Setting up or reorganizing a business together alongside family members is a very common choice in the Italian entrepreneurial landscape. These enterprises in Italy represent a flexible solution, particularly suited to small household-run ventures that want to collaborate in a structured way without forming a corporation. However, behind this seemingly simple legal form lie precise rules, including regulatory, tax, and social security obligations.

This article will analyze family businesses, starting with their definition and the requirements for establishing one. We will explore the rights of participating relatives, the role of collaborators or assistants, and the taxation of these structures. Lastly, we will look at the pros and cons compared to a Limited liability company (S.r.l.) or a sole proprietorship, to help you understand when this choice is really worthwhile.

What’s in this article?

• What are family businesses?
  
• Rights of participating family members
  
• Taxation and contributions in family businesses
  
• Family businesses: Advantages and disadvantages compared to S.r.l.s or sole proprietorships
  
• Opportunities for digitization and payment management with Stripe
  

What are family businesses?

Under Italian law, they are not a separate legal entity, but a particular form of sole proprietorship governed by Article 230-bis of the Italian Civil Code. In this context, the business owner remains a sole entrepreneur, while family members participate in the venture without becoming partners.

Who can participate?

A family business qualifies when the proprietor’s spouse, blood relatives up to the third degree, and in-laws up to the second degree actively collaborate on an ongoing basis. The collaboration must be stable and not occasional: sporadic help is not enough; a constant contribution to the activity is necessary.

Formal requirements

In formal terms, family businesses must be established by a written document, often a certified private agreement or a notarial deed, which lists the participating members and their respective shares of the profits. This step is key to protecting employees’ rights and ensuring proper fiscal treatment of the arrangement.

Liability and relations with third parties

A central aspect is that family businesses do not create a new legal entity: all relationships through third parties, from suppliers to customers, remain with the proprietor. Relatives do not respond directly to the outside world, but participate internally in economic results and important decisions.

Rights of participating family members

The regulations governing these enterprises provide defined protection for family members who actively participate in the business on an ongoing basis. The law does not consider their contribution as mere informal assistance, but rather attributes specific rights linked both to the services performed and to the financial results of the activity. Specifically, Article 230-bis of the Italian Civil Code sets out that participating relatives who are involved have the right to:

• Share in the profits of the activity, in proportion to the quantity and quality of the work performed

• Share in the assets acquired with profits and in the value created by the company over time, including goodwill (i.e., the increase in value linked to commercial growth, customer base, and market reputation)

• Receive maintenance, in relation to the household’s financial situation, when the activity is carried out mainly within the household

• Intervene in extraordinary management decisions, strategic choices regarding the business, and any acts leading to the termination of the activity

• Obtain payment of their share in the event of termination of collaboration or dissolution of the family business

These rights clarify the role of family coworkers: they are not employees, but collaborators to whom the law grants defined economic and monetary protections that differ from those granted to employees and corporate partners.

Taxation and contributions in family businesses

The taxation of family businesses follows certain rules that combine elements of sole proprietorships with earnings distributions among relatives who work in the venture. A grasp of these mechanisms is important in order to correctly assess the fiscal and social security implications of this organizational form.

How family business income is taxed

From a tax perspective, the activity generates income that the law attributes to the business owner. After calculating the total earnings, the proprietor can allocate a portion to participating family members, within the limits set by legislation (Consolidated Income Tax Act, Art. 5, paragraphs 4 and 5), which are:

• At least 51% of income must remain attributable to the entrepreneur.

• Up to 49% of income can be attributed collectively to family members who are collaborators.

• The breakdown must be set out in a written document and reflect the actual work contribution of each member.

Each participant reports an allocated share on their personal tax return and pays levies at progressive personal income tax (IRPEF) rates.

Family business and flat-rate regime

If the entrepreneur adheres to the flat-rate regime and meets all legal requirements, the activity might be eligible under the framework for family businesses. In this case, the regime operates as follows:

• Taxable income is determined by applying the profitability ratio provided for the relevant Classification of Economic Activity (ATECO) code.

• A substitute tax is applied in place of personal income tax, surtax, and regional tax on productive activities (IRAP).

• The criteria for dividing income between the business owner and family members remain unchanged.

The flat-rate regime simplifies accounting requirements, but imposes strict limits on revenues, professional expenses, and other conditions of access.

Social security contributions for collaborating family members

In addition to fiscal implications, these enterprises have defined social security obligations. Family members who participate in the activity on a continuous basis must register at the relevant Italian National Social Security Institute (INPS) office, depending on the type of business (craftspeople or traders).

In general, contributions are due as follows:

• Fixed annual contributions, independent of income generated

• INPS applies additional percentage contributions to income exceeding the minimum threshold set each year, while minimum contributions remain due below that level

• The contribution obligation applies to both the business owner and participating family members

The administration of INPS contributions in family businesses is a matter that requires careful consideration, as it significantly impacts overall labor costs.

Family businesses: Advantages and disadvantages compared to S.r.l.s or sole proprietorships

When considering adopting the family business as an organizational model, it is useful to compare it directly against the most common alternatives, in particular sole proprietorships and S.r.l.s. These enterprises share certain elements with both, but have specific features that affect liability, taxation, and operational management.

The following table summarizes the main advantages and disadvantages of family businesses compared to the other two forms.

Opportunities for digitization and payment management with Stripe

In recent years, family ventures have also been undergoing a process of digitization, driven by the growth of ecommerce and online services. Payment management for small and medium-sized enterprises (SMEs) has become a strategic element, primarily when businesses sell products or services through digital channels.

Solutions such as Stripe Payments allow you to accept online transactions easily and securely, supporting cards, digital wallets, and local payment methods. For family businesses, this means reducing operational complexity and offering customers a modern checkout experience, without requiring a complex administrative structure.

With Stripe Invoicing, you can automate billing, oversee due dates, and track collections, simplifying revenue sharing among relatives. This is especially useful when multiple people are collaborating on the task, and a clear view of cash flows is needed. And, thanks to collaboration among third-party partners, you can also use Stripe Invoicing for mandatory electronic invoicing.

Integrating digital payment tools facilitates internal management by enabling more accurate reporting, automated reconciliation, and greater control over financial data. For many family businesses in Italy, the digitization of transactions represents a concrete step toward more efficient and sustainable administration over time.