. Without a complete balance sheet, for example, you would never be able to check whether your business management is producing cash or not. Nor would you be able to calculate those indicators essential to catching any signs of business crisis. Now you understand why compliance does not always mean disadvantages. To summarize, in principle, the law guarantees the limitation of the asset liability of members of a limited liability company to the value of the company shares, and this principle is unbreakable. However, there is a way to overcome this limitation.
When faced with setting up an SRL, one problem is the difficulties associated with the fact that a partnership has progressive taxation, while an SRL is proportional. Mind you, this is not true! or at least it is not always true.Even the SRL can opt, in certain cases, for the same taxation adopted by partnerships. I am referring to high so-called "tax transparency." A taxation option that allows the SRL to transform, fiscally, into a partnership. The income generated by the LLC, will be imputed proportionally to each partner in relation to his or her shareholding. In this way, the SRL will tax its income like a normal partnership. All while maintaining the advantages of an SRL.
The LLC is subject to taxation under the TUIR, and in particular to IRES, which has a rate of 24.00% calculated on the difference between taxable revenues and deductible costs according to tax regulations. In addition, this type of company is required to pay IRAP, the regional tax on productive activities, with a rate that varies from region to region. One of the topics I am most asked about by readers and clients in consulting is that related to the management of one's SRL. Along with the establishment of an SRL, one must also think about how best to manage it. In particular, I am referring to the possibility for the partners and the director to be able to withdraw in the correct way the earnings that derive from the management of the company. Italian taxation certainly does not help, and one of the problems of every Italian SME is to know how to correctly manage the earnings that derive from its activity. In recent years, the proliferation of incorrect information, often provided by individuals, who are not familiar with the tax aspects of an LLC has generated much confusion.
You are ready for the big step: you want to form a company and realize your business dream. At this point you have asked yourself the question, "What legal form should I use for my company?" The limited liability company seems to meet your needs, but you have doubts about the differences between Srl and Srls. The "s" in Srls stands for "simplified version". This legal form has some simplifications for the entrepreneur.
In Italian commercial law, the legal form s.r.l., limited liability company, is a type of corporation introduced into the Civil Code in 1942. The aim was to introduce an intermediate corporate structure between a partnership and a joint stock company. Over time it was realized that the legislation had several shortcomings, which is why in 2003 it was the subject of a major amendment made by the company law reform. Only in this way was the goal of a hybrid model of S.p.A. and joint stock company achieved. With this corporate structure, sole proprietorships and partnerships (src and sas) are discouraged in favor of a limited liability model that offers perfect asset autonomy. By this is meant that, partners are not required to pay for the company's insolvencies with their personal assets and are therefore not dragged into the company's bankruptcy.
The legal form S.r.l.s. was introduced in 2012 and is governed by Article 2463 of the Civil Code. The Srls was designed especially for young people who intend to approach entrepreneurial activity. These are quick and easy companies to form, with a standard form dictated by law that cannot be changed, and without some stamp, secretarial and notary costs. In 2017, almost half of the registered Srls were simplified Srls (Source: IlSole24). Srls are chosen to start small family businesses with an average of three employees.
So why choose the limited liability legal form? For both LLC legal forms in the ordinary and simplified versions, there are advantages that we can summarize in these three points:
Transfer of company ownership from one party to another is faster
There are more opportunities to access credit because LLCs present more information that can be presented to banking institutions.
They ensure liability limited to the assets each entrepreneur invests in the company, the so-called perfect asset autonomy.
Before delving into the differences, it should be emphasized that srl and srls are not two different types of companies. Simplified is a subtype of ordinary srl. For this reason, for example, the transition from simplified to ordinary can be made when necessary without too many problems. Although the two companies are very similar, there are differences that make one or the other more or less advantageous, depending on one's needs. We can essentially outline three differences between LLCs and srls with regard to costs, administration, and in the company's bylaws.
One difference between Srl and the Srls should be noted right from its incorporation. The srls, also known as the 1€ srl, provides savings in initial incorporation costs. In this legal form, there are no notary fees, stamps and secretarial costs, only stamp duties and fees to the Chambers of Commerce. With an amount between €300-600, it is thus possible to establish an Srls. For Srl, it will be necessary to expect around €1,300-1,500. On the day of the founding also it will be necessary to pay at least 25 percent of the share capital amounting to a total of €10,000. In the case of a sole shareholder, the owner of the Srl will have to pay the full amount. The minimum capital for Srls, on the other hand, is €1.
Srls provide only two types of administration: sole director or board of directors. Here the partners can only be natural persons. If there are several partners in an srls, the person who will legally represent the company must be chosen. In the srl, on the other hand, there are several directors with the same "powers." In the ordinary corporate form there are many more diversifications in the area of administration, and the partners can also be legal persons.
The bylaws are the document that regulates the operation of the company. In the ordinary Srl there is the possibility of amending the bylaws according to the needs of the individual founding members. Of course, always taking into account the laws in force. This possibility, on the other hand, is not provided for in Srls, where the bylaws must conform to a ministerial model, with no flexibility in changing the relationship with the partners. Do you want to establish an Srl or Srls company? Contact us!
The Srls is particularly economical in incorporation; it cannot have a capital of more than €9,999.99, and since it is a model prefixed by law, the rules of operation and administration are already fixed and do not allow for exceptions for the partners. Incorporating an Srl provides for more but offers more flexibility regarding administration and bylaws. There are no differences, however, with regard to accounting requirements and annual costs of running and maintaining the company.
* Fulfillment of the request will be subject to appropriate and necessary verifications in accordance with anti-money laundering regulations.
** The price quoted is inclusive of professional fee and VAT, net of withholding tax.
*** The contents of this package are intended to be exclusively those detailed in the "INCLUDED SERVICES" section. Any other requests or variations in the terms and benefits of the package will be subject to separate quantification. It is always possible to add to the all-inclusive package the "EXTRA SERVICES" indicated in the appropriate section, if not already included in the identified package.
**** Share capital is required by law for incorporation and is to be excluded from the price shown for the identified all inclusive package.
***** The disbursement of the "BONUS CONSTITUTION" is subject to the signing of a regular annual engagement letter with Studio Locatelli Sani Ravani & Associati for the entrustment of the ordinary accounting, tax and corporate management of the newly formed company (to be quantified separately). The voucher is intended to be spendable only against the amount of the first invoice received under the annual assignment itself.
