Prospective foreign investors wanting to set up a business in Italy may establish a representative office or a branch, in order to explore local marketing and business opportunities and later decide whether to incorporate a company or not. Neither the representative office nor the branch are separate legal entities.

Representative office

The simplest business structure available to a foreign company is the representative office. It is often used by foreign companies to test the market before deciding whether to establish a branch or a subsidiary. A representative office does not allow a foreign investor to handle commercial or financial transactions of any kind, nor can it act as an agent or distributor of a foreign company. In order to open a representative office a foreign investor must enrol with the local Chamber of Commerce.

The representative office must obtain its own tax code number (codice fiscale).

Written notice of the establishment of a representative office must be given to the following employment institutions:

- the National Institute for Social Security (INPS);

- the National Institute for Insurance against Labour Accidents (INAIL);

- the Employment Office.

Branch

Foreign investors who do not want to incorporate an Italian subsidiary may conduct their business in Italy through a registered branch. The establishment of a branch is often advisable when the foreign company is likely to incur in losses during the initial year which can be offset against profits earned from other activities. It may also be advisable to form a branch when there is no double taxation treaty between Italy and the country of origin of the foreign investor.

The financing of the branch may be carried out through a specific loan agreement with the parent company. The following documents are needed to establish a branch of a foreign company in Italy:

a) a certified copy of the deed of incorporation of the company;

b) a certified copy of the minutes of the board of director or shareholders

meeting approving the establishment of the Italian branch indicating:

- the full address of the branch in Italy;

- personal details of the individual representing the branch;

c) a certified signature of the branch's representative.

A certified translation in Italian language of all these documents is required.

Italy’s legislation presents different kinds of legal entities, each one studied to suit the specific needs of the partners. Every entity has particular fiscal and legal rules.

· Unlimited (or General) Partnership (Società in nome collettivo)

An unlimited (or general) partnership is a partnership whose partners have unlimited liability for all the acts and transactions put into effect by the partnership itself. All or any of the partners may be appointed as administrators of the partnership. Creditors cannot claim payments from the members until after all remedies against the company have been exhausted.

· Limited Partnership (Società in accomandita semplice)

This entity has a combination of limited and unlimited liability. There are two categories of partners: the first one is made up of general partners (“soci accomandatari”) who have unlimited liability, the second consists of another kind of partners (“soci accomandanti”) who are liable only to the extent of their capital contributions to the partnership. Only general partners may be appointed as administrators of the partnership. The capital is represented by quotas and the business name must consist of at least the name of a general partner.

· Partnership limited by shares (Società in accomandita per azioni)

As before there are two categories of partners.

Creditors cannot claim payments from the general partners until after all remedies against the company have been exhausted.

Participations are represented by shares. General partners are directors by operation of law and are subject to the same duties as the directors of a Public corporations. Rules concerning the Shareholder Meeting and the Board of Statutory Auditors of Public corporations are also applicable, to the extent compatible, to such companies.

· Limited Liability Company (Società a responsabilità limitata)

A limited liability company (usually indicated as “S.r.l.”) is equivalent to a private limited company except for the capital stock that is represented by quotas instead of shares. The name of the owners of the quotas is registered in the quota holders book maintained by the company. The company’s articles of association may restrict the transfer of quotas. The minimum capital requirement is stated in euros 10.000,00.

From 2012 is possible to constititute LLC with a reduced capital of 1 Euro.

· Public (or Joint Stock) Corporation (Società per azioni)

This type of company is the equivalent of a public limited company (usually indicated as “S.p.A.’). There is a minimum capital requirement of euros 50.000,00 and it is represented by shares. A public corporation can issue different classes of shares with different rights attached to each of them. For example, not all classes of shares issued give the right to the shareholder to vote at company meetings. The Italian law applies particular limitations to the issue of shares with limited voting rights. All shares must be issued at least at par value and must be in nominative form; the names of the shareholders must be written in the shareholders book.

Only S.p.A. and S.r.l. entities confer limited liability on all their members who are responsible only to the extent of their capital contribution. They are the most common kind of business organisations established by investors who want to carry on economic activities in Italy. A subsidiary of a non-Italian parent company may be set up as either a public corporation or a limited liability company. There are no limitations on the number or nationality of Directors.