sesSocietà Semplice in Italy: an effective tool for real estate investment by family offices.

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The Italian Simple Partnership ('Società Semplice' or 'SS') is one of the most common corporate structures in Italy for managing investments in the real estate sector, especially family offices or individuals. This corporate structure was also chosen by the Agnelli family (one of the richest families in Italy) for their 'Dicembre Società Semplice'. Dicembre Società Semplice is a family safe at the top of a group that holds control of Stellantis, Ferrari, Cnh Industrial, Juventus, Gedi Group, Iveco, Louboutin, The Economist and others for a total of about 28 billion euros. This confirms the flexibility of this instrument. Let us now look at the concept of Società semplice in Italy. The use of this corporate structure is recommended for the following reasons: simplified bureaucratic procedures; maximum flexibility in management with minimum costs; tax advantages; convenience in succession planning.

1. Società Semplice: civil law aspects

Società Semplice is the simplest type of partnership recognized in Italian law, characterized by simplicity and flexibility. Its main characteristic is that it can only have the object of carrying out non-commercial profitable economic activities. But what does this mean? Italian law is interested in defining the scope of Società Semplice only in negative terms. It establishes that "Società Semplice cannot engage in commercial activities". As a result, the activities listed in Article 2195 of the Italian Civil Code are prohibited for Società Semplice, namely: industrial activities related to the production of goods or services; activities related to the intermediation of goods; land, water or air transportation activities; banking or insurance activities; and any other ancillary activities related to the above. However, Società Semplice may engage in other activities not listed above, such as: agricultural activities; intellectual professions (irrespective of the need to register with the professional register); real estate investment activities.

Characteristics

• Entities
• Commercial activities
• Activities carried out in an economic manner and with "industrial" characteristics, that is, in a complex way that involves the use and coordination of one or more means of production.
• Commercial companies
• Non-profit for-profit business activities
• An activity carried out without the need to coordinate means of production, in the absence of an industrial type of organization. Its purpose is to generate profits and excludes the possibility for partners to directly use the company's assets (e.g., a company owning several real estate properties intended for stable rental without providing additional support services).
• Commercial companies
• AND SOCIETA SEMPLICE

Before delving into the practical applications of the partnership as an instrument of real estate management, it is useful to provide a brief overview of the legal characteristics of this organization. Briefly, Società Semplice is characterized by the following aspects: limited formal obligations, except those required by the nature of the assets contributed, such as a public deed for real estate; no obligation to keep accounting records or prepare financial statements; exemption from bankruptcy proceedings; generally joint liability between shareholders, unless the articles of association provide otherwise, but only for non-managerial shareholders. Incorporating Società Semplice does not require any formal procedures or minimum capital. It can be established by a simple written agreement between the partners, although a notarized agreement is strongly recommended. The agreement should describe key aspects of the partnership, such as the nature of the business, capital contributions, profit and loss sharing, decision-making procedures, and dispute resolution mechanisms. It is also possible to include provisions regarding the participation of individual shareholders in profits and losses, as well as provisions containing rules to be followed in the event of the death of a shareholder.

• Type of position
• Explanation
• Profit and loss allocation rules
• Italian law prescribes criteria for the distribution of profits and losses to shareholders. The Articles of Association of Società Semplice may provide for different distribution rules.
• Shareholders' refusal to distribute profits
• Shareholders may waive profit distribution in whole or in part. Such a waiver may be exercised on a case-by-case or one-time basis in the articles of association.
• Rules to be followed after the death of a shareholder ("continuation provisions", company liquidation or "consolidation provisions")
• After the death of a shareholder, we can distinguish these types of provisions: - Provisions binding the necessary continuation of the company only with the terminated partners (consolidation provision); - Provisions binding the necessary continuation of the company with the heirs of the deceased (continuation provisions); - Liquidation of the company

Liability in Società Semplice is usually joint and unlimited between partners. This means that each partner is personally liable for the debts and obligations of the partnership, and creditors can pursue each partner individually for the full amount owed. The articles of association can always establish "limited" liability for non-managing shareholders. In any case, the partners of Società Semplice can be two limited liability companies (Italian or foreign). Thus, liability is limited for both partners. Another advantage is that a particular creditor of a shareholder cannot seize the shareholder's interest in Società Semplice as long as it exists. This means that Società Semplici that own family properties can be a valid alternative in terms of asset protection compared to a simple co-ownership of real estate owned by individuals, since in this case the debts of one of the co-owners cannot be enforced against the entire property by seizing his share. [Cassazione.]

2. Società Semplice for real estate management

Società semplice can also have the object of real estate management, provided that the articles of association explicitly exclude the exercise of any commercial activity. Società semplice is an excellent organization for real estate management in Italy for several reasons: it has full legal capacity, meaning it can own all kinds of rights and assets; it can function as an aggregator of wealth from several persons, allowing for pooled management and greater benefits as assets grow; it avoids problems associated with co-ownership of real estate, such as partition disputes; partnership interests can be owned by foreign companies, thus protecting investments from personal creditors. This fully satisfies the need for asset protection; it is subject to a different tax regime than commercial companies, in particular the same as for individuals; it has low management costs; there is no requirement to hold shareholder meetings and no obligation to keep accounting records or prepare financial statements as provided for in Article 2214 of the Civil Code.

3. Società Semplice and real estate: a tax perspective

Società semplice is treated as a natural person for tax purposes and will therefore be subject to the same taxation as a natural person. In addition, Società semplice, being a real estate company, offers other significant tax advantages. The company has only a tax code (codice fiscale) and not a VAT number (partita IVA); "Certification" of rental income can be made by means of a simple receipt instead of an invoice; Application of registration tax (imposta di registro) for rented properties at the rate applicable to individuals (2%). The provisions applicable to individual entrepreneurs apply (Resolution 20.10.2008, n. 390 / E). The sale of real estate owned by Società Semplice, which has owned it for more than five years, does not generate capital gains and therefore allows for a tax benefit in the form of tax-free net income.