A Guide to Starting a Business in Italy

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Italy is famous for many brands across a wide range of industries, and despite its reputation for red tape, bureaucracy, corruption, a rigid labor market, it remains an attractive destination for many entrepreneurs.

The process of setting up a business in Italy is quite lengthy and strenuous and can be especially challenging if you aren’t aware of the Italian laws and culture. However, you don’t have to worry! If you’re looking to start a business in Italy, we have all the answers.

Here are a few steps to help you get started on launching a business in Italy.

Draft a Business Plan

The key to setting up a business in Italy is drafting an iron-clad business plan. The success of a business largely relies on the understanding of the market and the target clientele. A business plan can help you put together all important information about your business, including its goals, objectives, strategies, idea, and target market.

Drafting a business plan will help you figure out the following:

  • If there’s room for your business in the Italian market
  • Your network and connections
  • Your target customers
  •  Your target market
  • Your start-up expenses
  • Your short and long-term objectives and plans

Once you’ve drafted a business plan, you’ll have a better idea of how to navigate the Italian market.

Decide Your Company Status

Drafting the business plan will probably give an idea about the type of company you want to form. Your choice of the legal entity you want to form depends on many factors, including the intended size of the business, the main operations, and the overall budget.

The most common types of companies are:

  • Sole trader – This simplest business structure that is owned and operated by an individual, where the owner is responsible for all payments and liabilities.
  • Partnership – Flexible type of company structure where individuals partner up with other individuals to run a business. Depending on the nature of the business, a partnership can have limited liability or unlimited liability.
  • Limited Liability Company – Large business entities that have no minimum threshold for share capital and have limited liability.
  • Public Limited Company – Large businesses listed in the stock exchange with an unlimited number of shareholders.

If you’re launching a new business, forming a limited liability company has many advantages in Italy. With this status, you can create a company comprising just one shareholder that invests a minimum of €1. Also, the director of a limited liability company doesn’t need to be a European Union resident, which is beneficial for foreign investors.

You can also form a public limited company if you plan to havea minimum paid-up capital of €50,000 or want your company listed on the stock exchange.

Get a Long-Term Permit

This is probably one of the most critical aspects to consider when starting a business in Italy. In order to set up your business in Italy, you will need to have a legal permit to live and work in the country. While EU residents that have international agreements with Italy are exempted from this, non-EU entrepreneurs will require a visa to be able to set up their venture.

Get Ready for Paperwork

Once you’ve decided on the type of company you want to create and filed for your visa with the Italian embassy, it’s time to register your company. You will need to put together many necessary documents for this step to play out successfully. If this seems like too much work, you can always hire a local lawyer who’s familiar with the Italian business ecosystem.

You will need to draft the memorandum and articles of association along with your company’s bylaws or social contract and have them notarized. The notary will register your business with the Universal Company Register. Along with the notary expenses, you will also have to bear the expenses for both the Chamber of Commerce and the Register of Enterprises as they will be involved in the registration process. Moreover, you will also have to bear the fee to get your accounting and corporate books authentication by the Trade Register.

If you choose to operate as a freelancer, the amount of paperwork required will significantly decrease, making the registration process much easier.

Set Up Your Corporate Bank Account

It is mandatory for every company to open their corporate bank account through which they can conduct business transactions. When opening a company bank account, you will need to provide the bank with some documents that show the legitimacy of your business. Since Italian banks are quite conservation when it comes to lending, you will have to have your start-up money ready beforehand, and depending on your company status, you will have to deposit at least 25% of this money into this account.

Register for Taxes

The Italian law has five main types of taxes: Income tax, corporate tax, VAT or sales tax, tax on services, and excise tax.If you’re a foreign national working in Italy, then you will be taxed on the income you earn there. Moreover, once your company is registered, the two main taxes to register for arecorporate tax and VAT. There may also be some other minor taxes, such as property tax and tax on financial transactions, that you might have to incur.

The Bottom Line

In the past, Italy has had a reputation for corruption, bureaucracy, red tape, and other structural issues that have position it unfavorably to potential foreign investors and entrepreneurs looking to start their ventures. However, many reforms have been brought on by the former Prime Minister, Matteo Renzi, that has made Italy an attractive destination for foreigners looking to set up their business. Some particular Italian industries that draw in investors and entrepreneurs include chemicals, manufacturing, transport, and mechanical and construction sectors. So, if you’re one of those looking for a business opportunity in Italy, we hope this guide can help get you started.

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