How to establish a «Limited Liability Company» (S.r.l.) in Italy

The limited liability company – in Italian: «Società a Responsabilità Limitata» or «S.r.l.» only – is the most popular Italian company type, mainly for the following reasons:

• a little registered capital is enough;
• the quota holders’ liability is limited to the pro-quota subscribed capital;
• it is a «low-cost» company, also easy to be managed.

In Italy, the S.r.l. differs from joint-stock companies as the participation in the capital is represented by «intangible» quota(s), which cannot circulate as stocks. This is why the members of an S.R.L. are called «quota holders» and not «shareholders».

Similar companies in other countries are L.L.C. in the U.S., L.T.C. in the U.K., G.m.b.H. in Germany; S.a.r.l. in France; S.L. in Spain. 

S.r.l. in a nutshell

• Company name: Società a responsabilità limitata – S.r.l.
• Minimum registered capital: EUR 10.000,00 (of which only EUR 2.500,00 must be paid at incorporation). The minimum corporate capital can be as low as EUR 1,00, but when the capital is lower than EUR 10.000,00 the company will be a “simplified S.R.L.”, subject to certain special rules and limitations (see below)
• Minimum number of quota holders: One
• Maximum number of quota holders: None
• Nationality of the quota holders: No limits (with some rare exceptions that must be verified on a case-by-case basis)
• Nationality of the directors: No limits (with some rare exceptions that must be verified on a case-by-case basis)
• Limited liability: Yes
• Auditing: Required only if (i) the company has more than 50 employees or exceeds € 4,400,000 in assets or € 8,800,000 in turnover for two consecutive years; (ii) is obliged to prepare consolidated financial statements; or (iii) controls other companies that are required to have statutory audits.

The list of info and documents needed

To incorporate an S.r.l., the information needed is as follows:

• the name of the new company

In Italy, there are no special limitations in identifying the company name.

• the personal data of the quota holders and the registered capital subscribed.

In the case of a sole quota holder, special rules and restrictions apply. For example, the corporate capital shall be fully paid, and all the company documents and correspondence shall point out that the corporate capital belongs to a sole quota holder; otherwise, the sole quota holder shall be jointly liable with the company for its debts.

Please note that on the day of the incorporation of the S.r.l., each quota holder must deposit in a bank account an amount equal to at least 25% of his/her/its quota of corporate capital. The unpaid capital shall be paid within 30 days if requested by the director(s). The bank deposit can be replaced by an insurance policy or a bank guarantee (under certain requirements); or by a contribution in kind. However, in this case, the law requires an independent expert valuation and some other formalities.

In case the quota holder is a company, some additional documents may be required (e.g., the resolution adopted by the shareholders’ meeting) which shall be translated into Italian (certified translation), notarized, and apostilled or legalized, depending on the case.

• the personal data of the director(s)

The director(s) can also be foreign nationals, but they shall hold an Italian fiscal identification number («codice fiscale»), which can be obtained from any local tax office («Agenzia delle Entrate»).

The first director(s) are appointed in the deed of incorporation.

• the address of the registered office

The office may be also a «virtual» one, for instance, located at the office of a law or accounting firm;

• the name and personal details of the first statutory auditors, if necessary

The “Simplified” S.r.l.

As mentioned above, when the partners set up an S.r.l. with a share capital of less than € 10,000, it will be an “S.r.l. Semplificata” (simplified S.r.l.).

Compared to the ordinary S.r.l., it enjoys some economic benefits during the incorporation phase (i.e.: exemption from paying stamp duty and secretarial fees, exemption from paying notary’s fees), but also some rather significant limitations, because the bylaws must be drafted by a standard model, and registered capital may be paid only in cash.

Should the shareholders decide to increase the registered capital to a value equal to or greater than € 10,000, they will be required to transform the company into an ‘ordinary’ S.r.l. (through a notarised public deed), thus losing the limitations seen above and thus, for example, being able to amend the bylaws.

The management of a simplified S.r.l., on the other hand, does not enjoy any benefits compared to the ordinary S.r.l., and this is the main reason why it has not been very successful in Italy. Indeed, the small registered capital may constitute a limitation to obtaining bank financing or requesting credit from suppliers.

Since these disadvantages are not balanced by any advantages or tax benefit in the management of a simplified S.r.l., the ordinary S.r.l. seems preferable, unless the founders have limited resources at the incorporation stage and can exclude from the outset that the new company will need access to bank financing or enter into particular corporate operations.

How to incorporate an S.r.l.

The deed of incorporation and the by-laws shall be executed before a Public Notary.

The deed of incorporation is a quite standard document that contains all the information provided by the law to set up an S.r.l.

The by-laws contain the company governance rules and can always be amended through a resolution of the quota holders’ meeting. The founding quota holders are free – except in the case of a simplified S.r.l. – to adapt the bylaws to their needs, establishing, for example, the manner and timing of the payment of share capital, the type of governance (sole director or board of directors), the powers and duration of the company’s administrative body, the procedures for the transfer of company shares, the majorities required for decisions by the quota holders’ meeting, the procedures and conditions for the withdrawal of quota holders, the conditions for the withdrawal, etc.

After the incorporation, a copy of the deed of incorporation and the by-laws shall be filed at the Italian Companies’ Register within 20 days. Until then, any person acting on behalf of the company will be personally liable.