SRL or sole trader
Liability, taxation, contributions and costs compared.
Open30 September 2026 · Companies
SRL or sole trader: comparing the numbers
When turnover grows, the question comes up: “Is it worth switching to an SRL?”. The answer is often sought in the tax rates, comparing one number with another. The comparison you need is a different one, and it starts from a more personal question: how much of what you earn do you need each year to live on?
01 · The starting point
The right question: how much you draw, not how much you earn
A ditta individuale (sole trader business) and an SRL (Italian limited company) tax income in two structurally different ways. As a sole trader, all of the year's profit is your income, whether you draw it or leave it in the business account. In an SRL the profit belongs to the company: it is taxed once in the company's hands, and a second time only when, and if, it reaches you.
Everything else follows from this. If you draw almost everything you earn, the SRL's double taxation reduces or cancels out the advantage. If, on the other hand, a substantial part of the profits stays in the business for investment, stock or reserves, the SRL can make a noticeable difference.
The non-tax aspects, starting with limited liability, are covered on the page SRL or sole trader: how to choose. Here we stick to the numbers.
02 · First model
How a sole trader is taxed
Outside the flat-rate scheme (regime forfettario), the business profit is added to the owner's other income and is subject to progressive IRPEF (Italian personal income tax), plus the regional and municipal surcharges. The higher the income, the higher the rate applied to the top band, according to the brackets for the current year.
Social security contributions are calculated on the same income; for artisans and traders there is a minimum fixed portion and a percentage on the amount above it. IRAP (the regional tax on productive activities) is not currently due from individuals carrying on a business.
The point to keep in mind: the profit is taxed in full in the year it is earned. If you close the year with a profit of €80,000 and leave €30,000 in the business account for next year's purchases, IRPEF and contributions are still calculated on the whole €80,000.
03 · Second model
How an SRL is taxed: two levels
The SRL pays IRES (corporate income tax), at a flat rate that is currently 24% at the standard level, and IRAP. What remains after tax is the company's profit, which can stay in reserves or be distributed to the shareholders.
When the profit is distributed, the dividend received by an individual shareholder is subject to a 26% substitute tax. A shareholder who works in the company can also receive pay as a director, which is a deductible cost for the company and, for the shareholder, income subject to IRPEF and contributions.
The mix of pay and dividends is the lever on which any advantage of the SRL is built, and it is also where choices need care, because pay and contributions follow their own rules, which must be checked case by case.
04 · Round numbers
An example with round numbers
Purely illustrative, simplified example: it ignores IRAP, contributions, surcharges and director's pay, to isolate the effect of the SRL's two levels of taxation. Profit before tax: €80,000.
| SRL scenario | All distributed | Half left in the company |
|---|---|---|
| Profit before tax | €80,000 | €80,000 |
| IRES at 24% | €19,200 | €19,200 |
| Company's net profit | €60,800 | €60,800 |
| Dividend distributed | €60,800 | €30,400 |
| Tax on the dividend at 26% | €15,808 | €7,904 |
| Total tax for the year | €35,008 | €27,104 |
| Amount still in the company | €0 | €30,400 |
In the first scenario the overall tax take approaches that on a high personal income: distributing everything cancels out much of the advantage. In the second, the part left in the company has paid only IRES. The comparison with a sole trader must be made by calculating IRPEF, surcharges and contributions on the same profit, using the brackets and rates for the current year.
05 · The cost of the structure
The fixed costs that move the break-even point
An SRL costs more to keep going: formation before a notary, compulsory ordinary accounting, financial statements to draw up, approve and file, the annual Chamber of Commerce fee, shareholders' decisions to be minuted, and notarial deeds for changes to the articles of association or transfers of shares.
These costs must be subtracted from the estimated tax saving. Example with hypothetical figures: if the SRL arrangement saves you €6,000 a year in tax but the structure costs €4,000 a year more than the sole trader business, the real advantage is €2,000, in exchange for more rigid obligations. If the estimated saving is €2,500, the margin is almost nil.
So the point at which an SRL starts to pay off is not a turnover threshold that is the same for everyone. It depends on the profit, the share you draw, contributions and running costs, and it shifts every time one of these factors changes.
06 · The rest of the choice
What the numbers do not tell you
Limited liability protects your personal assets from the company's obligations, within the limits provided for and except for the personal sureties that banks often ask directors to give. For businesses with significant risks towards third parties, this aspect can matter more than the tax sums.
Then there is the rigidity: in an SRL money leaves only on a specific basis, every significant choice must be decided in the required form, and closing a company requires a liquidation. It is a model suited to people who want a firm separation between the business and their personal life, less so to those who need flexibility in drawing money.
07 · The method
How to compare SRL and sole trader for your own case
Expected profit
Estimate the profit for the next two or three years, not just the current one.
Personal needs
Decide how much you need to draw each year to live on: it is the figure that drives the whole calculation.
Two tax scenarios
Calculate taxes and contributions for the sole trader business and for the SRL, with pay and dividends, under the rules for the current year.
Costs and risks
Subtract the SRL's running costs and weigh how much limited liability matters for your business.
The full comparison, covering liability, contributions and running costs, is on the page SRL or sole trader. The rates and brackets quoted in the examples must always be checked under the rules for the current year.
Frequently asked
The questions that keep coming up
Is there a turnover above which an SRL always pays off?
No. What counts is profit, not turnover, and above all how much of the profit you need to draw. Two businesses with the same turnover can reach opposite conclusions.
Can I move from sole trader to SRL without closing everything down?
Yes, there are tools such as contributing the business to the new company (conferimento d'azienda), which allow the business to be transferred without interrupting it. The tax effects and the costs of the transaction need to be assessed.
With an SRL, do I stop paying INPS contributions?
Contributions to INPS (the Italian social security institute) do not disappear: their basis and rules change. The director's pay carries its own contributions and, in many cases, a shareholder who works in the company remains registered with the artisans' or traders' scheme. This must be checked for each individual position.
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