Limited Liability Company: What is it and Types of SRL

Limited Liability Company: What is it and Types of SRL

Limited Liability Company

The limited liability company or SRL is the most used type of joint stock company. It has a flexible structure and allows it to carry out an economic activity by limiting the risk of the shareholders to the amount invested. There are several types of SRL. Let’s see them together in detail.

What is a SRL and what it means?

The meaning of the abbreviation SRL is a limited liability company. This type of company allows to carry out an economic activity and to limit the liability of the shareholders to the investments made (contributions in money, goods or work). The contributions of the shareholders become the property of the company which is liable for the debts of the business with its own assets (perfect patrimonial autonomy). Generally, the company is formed by two or more partners. However, it is also possible to establish an SRL with a single shareholder (single-member SRL).

The sum of the contributions of the shareholders constitutes the share capital. Each shareholder is assigned a share of the capital which is usually proportional to the value of the contributions made. The share entitles the shareholder to receive the profits from the company’s business and to participate in the shareholders’ meeting to make the most important decisions. For example, in a company with capital of € 1,000, one partner has a share of € 700 and another of € 300. The first shareholder is entitled to 70% of the profits and votes at the meeting, the second to 30%.

limited liability company srl

Types of limited liability companies

Limited liability companies are divided into:

  • Ordinary SRL (Article 2463 of the Italian Civil Code)
  • Simplified SRL (Article 2463 bits of the Italian Civil Code)
  • SRL innovative startup (Article 25, 2nd paragraph of Legislative Decree 179/2012)

All three types of SRL allow to limit the liability of the shareholders in carrying out the economic activity that is described in the corporate purpose. However, there are some important distinctions you need to know in order to choose the right company for your business.

Ordinary SRL

This is the most flexible form of Sal. The company can carry out any type of business. The minimum share capital is € 1 and there is no maximum limit. Shareholders can be both natural persons and other companies. Those who choose to open an ordinary SRL can customize the company’s statute, regulating every aspect of its organization. To set up the company, you must go to a notary to check and sign the documents necessary for the establishment.

Simplified SRL

A simplified SRL or SRLS is a limited liability company with reduced set-up costs but which has some limitations compared to an ordinary company. In particular, whoever constitutes an SRLS does not have to pay the fee to the notary. However, you still have to incur some expenses and pay some taxes for the establishment. Furthermore, the company statute is standard and cannot be customized and the shareholders can only be natural persons. Another difference between SRL and SRLS concerns the maximum share capital, which in a simplified company cannot exceed € 9,999, which could lead to some difficulty in finding an investor and obtaining financing.

A very similar type of company was the limited capital limited liability company, introduced in 2012. However, in 2013 this type of company was eliminated and all limited capital limited liability companies already established are now qualified as simplified limited liability companies.

SRL innovative startup

It is a company that mainly deals with developing, manufacturing and selling innovative products or services with high technological value. Like an ordinary SRL, the share capital of an innovative start-up has no amount limits and the company can have both natural persons and other companies as shareholders. However, you must have all the startup requirements required by law. Innovative startups can access some important concessions, such as ministerial guarantees on bank loans.

Administration of the limited liability company

The administration of the limited liability company can be entrusted to a single director or to two or more directors. If the administration is entrusted to more than one person, a board of directors (or Board of Directors) is formed which decides by majority. The directors have the task of making decisions on the management of the company and are responsible for their actions towards the shareholders (for more details, see the responsibilities of the directors).

There are also other forms of administration, adopted in specific cases:

  • the separate administration provides that each director can decide on his own initiative without the need for the consent of the other directors
  • the joint administration requires that decisions must be taken by all directors unanimously.

Accounting control body

In addition to the directors, in some cases it is also mandatory to have the statutory auditing body that the company can entrust to an auditor or to a supervisory body (sole auditor or board of statutory auditors). It supervises the company’s accounts, compliance with the principles of correct administration, the adequacy of the administrative and accounting structure adopted by the company, etc.

The appointment of the supervisory body is mandatory if the company:

  1. is required to prepare consolidated financial statements (financial statements of the parent company of a group of companies)
  2. controls a company obliged to carry out the statutory audit
  3. has exceeded at least one of the following limits for two consecutive years:
    – € 4 million of balance sheet assets
    – € 4 million of revenues from sales and services
    – 20 employees employed on average during the year

Share capital and contributions

To open the company, the shareholders must pay the contributions that make up the share capital. The initial capital is used to provide the company with the financial means necessary to start the business. The minimum capital of the SRL can be as low as € 1 even if it is recommended to pay a larger amount. Generally, the first contributions are made in cash. However, it is also possible to confer goods or a work activity. In these cases, the value of the contribution must first be certified by an expert.

After the constitution, the shareholders can choose whether to keep the initial capital of the company or to make a capital increase in case of need. To do this, you will need to go to the notary.

Establishment of a limited liability company

For the establishment of a limited liability company, the first step is the stipulation of the articles of association and the deed of incorporation for SRL. These documents regulate the functioning of the company and must be signed by the shareholders in the presence of a notary.

After signing the documents by the notary, there are some mandatory requirements to establish the SRL. The main ones are:

  • open the VAT number of the company
  • prepare and endorse the mandatory company books
  • register the company in the business register within 10 days of incorporation (this is done by the notary)
  • submit notices of the start of business

The costs for the establishment of the SRL are those relating to the notary’s fee, taxes and expenses. On average, the total cost to open an SRL is around € 1,500 + VAT + about € 600 of taxes. With our SRL incorporation service you can open your company in 7 days with 1 year of legal support 100% online. The service costs € 999 + VAT + Approximately € 600 in taxes and includes everything you need to set up your company with the full assistance of experienced professionals. You will be able to create and customize the articles of association and articles of association online in minutes and verify them with an experienced professional. Subsequently, you will be put in contact with a notary who will proceed with the establishment of the company. For the first year you can then create tailor-made contracts and request consultations with professionals for any need of the new business (e.g. contracts for suppliers and customers, commercial agreements, trademark registration, privacy and website terms and conditions).

Once the company is established, it will be necessary to complete the formalities to start the business and correctly manage the accounting. Generally, the costs of the first year of activity are around € 2,500 + VAT for the accountant’s fees and € 700 for taxes. Our customers can request the accounting service at the price of € 299 + VAT + € 700 of taxes for the first quarter. This price includes all the necessary formalities after the establishment of the company.