Setting up as a sole trader is one of the most popular way to start a business in Italy, and it’s still quite common because it’s easy and cheap. Sole trader registration is straightforward, accountancy is simpler than a limited company, and you can use part of the money in the bank account for your personal expenses. At the end of the year, you will keep all the profits after tax.
Disadvantage of setting up the business as a sole trader
Now you have read the advantages of a sole trader, but there are also disadvantages; if your business fails, you will have to pay for that failure out of your own pocket, and the creditors can take advantage of your personal wealth even outside Italy in your own country, although this usually happens only for important debts. This is the main reason why many entrepreneurs prefer a limited company.
The other disadvantage is the prestige. A limited company sounds more official and in general more respected. However, because a limited company has limited liability while the sole trader has not, it’s sometimes easier for a newly incorporated sole trader to find an office or get a loan. The landlord or the bank knows that – if the business goes bad – they can still tackle the personal wealth of the owner, so they are more open to take the risk.
Open or Close an Italian sole trader
A sole trading company is incorporated directly at the Chamber of Commerce and doesn’t require a notary public, who is mandatory instead to open an Italian limited company (S.R.L.) and an Italian joint stock company (S.P.A.). Thus the company formation is extremely cheaper.
Because a sole trader is deeply connected to the (sole) owner, the business usually ceases on the owner’s retirement or death. Before that, it can be dissolved with an application at the Chamber of Commerce.
Can a Sole Trader become a Limited Company
Starting small by sole trading is a way to test a market – many companies are born this way. If this is your case, and you plan to grow later, can you upgrade your sole trader company in a real limited company later?
The answer is “yes and no”. The answer is (in part) no, because you can’t simply upgrade your company. A Limited company requires a different procedure and in Italy the company formation should be done in front of a notary public. However you can achieve the same result dissolving the sole trader and moving all the asset to the new company, including the name, the logo and equipments. If your timing is correct, you will dissolve the sole trader, setup a new limited company and move the asset in the same very moment, like if the company has been upgraded.
Be careful because there can be some tax involved. In fact, moving the asset from a company to another can be taxed as a sale.
How to chose the name of your Italian sole trader company
The name of a sole trader should be the sum of two elements:
i) a fantasy name chosen by the owner
ii) at the end of the chosen name, the name of the owner himself.
For instance, if I decide to trade as “Ferrari” my company should be named “Ferrari di Stefano Tresca”, that it could be amusing because the same words in Italian mean also “Stefano Tresca has a Ferrari (the car)”.
Before choosing the name of a famous company – and be sued by them – read the post How to Choose the Name of a Company in Italy.
Business card and other stationery for sole trader
The name of the owner should be always shown in business card, letterhead and any other commercial document, or the company can be fined.
The reason is simple. If a sole trader company fail, the owner has to pay all the debts from his own pocket. He can’t just go bankrupt, in fact there is no limited liability. The law requires to show to your clients and providers who’s the person behind the company.
This is the reason why so many of our clients prefer to setup a more expensive Italian Limited Company (S.R.L.) and get a limited liability.
Sole trader vs. Limited liability company in Italy
So what’s the best choice, a sole trader or a limited liability? Our bigger clients have no doubt, they enter in the Italian market with all the firepower of a limited company (S.R.L.) and the bravest of them start from the beginning with a bigger and more prestigious Italian joint stock company (S.P.A.).
But what about the smaller entrepreneur, that want to test the market? Sole trader vs Limited company is one of the most asked question of my smaller clients, and – like any other common question – has no common answer.
Personally I would suggest a limited liability company all the time. I like to separate the business from my personal life and sleep well at night. If the business is not so good as expected, you can dissolve the company and lose just a few thousands euros.
However, a limited company can be very expensive (for a small business) to open and to dissolve. So you can go for the Sole trader if you can live with the idea that creditors can tackle your personal wealth, or if you have a business model that don’t allow loss, for instance you ship the goods only after you are paid (but be careful, because perfect business model are never so perfect as we think).
Whatever is your choice, do it. Italy is a bureaucratic nightmare, but it’s also one of the richest and most populated country of the European Union, definitively a market where any foreigner can make a profit.
Image source: s_falkow at Flickr.com
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46 Responses
Thanks Stephano. I am Russian citizen can I open my business in Italy as Sole Trader?
Hi Alexandr. Yes a Russian citizen can open a sole trader in Italy. You can invoice and receive payments. But you can NOT live in Italy unless you get ALSO an immigration visa. In short you have to manage your business online.
The only requirement to operate as a sole trader in Italy, is an Italian address. The less expensive solution is to take a virtual office from companies like http://www.Regus.com or http://www.officeinitaly.com (disclaimer: the last website was mine before I sold it).
Hi Stefano, very useful thank you! I have retired early from a company job and am thinking of setting up as a sole trader in Italy (I own a property there), as a communications consultant. Do you please know income tax rates/bands and national insurance contributions in this scenario? Other costs? Do I need to be an Italian resident? Thanks! Michael
Hi Michael. Sounds a good choice. Nobody can calculate your taxes. Laws come and go in Italy, and there are hundreds different rules to calculate expenses. However a common tax regime for Italian consultants is about 30-40% on the revenue.
The good news is that – if you work from home – you can probably save from taxes half of the rent. Pick a good accountant. I will try to make a list of accountant used to deal with foreign customers as soon as I have some time.
In general, I am afraid that you can’t calculate the convenience of starting a business in Italy in details. It’s more a leap of faith. If you are not happy, you can always close the business after one year.
About your residence, any EU citizen can operate as a consultant WITHOUT a residence permit. For non-EU is probably better to setup a limited company. Check this post: http://attorneyitaly.com/italian-limited-liability-company-srl
Hi Stefano,
We can not read your site about company type SAS. Can you please guide us. We are getting square figures only when we load it….
That’s because you see the Chinese version. The webmaster is on the way. I’ll drop an email when he has solved the issue (thanks for the warning)
DEAR WE ARE IN BUSINESS OF MANUFACTURING AND EXPORTING FASHION GARMENTS TO EU AND UK,USA FROM THE LAST 4-5 YEARS AND I M PLANNING TO OPEN AN OFFICE IN ITALY TO EXPLORE THE EU MARKET I M FROM PAKISTAN LAHORE KINDLY GUIDE ME HOW CAN I .
REGARDS
MO
Usually in front of a notary public. If you can’t fly in Italy, or you need help, a lawyer can help. Have a look to this website for more information. Good luck!
I am a Pakistan national and resident of Hungary, during my current visit to Italy a small business opportunity caught my eye, and thus I came to know about the “famous Italian bureaucracy” information on the Internet is too pleasant and simple, and the practical is tough, I was practically pushed and yelled at the central police station when I went there for information and I am still unable tto understand why? because before getting angry the women at the desk was trying to speak English, later…..Italian is a language of expression :)), but I was really really hurt until I reminded myself that i am a citizen of third world country, it is normal for me, now I am clueless about what to do, the information available on the official website is in English, I can understand it but the officers at the desk are completely unable to, and that is ridiculous that I try to explain the law and procedure of Italy to Italian officers, funniest thing is when they are asked Ok, what should I do now? They are as clueless as I am, what should I do now?
I don’t think that the issue was your nationality. The police is just not the best place to ask about a business. Next time, ask to a lawyer. They have bills to pay too 🙂
Stefano,
Can you give advice about setting up a company and the registered address. Does it need to be in an office or could it be from an address (home) and thus can the owner bill the company for use of the address etc… under italian law at arm’s length.
Is there any issues with this. If you wanted to resell the house etc.
Regards
Donald
Good morning,
Somebody will contact you soon.
Best regards
Michele
Best blog yet. You definitely helped me with making some strategic decisions when I was at a cross road. I hope you keep your blog going, especially in light of Italy’s very recent foreign investment measures. Thank you.
I am Greek and want to set up a personal company in Italy.
A shop and trade hand tools and hardware equipment
I would like to ask what is the capital needed for a sole trader and for limited company.
You will receive an answer very soon
Dear Stefano, I am a citizen of Belarus and I am about to buy a house in Italy and to move there permanently with my Family. I am sales agent working for different foreign companies, but now registered in Belarus. In Italy I found more suitable to be established as a personal company. Can you recommend what should come first – establish a property or get registered as personal company? I get an agents fee for my services (not selling or buying myself). Are there any sources about taxation of such kind of business?
Dear Alex,
it would be better first getting registered as individual company. About taxation, I will let you know soon further details.
Rgs
Michele
Thanks for your post. I’d appreciate a little clarification though. I moved to Italy to work in an academic position, and I’m up to starting a B2C e-commerce business we well. After reading the post, I’m still wondering whether the term “creditors” would apply in case I don’t have a loan or debts at all. I mean, I would like to register a sole trader venture fully financed from my savings, without any initial liabilities to a bank or any other financial authority. And if my business has failed, I will ask for a dissolve. Now the question is: would my personal assets even in my home country still be in danger should my business not perform as expected?
Thanks again.
Hi Gasser,
Creditors are all the persons you owe some money, not only banks. So, if your business goes on bankruptcy (fails), is because you are not able to pay some of them. This is not automatic, according to Italian laws, but depends on some requisites like the total debt and others.
As written in the article, Italian law allows the creditor of a trader to recover their money through his personal assets also abroad, but this happens, usually, only when money to recover is high (because the costs to recover abroad are high). Don’t worry.
Rgs
Michele
Hi Stefano,
I am an Australian born national and residency is a closed door so far after my father relinquishing his Italian citizenship to be naturalised as an Australian in 1968.
I would like to manufacture my furniture design prototypes in Italy so I can be truthful about, “made in Italy”.
I was also advised that registration as a sole proprietor in Italy would result in residency. Which would of course make everything else related to my proposed business function….like vehicle registration.Maggazzino rental contract. Power connection, phone etc….
Have I been ill-advised??? If so. Could you point me in the right direction?
Ringrazie.Marco
Dear Marco
I suggest you open a LTD, instead. This wouldn’t give you IMMEDIATELY residency (but you could go back and forth with a business visa), but it would avoid you to “merge” your personal responsability with the one of the trading.
Rgs
Michele
Sole Trader doesn’t provide residency or any kind of Visa?
Thanks
Just business visa
Hello!
Thank you for the very valuable information here so far.
I have double citizenship (italian passport) and I am considering in opening a business as sole trader (in this case, I offer services and not products). Can i open it and start the business right away or do I need to apply for grants? In this case I would work from home.
And also, is there an email contact from you guys where I can get more info?
Thanks!
Sabrina
Yes, because you are also Italian, you can open it without any grant.
Rgs
michele
Ciao Michele
I have been reading through the questions and your overview. Really useful. I am an Italian citizen, and have moved here, after living abroad in EU for many years. I want to open a service provider, so I think the sole trading is perfect for me as I won’t have creditors other than pay as you (professional indemnity insurance, membership of professional body, electricity and gas and water is about it). I hope I have understood correctly the answers to the queries, and that as I am providing the service (counselling for English speakers), probably health/illness cover would be a good option for me.
Many thanks for the time you take to reply and for the information above. If you know of a good financial/accountant in the Pisa area would love to know.
Rosy
Dear Sir,
i am from Pakistan looking forward to register a sole concern in my name here for the purpose of garment and leather goods,
please give me useful information relating to
following_
.Documentation
.Govt. fees for getting sole concern in my name and
enrollment with tax departments etc.
.Your professional fees
.any amount to show or deposit in sole business bank a/c
after or before registration or there is no such requirement.
.a document which entitle me to stay an work on behalf of my
sole business.
I would be grateful if you would kindly give information a requested above.
Regards,
Zubair Rasool.
92 342 2631113
Zubair Rasool (Facebook)
428/1 FB Area Karimabad, Karachi-75950-Pakista
We’ll reply ASAP.
rgs
michele
Hi Stefano
I am planning to set up a website business in Italy along with the partnership with my Italian Nationality friend.
So guide me how to start this work, what kind of registration we need to have?
Do I need to have the Srl?
Kindly reply me to my email, so we can discuss about it in details.
Kind Regards!
ok, it will be done
rgs
michele
Dear Sir , I plan to set up as a sole trader in italy .I am british , married to an italian and resident in italy for 18 years .My business offers a service rather than a product .Wedding planning to foreigners No office as mainly online and using my home address .Can you detail the costs involved in setting up this type of business .Thankyou Anne marie
Hi,
I’m a non-EU businessman trying to start an export company in Italy.
The Notary process was puzzling to me. He needs me to have work-visa in order for him to accept processing the documents.
A friend told me that the Questura in Como (where I want to register the company) will issue a “temporary” work-permit (7 days only) regardless of my tourist visa to allow me registering the company.
Is that account correct? if not, how to go around this obstacle?
Hi Bassam, the fastest solution to incorporate your company is trough a power of attorney. Your attorney will go in front of the notary public on your behalf. We can do it. Or you can ask a local lawyer with an experience in company formation.
Hope this help
Stefano
Dear Stefano
I am an Egyptian entrepreneur and I want to open a small business of import and export in Italy
Do I need an Italian partner and how much will this cost?
Thank you
Dear Rasha,
Are you in Italy?
Rgs
Michele
Hi Stefano
I am South African looking at starting an online business selling home decor, what do i need to know and do to be legal and how much will it cost.
Thank you.
Hello Natalie, if you are based in South Africa setting up a company in Italy may NOT be the best option. If you have a reason to setup a company in Italy, feel free to contact me on Clarity https://clarity.fm/stefanotresca and we’ll check together if it’s really worth.
Dear Stefano,
Thanks for this interesting post.
I have a doubt about the Italian sole trader bank account:
Does he have to open a business bank account only for his commercial purpose, or can he just use his personal (already existing) bank account?
Thanks.
Best regards
Best regards
Hello Baptiste. A sole trader can use his personal bank account too. However I will advise against that. If your friend or spouse send you money, if you receive a refund from Amazon, etc the Tax Agency could decide that these bank transfer are part of your business and tax them. At that point, you should object and prove otherwise. And this could be painful, expensive and time consuming (and you can’t be 100% sure to win)
Hi , i like all the answers but just want to make sure i am doing the right move , i love italy and want to live there for long time .
I am an romanian guy living in uk and want to move to italy with my wife and 2 kids . Want ro become sole trader doing amianto rimozione . Need to know if there is any special visa to work as sole trader in italy . Already been to torino and applied codice fiscale . I been given one straight away . What else do i need to set up my sole trading bussiness .
Thanks
Thanks to the EU – as a Romanian – you are supposed to live in Italy without any VISA. Just go to a local accountant and start your business. All the best for your venture!
Hello
I am a US citizen and I want to open a language school in Italy. I was thinking about starting as a sole proprietor but as I read the comments here, this does not grant me residency. What is the best option for me? I would like to also reside there, instead of traveling back and forth, which is not a sensible option.
you should open a company in your country, then a branch of it in Italy
rgs
michele spadaro
Hi,
I used to be a resident in Italy from 2008 until 2013 – I worked for a company and paid taxes there got married had 2 kids then got legally separated and moved away from italy. Now im back and I would like to pay taxes here again as a sole trader to have the medical and pension advantages rather than than pay taxes in England. I will set up as a sole trader and invoice the English company my hours and expanses every month and then pay taxes here since Im responsible for the italian market. Where do I start and do i get tax breaks for being separated and having 2 kids here?
Thanks,
D
Hi,
I am french but I am about to live in London. Can I be a sole trader in UK or have an Ltd and work as a designer and with producers (so, design products and sell them in Italy) in Italy – meaning is it possible to do this and wouldn’t I get additional taxes to add like the 30% taxes (tenuta d’acconto if I recall well) even if I will then pay my taxes in UK ?
I am a Pakistan national and resident of Italy as a student visa in 2019 because I want to plan register as a sole proprietor in Italy so i need a piece of advice and how is a procedure to register sole proprietor and change the permiso de soggiorno and live and work in Italy