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Individual enterprise for artisans and traders

Guide on how to start a sole proprietorship for artisans and traders, including advantages and disadvantages of the business form.

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A sole proprietorship indicates an activity carried out by a single person, who may use collaborators or employees to perform it. An introductory guide on the form of sole proprietorship, its advantages and disadvantages, and the INPS social security management for artisans and traders will be provided below.

Sole proprietorship: definition

According to the definition taken from the Business Register, a sole proprietorship (or sole proprietorship) is an activity carried out by a single person, the owner of the business, who may be assisted by collaborators, including family members, or employees. The owner of the business is solely responsible for the management of the business.

The sole proprietorship is characterised by the prevalence of both the work performed by the entrepreneurs and their family members over the work of others and the use of own capital over external forms of investment.

The Article 2083 of the Civil Code refers to the small entrepreneur and defining it as:

people who pursues an organised professional activity predominantly with their own labour and that of their family members.

How to start a sole proprietorship

All sole proprietors, including family businesses, are obliged to register in the Commercial Register at the Chamber of Commerce. Registration with the Chamber of Commerce must be submitted exclusively electronically, through a Single Communication (known as ComUnica), established by Law 40/2007.

ComUnica allows you to carry out a single fulfilment to complete all the formalities necessary for setting up a company, and in particular:

  • apply for a VAT number from the Inland Revenue;
  • register the company in the Company Registry;
  • fulfil Inps obligations for social security purposes;
  • fulfil Inail obligations for insurance purposes.

Sole proprietorship denomination

The denomination of the sole proprietorship is not compulsory, as the entrepreneur may also decide to not give any name at all. In that event, the company will be identified by the entrepreneur’s own name.

Entrepreneurs have the right to the exclusive use of his chosen firm, and the firm, however it is formed, must contain at least the surname or initials of the entrepreneur, except as provided for in Art. 2565 of the Civil Code.

In order to distinguish their business and products, entrepreneurs use signs that also distinguish them from other competitors such as the company, the sign and the trade mark.

It should be noted that since these are distinctive signs, the company must not cause confusion to competitors and must therefore not infringe the rights of others.

Benefits of sole proprietorship

Carrying out a sole proprietorship activities brings some benefits, such as:

  • the option to access the simplified accounting scheme;
  • the option to access the facilitated flat-rate scheme;
  • Not being subject to business bankruptcy and insolvency procedures.

Moreover, sole proprietorships using the flat-rate scheme can claim a 35% ‘discount’ on all INPS social security contributions.

Setting up a sole proprietorship certainly has the advantage of allowing entrepreneurs to run their business with low running costs. In fact:

  • There is no minimum initial capital requirement;
  • It is not necessary to use a notary public to draw up a deed of incorporation;
  • It is not required to prepare and file annual budget;

Taxes concerning individual proprietorship

Regarding taxes, there is no double taxation either on the income of the company or on the income or assets of the entrepreneur.

Therefore, the entrepreneur who sets up a sole proprietorship has a tax advantage by being subject to the payment of IRPEF (personal income tax) and INPS social security contributions.

Disadvantages of sole proprietorship

Although very simplified and less costly than the other forms provided for by law, The opening of a sole proprietorship has considerable disadvantages that particularly involve the liability profile.

The main risk to be considered for the entrepreneur starting a sole proprietorship concerns the asset. In the sole proprietorship there is no division between the personal capital of the entrepreneur and the capital of the enterprise: it is a case of imperfect patrimonial autonomy.

In this case, entrepreneurs will have unlimited liability towards third party creditors and will be liable with all their personal assets for the debts incurred by the enterprise.

Social Security Management for Artisans and Traders

The owner of a sole proprietorship, according to Article 2 paragraph 26 of Law 335/95, is obliged to register with an INPS social security management in order to correctly settle contributions relating to income received through the business activity.

The Gestione INPS Artigiani e Commercianti is the social security fund for individual entrepreneurs operating in the craft and trade sectors.

Generally, artisan activities are recognised by the centrality of the technical-manual work carried out, for the most part, by the owner in person. On the other hand, commercial activities are based on the sale of goods and/or services, or perform functions ancillary to sales.

The two types of social security contributions for artisans and traders

Those enrolled in the INPS Artisans and Merchants Management pay two types of social security contributions. These contributions are based on the minimum income established by INPS, which is €16,243, and the social security rate of approximately 24.00%:

  • Quarterly annual contributions: the fixed and compulsory amount irrespective of the receipts actually produced during the year are calculated using the social security rate on the minimum income;
  • Contributions calculated on income exceeding the minimum: payable if the INPS minimum income exceeds. They are calculated only on that ‘portion’ of excess income, when applicable.

Payment of rates for artisans and traders

The IVS contribution on the minimum income, divided into four equal quarterly instalments, must be paid to the Artisans and Traders Management by:

  • May, 16th: first instalment
  • August, 20th: second instalment
  • November, 16th: third instalment
  • February, 16th: fourth instalment

Contributions on the portion of income exceeding the minimum amount are, instead, paid within the time limits set for the payment of personal income tax, for balance, first and second instalment, deductible from the annual income when preparing the personal income tax return.

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Regulatory Framework

Civil Code: Art.2081 et seq.

Reference (Italian only)

Civil Code: Art 2563 et seq.

Reference (Italian only)

Title 1 TUIR for Individuals

Reference (Italian only)

Social security contributions for artisans and traders

Reference (Italian only)

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