Italy represents a destination of interest for foreign investments and among the types of investments chosen are those of capitalizing in start-ups and small and medium-sized enterprises (SMEs) as in many cases they grant excellent results in terms of returns and innovations. Like any type of investment, however, there are opportunities but also legal risks that should not be overlooked but understood and managed. In this article we offer an overview of the main benefits and risks in this type of investment.
When selecting an investment it is advisable, first of all, to identify the target sector. Start-ups – especially those innovative ones – and SMEs often identify themselves in niche, innovative sectors with high growth potential, such as the technology sector, the medical sector and the renewable energy sector. These segments guarantee innovation in terms of intellectual and industrial property, with high-level and often exclusive products that guarantee excellent results from which the investing company can benefit. The choice of sector is therefore fundamental to guarantee greater growth opportunities and room for innovation in the investment.
Another assessment concerns the tax aspects: Italy offers various tax incentives for investors in start-ups and SMEs, be they natural persons or legal entities, including deductions and incentives, tax credits for research and development or incentives for operations of equity and crowdfunding. By way of example, investors in innovative start-ups can obtain up to 30% tax deductions upon investment and 30% deduction on taxable income.
Start-ups and SMEs, nowadays, are also a reason for the development of personal and industrial relationships: in fact, networks or think-thanks are often created between entrepreneurs which guarantee advantages and opportunities for investment, opening the way to new opportunities for business and partnerships.
From a regulatory point of view, however, it is important to pay close attention and keep up to date with continuous regulatory developments. Innovative SMEs and start-ups are in fact the subject of frequent legislative updates, for example in the field of data protection or tax regulation; therefore, the investor is required to stay updated on news that may impact his investment, evaluating the impact – sometimes even unfavorable – that may occur.
These regulatory developments may concern not only the investment itself but also the sector in which the company operates: a lack of compliance following developments in environmental or safety regulations, for example, can have a strong impact on the organization, even if it is a start-up or a small company.
In terms of internal structure, it is essential to have a functional management organization which – being often simplified compared to that of large companies – requires preliminary checks on functionality, before the investment and in the operational phase. Precisely for this reason the investment must be preceded by an accurate due diligence on the company which provides an in-depth snapshot of the company situation. Likewise, it is important to make use of the support of professionals for the preparation of all documents (including contracts) that regulate the company’s relationships with third parties.
Investing in startups and small and medium-sized businesses can offer significant opportunities, but it also carries legal risks that require attention and preparation. Understanding the associated benefits and risks and taking appropriate steps to manage them can help maximize the chances of investment success and protect investors’ interests.
Italy represents a destination of interest for foreign investments and among the types of investments chosen are those of capitalizing in start-ups and small and medium-sized enterprises (SMEs) as in many cases they grant excellent results in terms of returns and innovations. Like any type of investment, however, there are opportunities but also legal risks
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