If you’re considering starting a business or managing assets in Italy, you’ve probably heard of a simple partnership. It’s one of the oldest and most streamlined forms of company structure in the Italian legal system, used mainly for the management of family assets, real estate investments, agricultural activities and, more generally, for any noncommercial initiative.

In this in-depth guide, we’ll examine what a simple partnership is, its basic characteristics, when to use it, what advantages it can offer you compared to a limited partnership (S.a.s.) or a limited liability business (S.r.l.), and what tax implications it entails. Lastly, we’ll explore the advantages and limitations of a simple partnership to help you assess whether it’s the most suitable solution for your personal or business goals.

What’s in this article?

• What is a simple partnership?
  
• When a simple partnership should be used
  
• Differences between a simple partnership (S.s.) and a limited partnership (S.a.s.)
  
• Differences between a simple partnership (S.s.) and a limited liability business (S.r.l.)
  
• Tax implications
  
• Advantages of a simple partnership
  
• Limitations of a simple partnership
  
• How Stripe Tax can help you
  

What is a simple partnership?

A simple partnership is the basic form of partnership provided for by Italian law. It’s used to carry out noncommercial activities, i.e., all those that do not fall within the definition of business activities provided for by the Italian Civil Code.

For this reason, a simple partnership is often considered to be a noncommercial company, used to manage real estate, family assets, agricultural investments, and nonbusiness management activities. The way a simple partnership works is based on a few key features, which we’ll examine below.

Ease of incorporation

No minimum capital is required. The articles of incorporation of a simple partnership can be drawn up in a private document, even without notarization, unlike in the case of corporations. However, it’s still necessary to register a simple partnership with the Italian Revenue Agency.

Significant contractual autonomy

Partners are free to define roles, powers, profit sharing, and responsibilities in the partnership agreement.

Unlimited liability

In a simple partnership, partners are jointly and severally liable for the partnership’s obligations, unless otherwise agreed for nonmanaging partners. This is one of the reasons that simple partnerships are mainly used in family or asset management contexts.

Absence of commercial purposes

What sets a simple partnership apart from other types of companies is its noncommercial nature. It can therefore be used only for activities that are not entrepreneurial in nature, such as the management and administration of family assets or property.

This characteristic explains the widespread use of simple partnerships in various practical applications, including:

• Real estate simple partnership: Used to manage one or more properties without trading activities or commercial leases

• Agricultural simple partnership: Suitable for managing family-run farms or agricultural businesses

• Simple partnership holding company: Used to hold company shares for the purpose of organizing and protecting assets

When a simple partnership should be used

Understanding whether a simple partnership in Italy is the right solution for you depends largely on the type of business you want to run and your long-term goals. Let’s examine the contexts in which a simple partnership is particularly suitable.

Real estate asset management

A real estate simple partnership can be used to hold and manage family properties. It’s suitable when:

• You want to separate real estate management from your personal assets
  
• You want a simple solution for managing inheritances or family shares
  
• You do not carry out commercial activities, such as short-term leases or speculative trading
  

Land management and noncommercial agricultural activities

Agricultural simple partnerships are very common in the primary sector when agricultural activities are not commercial or entrepreneurial in nature. Simple partnerships are a good fit for families that manage land or small farms.

Noncommercial holding company

A simple partnership holding company is used to hold shares in other companies. It does not carry out commercial activities, but is useful in contexts of succession planning, family governance, or centralized share management.

Asset planning and generational transfers

Thanks to its contractual flexibility and low costs, a simple partnership is often used to:

• Structure the succession of complex assets
  
• Grant different rights to partners
  
• Protect and separate family assets
  

Noncommercial activities

A simple partnership is suitable for activities that are not entrepreneurial in nature. This includes, for example, the management and preservation of family assets, the administration of noncommercial real estate assets, and the collection of passive income, such as residential lease payments or financial income. It’s therefore a suitable structure when the object is to manage assets or investments in an orderly and shared manner, without carrying out any true business activity.

When is it advisable to set up a simple partnership?

It’s advisable to set up a simple partnership when your goal is not to run a business, but to manage and administer assets in an orderly and economical manner. It’s a good fit if you want to:

• Manage real estate or land with other family members
  
• Organize the ownership of assets in a simpler and more transparent way
  
• Hold shares in other companies through a noncommercial holding company
  
• Simplify estate planning, i.e., decide how assets will be divided and managed in the future
  

Differences between a simple partnership (S.s.) and a limited partnership (S.a.s.)

Because the names are similar, many people confuse a simple partnership (S.s.) with a limited partnership (S.a.s.). In reality, these are two structures with completely different purposes, types of partners, asset liability, tax obligations, and scopes of use.

Purpose of the business

This differs depending on whether it is an S.s. or an S.a.s.:

• S.s.: Can only engage in noncommercial activities
  
• S.a.s.: A commercial company in all respects
  

If you carry out business activities (sales, manufacturing, services), you can’t use a simple partnership.

Types of partners

In an S.a.s. there are:

• General partners, with unlimited liability and administrative powers
  
• Limited partners, who have limited liability but cannot manage the company
  

In a simple partnership, however, this distinction does not exist.

Asset liability

• S.s.: All partners can be held liable without limitation.
  
• S.a.s.: Limited partners are liable only up to the amount of their contributed share.
  

Taxation matters

Both an S.s. and an S.a.s. apply transparent taxation, which means that the income generated by the company is simply attributed to the partners and taxed in their personal income tax returns, in proportion to their shares. However, an S.a.s. is a commercial company and is therefore subject to more complex obligations, such as regular accounting and, when the business is organized as a company, the payment of regional production tax (IRAP).

Scope of use

An S.s. is suitable for asset management; an S.a.s. is suitable for entrepreneurial activities.

Differences between a simple partnership (S.s.) and a limited liability business (S.r.l.)

Before comparing an S.s. with an S.r.l., it’s useful to remember the underlying distinction between partnerships and corporations:

• Partnerships: These could include a simple partnership (S.s.), a general partnership (S.n.c.), or a limited partnership (S.a.s.). Partnerships are based on the personal relationship between the partners and, except in special cases, provide for unlimited liability for the company’s obligations.
  
• Corporations: These types of companies, such as an S.r.l. or a joint-stock company (S.p.A.), are structured to separate the company’s assets from those of its shareholders, ensuring limited liability and a more formal organization, typical of entrepreneurial activities.
  

Given this context, an S.s. and an S.r.l. meet very different needs. An S.s. is a noncommercial partnership, suited for managing assets and activities that are not entrepreneurial in nature. On the other hand, an S.r.l. is a corporation designed to carry out commercial activities under conditions of greater asset protection. Here are some key differences between the two structures.

Asset liability

• S.s.: The partners are jointly and severally liable, without limitation, for the partnership’s debts.
  
• S.r.l.: Liability is limited to the capital contributed, except in exceptional cases of mismanagement.
  

Legal framework and scope of activity

• S.s.: A simple partnership can carry out only noncommercial activities.
  
• S.r.l.: An S.r.l. is the typical entity for conducting business activities.
  

Costs and administrative charges

The costs of running an S.s. are low: no minimum capital, fewer requirements, and simplified accounting. By contrast, an S.r.l. requires:

• Mandatory notarial deed
  
• Registration with the Business Register
  
• Standard accounting
  
• Filing of annual financial statements
  

Taxation

As already mentioned, taxation of an S.s. is based on transparency. As an S.r.l. is subject to corporate income tax (IRES) and regional production tax, it’s taxed as a commercial company.

Comparison of a simple partnership, a limited partnership, and a limited liability business

Tax implications

The taxation of simple partnerships is one of the main reasons it’s chosen for asset management. In fact, simple partnerships are not subject to corporate income tax, regional production tax, or other taxes typically levied on commercial companies. Taxation is transparent, meaning it is applied directly to partners, a feature that sets it apart from other types of companies. These are the main taxation factors to consider:

Transparent taxation

Profits generated by a simple partnership are allocated directly to the partners in proportion to their stake in the partnership, regardless of the actual distribution of profits. According to Article 6 of the Italian Consolidated Income Tax Act, the income of partners in a simple partnership can be taxed as:

• Property income
  
• Capital income
  
• Employment income
  
• Self-employment income
  
• Other income
  

No corporate income tax

Unlike corporations, simple partnerships are not subject to corporate income tax. This greatly simplifies taxation.

Indirect taxes

When managing real estate, the simple partnership must consider:

• Municipal property tax
  
• Registration tax on purchases
  
• Inheritance and gift tax (often with significant tax breaks)
  

Tax advantages of simple partnership holding companies

A simple partnership used as a holding company can offer particularly favorable taxation in the management of shareholdings. Dividends and capital gains realized by a simple partnership are not taxed directly on the partnership, but are attributed to the shareholders according to rules that are often more favorable than those applicable to commercial companies.

Possible tax benefits for aided transformation

In recent years, there’s been much talk of aided transformation into a simple partnership. Although legislative references change from one year to the next, the central concept is that the conversion of commercial companies into simple partnerships can, in some cases, benefit from tax breaks. Regulations change over time, so it’s important to monitor updates.

Recap: How taxation works for a simple partnership

Here are the key elements of taxation for a simple partnership:

• Taxation of simple partnerships is based on transparency. The income generated is not taxed by the company, but is attributed directly to the partners in proportion to their shares, irrespective of profit distribution.
  
• A simple partnership is not subject to corporate income tax and, except in special cases, is not subject to regional production tax either.
  
• Income attributed to shareholders falls within the categories set out in Article 6 of the Italian Consolidated Income Tax Act, such as real estate income, capital income, or other income.
  

Advantages of a simple partnership

A simple partnership has many advantages, such as:

Low operational costs

The costs of a simple partnership are among the lowest possible:

• No minimum capital requirement
  
• Basic accounting
  
• No obligation to prepare financial statements
  
• Fewer tax obligations
  
• No obligation for external audit
  

Flexibility of the articles of incorporation

Contractual autonomy allows shareholders to establish customized rules, for example for the management of family assets.

Favorable taxation

Taxation of a simple partnership can be advantageous, especially in the following cases:

• Long-term leased properties
  
• Simple holding companies
  
• Agricultural activities
  

Prime tool for asset planning

Thanks to its simple structure and low costs, a simple partnership is often used for:

• Asset protection
  
• Family governance
  
• Generational transitions
  

Limitations of a simple partnership

In addition to its advantages, a simple partnership has certain limitations that you should take into consideration when choosing the legal structure for your business. Its main limitations are:

• No limitation of liability: In a partnership, shareholders are liable without limitation and with their personal assets for the debts of the company. This can represent a significant risk if the management involves assets that can generate significant obligations.

• Cannot carry out commercial activities: If you have an entrepreneurial project, this is not the right type of company for you.

• Limited recognition by banks and institutions: Some institutions prefer to deal with corporations, especially when it comes to financing.

• Not suitable for operational activities: For management or operational activities, a commercial company such as an S.n.c., S.r.l., or S.a.s. is preferable.

How Stripe Tax can help you

If you’re considering whether to operate through a simple partnership or another corporate form, you’re probably already thinking about how to efficiently manage the tax obligations associated with your online sales. Whichever option you choose, you’ll need to ensure tax compliance for your sales in the markets where you operate. This is where Stripe Tax comes into play, allowing you to manage these obligations in an automated and compliant manner.

Stripe Tax reduces the complexity of tax compliance so you can focus on growing your business. Start collecting taxes globally by adding a single line of code to your existing integration, clicking a button in the Dashboard, or using our powerful API.

Stripe Tax helps you monitor your obligations and alerts you when you exceed a sales tax registration threshold based on your Stripe transactions. It can also register to collect tax on your behalf in the US and manage filings through trusted partners. Stripe Tax automatically calculates and collects sales tax, VAT, and GST on:

• Digital goods and services in all US states and over 100 countries
  
• Physical goods in all US states and 42 countries
  

Stripe Tax can help you:

• Understand where to register and collect taxes: See where you need to collect taxes based on your Stripe transactions. After you register, switch on tax collection in a new state or country in seconds. You can start collecting taxes by adding one line of code to your existing Stripe integration, or add tax collection with the click of a button in the Stripe Dashboard.

• Register to pay tax: If you need to register for a sales tax in the US, let Stripe manage your tax registrations. You’ll benefit from a simplified process that prefills application details—saving you time and simplifying compliance with local regulations. If you need help registering outside of the US, Stripe partners with Taxually to help you register with local tax authorities.

• Automatically collect tax: Stripe Tax calculates and collects the right amount of tax owed, no matter what or where you sell. It supports hundreds of products and services and is up-to-date on tax rules and rate changes.

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Learn more about Stripe Tax, or get started today.