Profit-making purpose

Definition. Objective profit and subjective profit

Profit-making is defined as the intent to achieve personal gain or profit.

Traditionally, a distinction is made between subjective profit and objective profit. Subjective profit concerns the production of profit as the psychological motive of the entrepreneur. It requires the parties to act for the purpose of sharing among themselves the profits made in the business (subjective profit).

Objective profit, on the other hand, concerns the production of profit in terms of the objective manner in which the activity is carried out. In this sense, the purpose of profit refers to the fact that the business activity is aimed at making profit (objective profit).

Profit-making purpose and business activity

Article 2082 Italian Civil Code defines entrepreneur as "anyone who professionally carries out an organized economic activity for the purpose of producing or exchanging goods or services." Among the requirements of business activity it introduces, in particular, the economic character of the activity carried out (i.e., economicity). This requirement is understood by doctrine and jurisprudence as the abstract suitability of the income generated by the activity to cover the costs of production on the basis of reasonable ex ante predictability (for more on the notion and requirements of business activity under the Italian Civil Code see Entrepreneur (under Italian Law)).

What characterizes entrepreneurial activity is thus the fact that the activity is carried out at least on a balance-sheet basis (economic method). On the other hand, it is not required that the activity be carried out in a manner tending to the realization of revenues in excess of costs (profit-making method) and thus to the accrual of a profit to be eventually attributed to the entrepreneur.

Therefore, according to Article 2082 of the Civil Code, business activity is that carried out by the economic method, while the pursuit of a profit-making purpose is not necessary.

Profit-making purpose and companies

Under Article 2247 of the Civil Code, "by the contract of partnership two or more persons contribute goods or services for the joint pursuit of an economic activity with a view to sharing the profits thereof."

The purpose of profit characterizes the company contract. Thus, companies are required to operate on a profit-making basis, in the twofold sense that the business activity must be aimed at making profits (objective profit) and that the profit must be distributed among the members (subjective profit).

Within the framework of collective forms of business operation, corporations are those business forms aimed at profit. However, there are alternative models of collective exercise of enterprise for non-profit purposes, on which see Collective enterprise.

Profit-making purpose, mutualistic purpose and consortium purpose (outline)

The Italian legal system also includes among companies cooperative enterprises, distinguished by a mutualistic rather than a profit-making purpose. The mutual enterprise is aimed at realizing a patrimonial advantage for the members as it operates to "provide goods or services or work opportunities directly to the members of the organization on more advantageous conditions than they would obtain on the market" (see Report to the Civil Code, no. 1025).

Still different, finally, is the purpose that distinguishes consortia and consortium companies, namely, the consortium purpose, understood as cost savings. The activity carried out by the entrepreneurs who are members of the consortium is not aimed at the goal of maximizing profit, but at an expense-saving purpose, similar as such to the mutualistic purpose. However, it differs from this because in the consortium, the expense saving is functional to the pursuit of each consortium member's typical purpose (which is generally a profit-making purpose).

References

F. Galgano, Diritto commerciale, 1, L’imprenditore, 13° ed., Zanichelli, Bologna, 2013, p. 23 et seq.;

F. Galgano, Diritto commerciale, 2, Le società, 18° ed., Zanichelli, Bologna, 2013, p. 15 et seq.;

G. Meruzzi, Complemento di diritto commerciale, 1, Impresa, società in generale e società di persone, 2° ed., Egea, Milano, 2019, p. 99 et seq.;

G. F. Campobasso, Diritto commerciale, 1, Diritto dell’impresa, 8° ed., Utet Giuridica, Milano, 2022, p. 31 et seq.