The Sole Proprietorship in Italy
The laws and rules of the so called Impresa Individuale or Ditta Individuale
How to incorporate an individual company in Italy
The sole proprietorship is one of the simplest and most common forms of doing business, it is called "impresa individuale” or “ditta individuale”, it is:
- an activity carried out by a single subject, the owner of the company;
- who can use the help of collaborators, including family members, or employees;
- the owner of the company is the only person responsible for business management.
Article 2082 of the civil code defines entrepreneur (in general): one who carries out professionally, that is systematically, an organized economic activity in order to produce and exchange goods and services.
Article 2083 of the civil code provides the definition of a small business owner: he is the one who carries out a professional activity organized mainly with his own work and members of his family.
In the sole proprietorship, the firm coincides with its owner, both in terms of substance and procedure.
The sole proprietorship is characterized:
- the prevalence of the work done by the entrepreneur and (eventually) his family members, over the work of others;
- use of its own personal capital equity, compared to forms of external investment typical of companies.
The individual entrepreneur (owner of the sole proprietorship) takes care of all the issues:
- he can have employees who help him in the work, accounting or management;
- even if he hires employees, only he is responsible for the company and business obligations;
- alternatively, the individual entrepreneur can also work alone, in complete autonomy.
In order to register a sole proprietorship, it is necessary:
1) to present, exclusively electronically, the Single Communication for registration called “ComUnica” to the Company Register responsible for the territory with which all the formalities necessary for the establishment of the business are carried out with a single fulfillment; Registration via ComUnica can take place through the use of special software made available free of charge by the Chambers of Commerce and available on the Company Register website or through the Starweb application;
- registration in the Company Register takes place in the “ordinary section” or in the “special section”, depending on whether the owner is a commercial entrepreneur (as defined by article 2195 of the civil code) or a small entrepreneur (small business, artisan or agricultural).
- registration in the special section has the effect of certification of the registry, of news advertising and of the special function of legal advertising (declarative effectiveness);
- the firm name, also called "denominazione della ditta indidividuale", is the name with which the company is entered in the Company Register; this indication is not mandatory, the entrepreneur may also not put any denomination and, in this case, the name of the sole proprietorship will be the entrepreneur's proper name; if instead the entrepreneur chooses a name, then the name will be composed of the chosen name + the entrepreneur's name; in the invoices of a sole proprietorship it is not sufficient to indicate only the name, but it is mandatory to insert both the firm name and the name of the owner;
2) submitting the VAT registration request to the Revenue Agency; the Ateco code of the activity to be carried out by the individual company must be indicated, it is the indication of the professional category to which it belongs according to the general classification of Istat;
3) it is sufficient to attach the identity card and the payment of a stamp duty;
4) fulfillment of INPS obligations for social security purposes;
5) fulfillment of the INAIL obligations for insurance purposes;
6) eventually, other specific authorizations may be required in relation to the type of activity that will be carried out (for example, in the case of a bar or shop, authorization from the municipality is required, etc.).
Choosing to set up a sole proprietorship company certainly has the advantage of allowing the entrepreneur to manage his business independently and with significantly reduced management costs.
The performance of economic activity by sole proprietorship has some advantages:
- lack of the obligation to keep accounting records;
- about fiscal regime, it is possible to choose a simplified accounting scheme or a flat-rate scheme;
- it is not subject to bankruptcy and insolvency procedures, considering the small capital size;
- there is no initial mandatory minimum capital;
- no formality is required for the establishment of the firm (it is not necessary to resort to the notary for the stipulation of a memorandum of association);
- the owner is not required to prepare and file the annual financial statements.
The prevailing risk to be considered for the sole proprietorship is of a patrimonial nature: the sole proprietorship is unlimitedly liable towards third party creditors and the owner of it is liable with all its personal assets for the debts contracted by the company (lack of patrimonial autonomy typical of joint stock companies, including single-person limited liability companies, also made up by one single shareholder).
From a fiscal point of view:
- the income produced by the sole proprietorship must be added to all the other income of the owner;
- the progressive IRPEF and IRAP rate paid on corporate income is applied to the overall taxable amount;
- the annual fee for registration in the chamber of commerce is due.