What is an SRLS Company in Italy? Establishing a Limited Liability Company with Low Capital

What is an SRLS company in Italy?

Società a Responsabilità Limitata Semplificata, or SRLS for short, is a simplified limited liability company model regulated under Italian law. SRLS was developed as an alternative to the classic SRL (Small Limited Liability Company) especially for entrepreneurs who want to start a business with low initial capital.

SRLS, like a classic SRL, is a capital company. The company has a separate legal personality and assets from its shareholders. As a rule, the company's own assets are liable for its debts. The shareholders' liability is generally limited to the capital they have committed to contribute to the company.

SRLS's most striking feature is that company capital can start from 1 Euro. However, this does not mean that a company can be established for a total cost of 1 Euro, or that 1 Euro will be sufficient for every business activity.

The Italian National Council of Notaries states that the capital of an SRLS (State-Owned Enterprise) can range from a minimum of €1 to a maximum of €9,999.99; the entire capital must be paid in cash to the management body at the time of incorporation. Furthermore, the incorporation document must be drawn up before a notary in accordance with the standard model stipulated by law, and these standard provisions cannot be altered.

In this respect, SRLS can offer a more economical and simpler structure during the establishment phase. However, the standardization of the articles of association significantly limits the partners' ability to tailor internal company relationships to their own needs. Therefore, despite its low cost, SRLS is not suitable for every venture and every partnership model.

Can Turkish citizens establish an SRLS (Special Service Line) in Italy?

Turkish citizens can become shareholders in SRLS or participate in its establishment, provided they meet the conditions stipulated in Italian legislation.

However, there is an important limitation regarding SRLS. The partners of this type of company must be natural persons. In other words, a Turkish citizen can be a personal partner in an SRLS; however, it is not possible for a limited or joint-stock company established in Türkiye to be a partner in an SRLS.

If a Turkish company plans to establish a subsidiary in Italy, the classic SRL (Small and Medium-sized Enterprise) model would be more suitable. This is because in a classic SRL, it is possible for legal entities to be partners.

To establish an SRLS company, a Turkish citizen must obtain an Italian tax identification number (Codice Fiscale), prove their identity and power of representation in notary procedures, and prepare the necessary documents for incorporation.

If the founder grants a power of attorney from Türkiye, the power of attorney may need to be prepared in accordance with Italian notary procedures, apostilled, and translated into Italian.

However, being an SRLS partner does not automatically grant residency or work rights in Italy. Even if a Turkish citizen owns a company, they must obtain the appropriate visa and residence permit separately if they actually wish to live or work in Italy.

Is there an age limit for SRLS?

When SRLS was first introduced, it was designed as a company model for young entrepreneurs and included an age limit for partners. However, subsequent legislative changes removed the 35-year age limit.

Therefore, nowadays, people over the age of 35 can also establish or become partners in an SRLS.

Some outdated information can still be found online stating that only individuals under the age of 35 can establish an SRLS (Self-Regulatory Service). This information is no longer current.

However, the requirement that partners must be natural persons remains in effect. Therefore, while there is no age limit, the inability of legal entities to be SRLS partners is a significant difference.

What is the minimum capital required for SRLS?

The capital of SRLS can be set at a minimum of €1 and a maximum of €9,999.99. The entire capital must be paid in cash at the time of incorporation.

In the SRLS model, in-kind capital contributions are not permitted. Directly contributing real estate, machinery, vehicles, trademarks, patents, software, or other economic assets as company capital is not compatible with the SRLS model.

This is one of the key differences between a classic SRL and an SRLS. While classic SRLs allow for in-kind capital contributions under certain conditions, SRLS require capital to be paid only in cash.

Capital is deposited with the directors when the company is established, or paid in accordance with notary and bank procedures. The payment is indicated in the company's articles of incorporation.

While it is legally possible to set a company capital of 1 Euro, this is generally insufficient from a commercial perspective. Considering the company's expenses for rent, software, inventory, insurance, accounting, marketing, and employees, the initial capital should be determined according to the actual business plan.

What does it mean to start a company with a capital of 1 Euro?

Statements like "You can set up a company in Italy for 1 Euro" are often misunderstood. The 1 Euro stipulated by law is only the minimum company capital. This amount does not cover all the company's establishment and operating expenses.

The following costs may arise when setting up SRLS:

• Commercial registry registration fees,
• Chamber of commerce fees,
• Stamp and registration taxes,
• Codice Fiscale transactions,
• PEC email account,
• Digital signature,
• Accountant's fee,
• Legal and consultancy fees,
• Translation and apostille costs,
• Company headquarters or office expenses,
• Bank account fees,
• Licenses and operating permits.

Therefore, having a capital of 1 Euro does not mean that the company will be established for free or at a symbolic total cost.

Furthermore, banks, suppliers, and customers may perceive a company with very low capital as financially weak. If the company is going to enter into large contracts, acquire inventory, or hire employees, €1 in capital does not constitute a reliable financing model.

Therefore, SRLS's capital should be determined not according to the legal minimum threshold, but according to the company's cash needs, at least for the first year.

Is a notary required for the establishment of SRLS?

SRLS is a capital company, and its incorporation documents must be prepared in the presence of a notary. SRLS is not a simple sole proprietorship that can be established with just an online form without a notary.

The notary verifies the founders' identities, licenses, capital payments, company name, field of activity, registered address, and the appointment of managers.

The Italian National Council of Notaries states that the SRLS incorporation document must be drawn up by a notary as an official document conforming to the standard legal model. The provisions of the standard model cannot be altered.

The SRLS establishment stipulates that no notary fees will be charged for the preparation of the standard incorporation document. However, this exemption does not mean that there are no costs involved during the establishment process.

Commercial registry, chamber of commerce, tax, translation, power of attorney, and professional consulting expenses may still arise. Furthermore, additional costs may be incurred if extra procedures are required or different documents are prepared outside of the standard model.

What does a standard Articles of Association mean?

The most important feature of SRLS is that its founding document is based on a standard and immutable model.

In a classic SRL (Small and Medium-sized Enterprise), the articles of association can be detailed according to the needs of the partners. In an SRLS (Small and Medium-sized Enterprise), however, the standard incorporation text stipulated in the law and relevant regulations is used.

This standard structure can speed up the incorporation process and reduce notarial costs. However, it also limits the possibility of making adjustments to suit the specific needs of a company.

For example, it may not be possible to regulate the following topics in detail in the SRLS standard text:

• Making the transfer of shares subject to special approval conditions,
• Giving partners different voting rights,
• Granting a specific partner the authority to appoint a manager,
• Creating preferential treatment in profit sharing,
• The deadlock mechanism between equal partners,
• Partnership withdrawal procedure,
• Drag and drop shipping rights,
• Non-compete clause
• Investment obligation,
• Share buyback mechanisms.

Therefore, for ventures with multiple partners, those planning to attract investors, or those with complex management structures, a classic SRL may be more suitable than an SRLS.

Is it possible to have a separate Partners Agreement in SRLS?

While SRLS's standard articles of association cannot be amended, it is possible for partners to enter into a separate shareholders' or partners' agreement among themselves.

This agreement may regulate certain matters relating to the partners' work obligations, investment commitments, confidentiality, non-compete clauses, company management, and share transfer.

However, it should be remembered that the partnership agreement only has legal effect between the parties. A provision not included in the company's articles of association cannot be invoked against third parties or the company in all circumstances.

For example, partners may agree among themselves that a share cannot be transferred without the consent of the other partner. However, if this restriction is not included in the articles of association and the registry structure, it may not provide the same protection regarding the validity of a share transfer to a third party.

Therefore, attempting to resolve significant and complex partnership relationships solely through a private contract may not be sufficient. In such cases, the flexible main contract structure of a classic SRL (Small and Medium-sized Enterprise) should be preferred.

Can SRLS be established with a single partner?

SRLS can be established by a single natural person. In a single-shareholder SRLS, all shares of the company belong to one person.

Single-owner structures are particularly relevant for small-scale operations, independent consulting, software, digital services, and sole proprietorships.

However, it should be remembered that a single-shareholder company also has a separate legal personality. The company account and the shareholder's personal account must be separated, and all transactions must be conducted in the company's name.

A sole shareholder cannot use company funds as if they were a personal account. Payments made from the company to a shareholder must have a justifiable legal basis, such as wages, expense reimbursement, debt repayment, or dividends.

A single-shareholder structure must be clearly indicated in the commercial registry. Any changes in the number of shareholders must also be reported to the registry.

Can SRLS be established with multiple partners?

SRLS can also be established with more than one natural person as a partner. The share percentages of the partners are indicated in the articles of incorporation.

However, due to the standard articles of association, the management and decision-making relationships of the partners cannot be regulated in as much detail as in a classic SRL.

There is a risk of decision-making deadlock, especially in 50-50 ownership structures. If the partners cannot agree on a significant issue, the management of the company may cease.

Since the standard text does not contain detailed interlocking mechanisms, the equally-owned SRLS organization should be carefully considered.

Similarly, in structures where one partner actively works for the company and the other only contributes capital, the roles and responsibilities must be regulated by a separate contract.

In projects with multiple partners, if there is a significant amount of capital, intellectual property, or a long-term investment plan, a classic SRL (Small and Medium-sized Enterprise) structure generally offers a safer and more flexible structure.

Can legal entities become SRLS partners?

SRLS partners must be natural persons. Companies, associations, foundations, or other legal entities cannot be SRLS partners.

Therefore, a limited or joint-stock company established in Türkiye cannot become a partner in an SRLS (State-Owned Liability Company) by establishing one in Italy.

If a Turkish company plans to establish a subsidiary in Italy, a classic SRL (Small and Medium-sized Enterprise) should be preferred.

The ban on corporate partners could also affect SRLS's capacity to grow and attract investment. If institutional investors or foreign companies wish to partner in the future, the company type may need to be converted to a classic SRL.

Therefore, even if only individual partners are initially involved, choosing SRLS may create additional conversion costs in the long run if the goal is to attract corporate investment in the future.

Who could be the CEO of SRLS?

SRLS's management may be entrusted to one or more directors. Directors are not necessarily required to be company shareholders.

Therefore, a professional from outside the company or a foreign manager may be appointed.

A Turkish citizen can also become an SRLS administrator if they complete the necessary tax and identity procedures.

However, being appointed as a manager does not automatically grant the right to work or reside in Italy. If the manager will actually be working in Italy, they must also have the appropriate immigration status.

The management model is defined within the boundaries of the standard organizational text. A single director, joint management, or multi-director structure can be evaluated according to specific needs.

Manager's Responsibility

The SRLS director is responsible for ensuring that the company's operations are conducted in accordance with the law, the company's articles of incorporation, and the company's best interests.

The manager may face personal liability in the following situations:

• Neglecting tax and social security obligations,
• Using company assets for personal purposes,
• Keeping false accounting records,
• Failure to inform shareholders of capital loss,
• The company continues to be burdened with debt despite its financial difficulties,
• Illegal profit distribution,
• Violation of employee rights,
• Engaging in actions that harm creditors.

The fact that the company has limited liability does not mean that the director will not be held responsible for their own negligent conduct.

Even if the foreign manager lives outside Italy, they must regularly monitor the company's operations. Authorizing an accountant or local representative does not absolve the manager of all responsibility.

Key Differences Between SRLS and Classic SRL

Although SRLS and classic SRL are based on the same limited liability system, there are important differences between them.

Capital

SRLS's capital must be between €1 and €9,999.99 and must be paid in full in cash at the time of incorporation.

In a classic SRL, the capital can be €10,000 or higher, but it can also be set below €10,000 under certain conditions. In-kind capital contributions are also possible in a classic SRL.

Partners

In an SRLS, only natural persons can be partners. In a classic SRL, both natural and legal persons can be partners.

Articles of Association

SRLS uses a standard and unchangeable incorporation text. In a classic SRL, the articles of association can be customized to the company's needs.

Notary fee

SRLS may have an advantage in terms of notary fees for standard incorporation procedures. In a classic SRL, notary fees are charged.

Acquiring investors

In SRLS, corporate investment processes are more limited because legal entities cannot be accepted as partners and the articles of association are not flexible. Classic SRLs are more conducive to attracting investors.

Corporate structure

SRLS may be more suitable for simpler small businesses. Classic SRLs are stronger in terms of growth, investment, partnerships, and specific management arrangements.

Can SRLS be converted to Classic SRL later?

An SRLS (Small and Medium-sized Enterprise) can be converted into a classic SRL (Small and Medium-sized Enterprise) in the future. This conversion may occur when the company grows, increases its capital to €10,000 or more, wishes to attract corporate investors, or requires more detailed articles of association.

The conversion may require a joint decision, notarization, a new articles of association, and notification to the trade registry.

This process does not mean the company is liquidated and re-established. The company's legal personality generally continues; however, its type and articles of association are changed.

However, the conversion incurs additional notary, registry, legal, and accounting costs.

If it's anticipated from the outset that the company will grow rapidly and attract investors, it might be more efficient to establish a classic SRL directly, rather than first setting up an SRLS and then immediately converting to an SRL.

Profit Distribution in SRLS

SRLS's profits may be distributed after the annual financial statements have been prepared and approved by the shareholders.

However, not all profits can be automatically distributed to shareholders. Legal reserve requirements, past year losses, and the company's financial situation must be taken into consideration.

Limited companies with a capital of less than €10,000 are required to set aside a certain portion of their net profit for reserves. This higher reserve allocation obligation continues until the sum of capital and reserves reaches €10,000.

Therefore, a significant portion of the initial profits of an SRLS established with a capital of 1 Euro may need to be retained within the company.

Profit distribution to partners is subject to tax. Dividends received by Turkish partners from Italy must be assessed under both Italian and Turkish tax law.

Accounting and Tax Obligations in SRLS

Although SRLS requires low capital, it is a separate legal entity and taxpayer, just like a classic SRL.

The company must maintain accounting records, prepare annual financial statements, submit tax returns, and fulfill its trade registry obligations.

If the company's activities are subject to VAT, Partita IVA transactions are performed. Invoice issuance and electronic invoicing obligations may apply.

If an employee is hired, INPS social security and INAIL occupational safety insurance records will come into play.

Even if the company generates no revenue, accounting, record-keeping, and annual reporting costs may continue.

Therefore, SRLS should be evaluated not only on the basis of establishment costs, but also on the basis of annual operating and compliance costs.

Commercial Registry and ComUnica Transactions

SRLS is registered in the Italian Commercial Register after being established in the presence of a notary.

The Commercial Registry contains official records relating to a company's name, registered office, capital, partners, directors, and business status.

Establishment and commencement of operations notifications can be submitted to the relevant institutions via the ComUnica system. ComUnica is a system that combines different notifications related to the Commercial Registry, tax, social security, and occupational accident insurance into a single electronic process. The Commercial Registry guide explains the ComUnica procedures for establishment and commencement of operations notifications of new businesses.

Establishing a company and starting operations are not the same thing. Depending on the field of activity, it may be necessary to submit a SUAP or SCIA notification to the municipality and obtain additional licenses.

Codice Fiscale and Partita IVA for SRLS

Foreign founders and directors are required to obtain a personal Codice Fiscale number.

A tax number and a Partita IVA registration based on the company's activity are also created for the company itself.

If a company will conduct VAT-taxable trade with businesses within the European Union, registration with the VIES system may be required.

Choosing the correct ATECO code is crucial when defining the business activity. An incorrect or incomplete activity code can lead to tax, licensing, and social security issues.

Company Headquarters and Virtual Office

SRLS must have its registered office in Italy. This address will be used for commercial registration and official notifications.

The company headquarters can be a rented office space, co-working space, or a professional address that meets the appropriate conditions.

If you plan to use a virtual office, you should check whether the address is accepted by banks, notaries, municipalities, and relevant authorities.

For a restaurant, shop, warehouse, or manufacturing company, a virtual office address alone will not suffice. A lease agreement, SUAP (Supplementary Business Act) procedures, and operating permits are also required for the actual business location.

PEC and Digital Signature

SRLS must have a registered email address called a PEC.

Official notifications sent via PEC may constitute legal notice. Therefore, the account should be checked regularly.

The company uses digital signatures in its trade registry and financial statement processes.

For foreign managers, completing digital signature and identity verification processes during the establishment phase would be beneficial.

It can be risky for only the accountant to control the PEC account or digital signature. The company manager should be able to directly track official notifications.

Opening a Bank Account

SRLS must open a bank account in the company's name. Managing capital, income, and expenses through the company account is important for corporate separation purposes.

The bank may request identification, address, tax, income, and fund source documents from foreign partners and managers.

The company's business plan should clearly explain its field of activity, customer profile, estimated turnover, and source of capital.

The fact that a company has been established with a capital of 1 Euro does not mean that a bank account will be easily opened. The bank may consider very low capital, an inadequate business plan, or the absence of real economic activity as risk factors.

Does setting up SRLS grant a login credential?

Establishing an SRLS company, becoming a partner in a company, or being appointed as a director does not, by itself, grant a residence permit in Italy.

A Turkish citizen can own a company in Italy, but if they want to actually work and live in Italy, they must have the appropriate visa and residence permit.

Freelance work visas, startup visas, investor visas, or other immigration pathways may be assessed on a case-by-case basis.

Advertisements claiming that one can automatically obtain Italian residency by establishing an SRLS with a capital of only 1 Euro are false.

The company's actual business activity, business plan, financial adequacy, permits, and the applicant's professional status may also be examined in the immigration application.

Which businesses are suitable for SRLS?

SRLS may be suitable for startups that have the following characteristics:

• Small businesses with a single or few shareholders,
• Service activities that require low initial investment,
• Consulting and digital services companies,
• Startups that do not plan to attract external investors in the initial stage,
• Businesses that do not require complex partnership arrangements,
• Entrepreneurs who want to separate their business risk from their personal assets.

In contrast, classic SRL (Special Offered Partnership) may be more suitable for the following projects:

• Affiliated companies in which the Turkish company will have a stake,
• Startups that will attract institutional investors,
• Projects with multiple partners and complex voting structures,
• Companies will be created with different share and profit rights,
• Large capital investments,
• Companies to which in-kind capital will be contributed,
• Structures requiring equal partnership and a dedicated lockout solution,
• Startup companies planning an upcoming investment round.

Documents Required for SRLS Establishment

For Turkish citizen founders, the following documents may generally be required:

• Valid passport,
• Code Fiscale,
• Address document,
• Documents showing marital status or identity information,
• If the transaction is to be carried out by proxy, a special power of attorney is required
• Documents relating to the source of capital,
• Acceptance statements for management positions,
• Information about the ultimate beneficiary.

In Türkiye, power of attorney documents and other official documents may need to be apostilled and translated into Italian.

The list of required documents may vary depending on the notary, bank, and type of business activity. Therefore, coordination with the relevant Italian notary is necessary beforehand when preparing the documents.

SRLS Establishment Process Step by Step

The first stage involves evaluating the suitability of the business activity and company model for compliance with SRLS.

In the second stage, the company partners, their share percentages, and the manager are determined.

In the third stage, the company name, registered address, and field of activity are prepared.

In the fourth stage, the Codice Fiscale is obtained for foreign founders and managers.

In the fifth stage, the amount of capital is determined and a cash payment plan is prepared.

In the sixth stage, the standard incorporation document is signed in the presence of a notary.

In the seventh stage, the company is registered with the Commercial Registry.

In the eighth stage, Partita IVA, PEC, digital signature, and relevant institutional registrations are completed.

In the ninth stage, a bank account and accounting system are established.

In the tenth stage, SUAP, SCIA, and sectoral permits are obtained according to the activity.

In the eleventh stage, if the founder will be working in Italy, the visa and residence permit process will be handled separately.

Common Mistakes in SRLS Setup

The most common mistake is thinking that an entire business can be run with just 1 Euro of capital.

The second mistake is assuming that establishing the company will automatically grant residency.

The third mistake is failing to assess whether the standard articles of association are sufficient for the partnership relationship.

The fourth mistake is assuming that a Turkish company could be a partner in SRLS.

The fifth mistake is establishing an SRLS with the intention of attracting institutional investors in the future.

The sixth mistake is the lack of regulation to prevent deadlock in equal partnerships.

The seventh mistake is assuming that incorporation costs consist solely of company capital.

The eighth mistake is confusing the company account with the partners' personal accounts.

The ninth error is the failure to follow up on PEC statements and annual accounting obligations.

The tenth mistake is failing to investigate the banking and operating license requirements before establishing a company.

Why is legal support important?

Although the SRLS establishment process is based on standard documentation, the investor's need for legal advice remains.

The lawyer will first assess whether SRLS is a suitable business model. For some ventures, the advantage of low incorporation costs may not outweigh the loss of bylaw flexibility.

If there is more than one partner, a separate partners' agreement must be prepared and the roles clearly defined.

Turkish citizens' power of attorney, apostille, translation, and Codice Fiscale procedures must be carried out in accordance with Italian notary practices.

The lawyer also prevents misguided immigration plans by explaining the difference between company formation and residency permits.

Conclusion

SRLS is a simplified company model created in Italy for individuals who want to establish a limited liability company with low initial capital.

The company's capital can range from a minimum of €1 to a maximum of €9,999.99. The entire capital must be paid in cash at the time of incorporation. The SRLS incorporation document is drawn up in accordance with the standard legal model before a notary public, and the standard provisions cannot be changed.

SRLS partners must be natural persons. Turkish citizens can be SRLS partners; however, a company established in Türkiye cannot be a partner in SRLS.

While SRLS has the advantage of low capital and establishment costs, its standard articles of association limit the company's ability to customize its ownership and management arrangements.

Therefore, while SRLS may be suitable for small, simple businesses with few shareholders, a classic SRL might be a more appropriate option for ventures that will acquire investors, include corporate partners, or have complex management structures.

A capital of 1 Euro does not mean that the company will be established with a total cost of 1 Euro. Additional expenses will arise for the trade registry, accounting, company address, bank, PEC (Process Electronic Mail), digital signature, licenses, and professional consulting.

Establishing an SRLS (State Insurance Company) or becoming a company director does not automatically grant a Turkish citizen the right to reside and work in Italy. Company formation and the visa and residency process are separate legal procedures.

Entrepreneurs planning to establish an SRLS in Italy need to consider not only the establishment costs but also the company's future partnership, investment, financing, and management needs. Choosing the right company type is crucial for avoiding subsequent conversion and conflict costs.