SrlMy very first article on Italian companies is not surprisingly about the S.R.L., the Italian Limited Liability Company or – in Italian – Società a Responsabilità Limitata. This is the most popular tool among foreign investors. If your business doesn’t require a specific type of company, you will probably start your Italian venture with an SRL.

Limited Liability Company in Italy – Summary

  • Company name: S.R.L. (‘Società a Responsabilità Limitata’)
  • Similar companies: LLC in US, LTD in UK, Ireland, Cyprus, etc, GmbH in Germany and Austria, SARL in France, SL in Spain
  • Minimum share capital: Eur 10,000 (only Eur 2,500 should be paid. See below)
  • Minimum number of shareholders: One. However 1 shareholder should deposit a bigger share capital. See below.
  • Minimum number of directors: One
  • Nationality of the shareholders: Any (with some rare exceptions)
  • Nationality of the director: Any (with some rare exceptions)
  • Limited liability: Yes. Shareholders benefit of a complete limited liability.
  • Auditing: Not required (Exception: if the company has a share capital of Eur 120,000 or more, the auditing is required)
  • Physical office: Not required (a virtual office is enough to setup the company and to obtain the VAT number)

NOTE: The minimum share capital and liability in Italy is Eur 10,000. However, if you run a small business or a start up, you probably don’t want to freeze all this money at the very beginning of your venture. Good news is that if your company has two or more shareholders, they are required to deposit only Eur 2,500. In short:

  1. one initial shareholder = share capital to be deposited Eur 10,000;
  2. two or more shareholder = share capital to be deposited Eur 2,500. It doesn’t mean Eur 2,500 for each shareholder, it’s Eur 2,500 in total.

Why one entrepreneur should pay more than two or more entrepreneurs? Well, the answer is quite simple and you will hear it many times dealing with the Italian bureaucracy: “it’s the law”. Yes but why the law has been written like that? … A mystery ! (My very personal opinion at the end of the post).

When you do have to setup a limited company

  • When you don’t have a reason to incorporate a specific type of company. If any type of company is fine, then you should probably setup an SRL.
  • When you want a full presence in Italy and an Italian VAT number, but you prefer to start small. When you are more confident of your venture, you could always upgrade your limited company SRL to a joint stock company (SPA.).

When you do NOT have to setup a limited company

  1. When the law requires an Italian Joint stock company (SPA). Usually you need a joint stock company SPA to operate in regulated market such us:
    – Open an Italian bank, institute of credit, or insurance,
    – Intermediate in gold. A SPA could be useful to setup a chain of pawn shops in Italy,
    – Operate in the telecom industry, especially as a mobile operator etc.
  2. When you provide your services from your own country, for instance you run a call center or you provide IT support online/by phone. If you need an office in Italy just to employ a sales team, you should consider to setup a Light branch or a Representative Office. It’s cheaper, legal and usually you don’t have to pay corporate taxes in Italy.

More on the share capital of a SRL

The minimum share capital is Eur 10,000 but you can decide to have bigger capital to favorably impress banks, providers and clients. The capital to be effectively deposited before the incorporation follows the usual rule:

  • one shareholder = 100%,
  • two ore more shareholder = 25%.

For instance, if you incorporate a company with a share capital of Eur 50,000, the shareholders are liable for Eur 50,000, but – if two or more – they need to deposit only Eur 12,250 (25% of the total).

That’s all …

That’s a complete overview of the basics, and I hope it could be helpful. Nowadays I rarely provide basic company formation services, but if you have a question feel free to ask (use the email icon on the top right corner of the screen). I do my best to read and reply to all the email.

P.S. – If you are like me fascinated by history and human nature, you can maybe like this.

So “Why a shareholder should pay more share capital than two shareholders in Italy”?

I have read many technical explanation when I was at the university, and later during my JD thesis. None is convincing. In my very personal opinion the reason is not legal but human. Our Italian Civil Code is older than our Constitution, Italy was a rural nation and the bureaucrats (not to mention the Nobles) were quite skeptical about doing business. Two shareholders means convincing another fellow villagers to take a risk with you. So your idea should be really good, or you should be a very influencing person (a.k.a. probably a Noble). The law is made to punish  innovators.

This is just my opinion of course, what’s your idea?

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