Starting a business is no less than a roller coaster ride. On the one hand, you have the prospect of great promises in your sight, which keeps you energized, and on the other, you have apprehensions of “whether it would work or not”. You can tackle this fear of yours to a great extent by conducting in-depth market research and preparing a business plan.
Locating your business in Italy can never be the wrong option considering the possibilities it offers. However, one needs to have the skin and endurance to tackle the administrative and bureaucratic procedures when starting a business here. Italy’s economy is a highly developed and modern one, which despite its stiff labor market, remains an enticing option for ex-pat investors and start-uppers. The country also features the eighth highest standards of living and is in possession of the third largest gold reserve. When it comes to private wealth, Italy secures the second position in the private wealth to GDP ratio, which is just next to Hong Kong.
Although, the country might be a tad notorious for all the red tape one has to go through when starting a business. You may ease your journey with the appropriate guidance and knowledge. Here is a thorough account that elaborates on the requirements, formalities, and procedures of opening a business in Italy. You will also know how easy it is to start a venture here and what a responsible employer in Italy looks like. So, get going!
Italy has introduced several reforms to simplify the process of starting and running a business. You may choose to operate as a company or a sole trader. Both legal structures are overseen by the Italian civil code. You may begin your journey of opening a company by preparing a solid business plan and choosing a company name that is not taken by anyone else. Then, you will need to select a legal structure for your business. For instance, you may opt for a limited liability company, limited partnership, general partnership, etc. After this, consider drafting the company’s memorandum, which is followed by going to the notary public and registering the business and its bylaws. The needed documents are submitted to the Register of Enterprises in Italy. Open a business bank account in Italy and deposit the minimum share capital.
This useful information on starting a business in Italy is mentioned in further detail in the sections that follow. Read and increase yourself in the knowledge!
Process of setting up a business in Italy
Italy, one of the founding members of the EU, is the 8th biggest economy in the world. The sectors that mainly contribute to its terrific economy are manufacturing, agriculture, service industry, tourism sector, fashion, and automobile. Furthermore, the country also finds a covetable place in the list of the largest wine producers and also, and it holds the third huge gold reserve. Italy offers immense potential for new businesses and ventures and is quite supportive, as demonstrated by the Doing Business report 2020. The country got 58th position among 190 countries in the Ease of Doing Business index. Now, as you have learned the perks of establishing a business, let’s walk you through the process of starting a venture in Italy. Read on, then!
- Prepare a masterful business plan: Whether you are planning to start a small business r thinking of expanding the current firm, a business plan will act as a reliable and worthwhile guide in making critical business-related decisions. It facilitates increasing clarity on different aspects of your venture as performing market research, analyzing your competitors, understanding the product/ service demand and supply, etc. Furthermore, investors and potential associates solicit a business plan, where a masterful one would succeed in convincing them. Thus, it unfurls the opportunities for new businesses.
- Choose a legal structure: The business ownership structure you choose for your company impacts several aspects such as your tax rates, paperwork requirements, management, fundraising abilities, liabilities a company will face through the lawsuits, etc. Therefore, avoid rushing when deciding the legal structure of your business, as it has several ramifications. In Italy, the most common types of business structures are limited liability companies, stockholding companies, general partnerships, and limited partnerships.
- Open a business bank account: Italian banks are pretty conservative; you need to bear this in mind when starting a business here. Before launching a venture, you need to have minimum share capital ready in hand to deposit in your business bank account. At least 25 percent of the venture capital must be deposited into this bank account. This step of setting up a business bank account is easier for residents, while non-residents need to go through extra formalities and fulfill additional requirements. Ex-pats must be prepared to endure a lot of paperwork at every step!
- Procure a long-term permit: This is one of the critical aspects to regard when starting a business in Italy. To launch a venture in the country, you will need to permit live in Italy and operate your business. EU residents with international agreements set up do not need to go through this step. However, non-EU citizens must solicit a full visa in the country where they are reading from the Italian consulate.
- Other paperwork to attend: To get your business registered in Italy, you need to draft articles of association aka Statuto and memorandum aka Atto Costitutivo, along with the company’s bylaws. Once you have them, get them notarized with the Universal Company Register. Freelancers have to go through a bit less amount of paperwork and different registration procedures. Furthermore, one has to pay fees for the Chamber of Commerce and the Register of Enterprises. Once your business’s registration is finalized, you will be assigned a VAT number and a tax number.
- Create a verified email address: As a final step, you need to set up a business email address that would be authorized by the government. You will have to pay fees for opening this email address.
Hiring Employees in Italy
So, finally, have you got your business registered and procured different permits and licenses? Yes, now is the time to turn to the step of recruiting people to handle various operations of your company. Instead of acting extravagantly in the hiring process, you need to focus on recruiting talented employees. This step neither initiates by inviting applicants and interviewing them for the role nor does it end with directing them to their office desk. There are many regulations which are mentioned employment and labor laws of a country, which an employer needs to follow. Here we have collated the main ones to help you know what it takes to become a responsible employer in Italy. Read on!
- Trial Period/Probation Period: Periodo de prova, i.e., the probationary period, must be mentioned in the employment contracts. During the trial period, the employer, as well as the employee, has the liberty to terminate the service without stating any grounds, without posing notice, and without reimbursing any indemnity in place of notice of termination. The trial period duration varies in correspondence with various categories of employees. The duration of the probation period, for instance, cannot surpass 6 months for upper-level employees.
- Leave and Holidays: Italian law entitles employees to receive a minimum of four weeks of vacation per year. However, applicable NCBA may allow for a longer dur
ation. This four-week vacation must be given in a way such that two weeks fall in a row in the same year while the remaining two weeks may be utilized within 18 months of the end of the year of accretion.
In Italy, there are about 11 public holidays and extra four days that were earlier included under public holidays. However, currently, these four days are considered working days on which the employees are paid for double work time. If a person becomes absent from work due to sickness, injury, or accident, the employer cannot dismiss the employee unless it is the scenario of the company’s closure or due to some other justifiable reason.
- Maternity Leave: Female employees in Italy are entitled to 2 months of leave before the anticipated date of childbirth which can be extended to 3 months in complicated cases, and 3 months of leave after childbirth. During the period of maternity leave, the employee is entitled to receive 80 percent of the regular wages. After the end of the maternity leave, the employee can join back for the same role in the same office under the same or better work conditions.
If a doctor says so, maternity leave can begin one month before the expected date of child delivery and end with 4 months f leave taken after childbirth.
- Termination of Services: Italian law mentions clearly the sound and fair reasons for dismissing an employee, which can be categorized as follows:
- Subjective justified grounds: These grounds include infringement of obligations mentioned in the employment contract, showing negligence in duties, or exhibiting highly unserious behavior towards the responsibilities.
- Objective justified grounds: These grounds include dismissal due to a decline in the company’s economic condition, such as related to its proper functioning, work organization, or production.
- Giusta causa or just cause: These grounds of dismissal include any grave breach or misconduct that makes it virtually impossible to continue the employment relationship. It may involve crimes like theft, serious subordination, riot, etc.
- Pension: Pensions in Italy are governed by INPS and reimbursed by contributions based on salary done by the employer as well as the employee. If a person will receive the benefits of a pension or not depends on the payment of contributions in social security funds as provided by the law. In particular, in cases mentioned by the law, to enable the employee to reach the threshold of getting a pension, the government makes contributions directly. However, if an employee’s services are terminated due to retirement before age or due to other reasons, the contribution reimbursed by the law may be directly paid by the workers only.
- Work Hour Norms: Working week in Italy can be established in a company by a mutual agreement. Nonetheless, a typical working week cannot exceed the limit of 48 hours including overtime. Often companies may face the need to ask the employees to work overtime. Overtime as per the law can be done only under mutual agreement between the employee and the employer. Overtime working hours cannot exceed the duration of 250 hours annually.
How easy is it to conduct business in Italy?
You need to fulfill many formalities, procure permits and licenses, get electricity connections, credit, and so on to start a business. In some countries satisfying these requirements may seem to take ages until you find yourself nerved, while in others, you would be surprised at the rate at which things are accomplished. How easy it is to establish a business in a country is decided by its EODB rank which is estimated by the World Bank. This authoritative institution conducts research on different elements that contribute to rendering the process of starting a business easier and publishes the report in the Doing Business. According to the Doing Business report 2020, Italy got 58th rank among 190 economies that the World Bank compares and scored 72.9 out of 100. Read on to understand the rankings of Italy in different Doing Business indicators.
- Starting a Business: Starting a business is an indicator considered by the Doing Business when estimating the extent of support, it provides to the new businesses. It does so by measuring the formalities, procedures, costs, and time it takes to launch a venture in a country. Italy was ranked in 98th position among 190 countries and scored 86.8 out of 100, according to the Doing Business report 2020.
- Managing Permits: Licenses and permits are other critical requirements that act as permissions for a business to establish itself and carry out its different operations. The Doing Business estimates the strength of this indicator by measuring the time, the number of formalities, and the cost of the process of acquiring permits entails. Italy bagged 97th rank among 190 countries, according to the Doing Business report 2020, and scored 68.3 out of 100.
- Getting Electricity: Electricity is the lifeline for establishing and operating businesses. So, no doubt, you will need to procure an electricity connection which may take longer in some countries than the others. The Doing Business measures the cost, procedures, time, and formalities involved in getting an electricity connection. Furthermore, the report also estimates and presents the data on the transparency of tariffs and the reliability of the electricity supply in a country. Italy was ranked at the 38th position in this sub-index among 190 countries and scored 68.3 out of 100.
- Getting Credit: Credit is another requirement that can impact how the business scales. It is needed to hire staff, more employees, satisfy the expenses, and for other reasons. Doing Business gauges, the time, cost, and procedures involved in procuring business credit. It also evaluates the efficiency of credit reporting systems and understands how efficient movable collateral laws in a country are. According to the Doing Business report 202, Italy received 119th position among 190 economies and scored 45 out of 100.
- Managing Payroll: The need for incorporating a payroll system in the company arises when the staff size increases, and the number of employees rise. Not only do you need to pay their salaries and reimbursements on time but also abide by the regulations and obligations related to tax payments. An efficient payroll management consultant like Zimyo will help you accomplish this productively without triggering nuisances.
- Paying Taxes: Businesses need to pay local, federal, and other taxes when they become eligible for it. To file and pay taxes, one has to take care of regulations, meet ce
rtain requirements, go through the procedures, and fulfill formalities. The Doing Business measures these aspects of paying taxes to understand how easy it is to run a business in a particular country. Italy got 128th rank among 190 countries and scored 64 out of 100, according to the Doing Business report 2020.
- Enforcing Contracts: This is another indicator regarded by Doing business where it parses through the process of enforcing contracts in a country to see how efficiently a court there solves a commercial dispute. Furthermore, it also evaluates the efficiency and power of legal practices, law, judiciary, and rules to enforce contracts. Italy got 122nd rank among 190 countries and scored 53.1 out of 100, according to the Doing Business report 2020.
- Resolving Insolvency: To estimate the strength of this indicator, the World Bank looks at the insolvency laws of a country and assesses how efficient and supportive they are in helping the debtor overcome the situation. According to the Doing Business report 2020, Italy got 21st position among 190 countries and scored 77.5 out of 100.
As much as Italy is popular for its delectable cuisine, rich history, and art, it is equally favored for its business-enabling environment in Europe. The country’s significant geographic location renders it a gateway and a logistic hub of the European Single Market. Starting a business in Italy is definitely promising and full of opportunities. However, you will need to have a proper understanding of the bureaucracy and different requirements. Business practices, regulations, and local laws. Some small businesses that are displaying much scope in Italy currently are meditation classes, wine business, offer virtual assistant services, cigar clubs, tourism instructor business, fashion business, private hire car businesses, and so on.
Zimyo is a leading HR and Payroll management services provider in Italy with extensive experience. The company assists businesses hire the best talent and takes care of the financial requirements of employees, such as advances or credit for a hassle-free work experience.