Entrepreneur (under Italian Law)

Introduction: the entrepreneur from an economic point of view

In the economic sense, the entrepreneur is the activator of the system, the one who organizes and combines the factors of production in order to create new wealth. For this reason, he bears the business risk, i.e. the risk of not being able to cover the costs incurred with the revenues from production, and takes the general profits from the business. He also organizes the means employed and directs production, deciding what, how and how much to produce.

The legal definition

The former Italian Commercial Code, reflecting the mercantile origin of commercial law as a law proper to the merchant class, focused its discipline on the figure of the merchant, who was defined as the one who performs acts of commerce 'by habitual profession' (Art. 8 Commercial Code 1882). Commercial acts were listed in detail in Art. 3 of the Commercial Code, which also included factories and manufacturing enterprises.

Instead, the adoption of the 1942 Civil Code placed the entrepreneur at the centre of the system, giving it a legal definition consistent with the economic substance of the phenomenon. According to Article 2082 of the Italian Civil Code, 'an entrepreneur is anyone who professionally carries out an organized economic activity for the purpose of producing or exchanging goods or services'. Also from a legal point of view, therefore, an entrepreneur is one who, through his activity, aims to create new wealth by producing goods and services or by increasing the usefulness of those already produced by intervening in their circulation. An essential requirement is therefore that the goods and services produced are intended for exchange: an entrepreneur is not one who carries out the activity with the sole purpose of satisfying exclusively personal needs.

The definition of entrepreneur given by the civil code also provides a subjective qualification: not the enterprise itself, but rather the entrepreneur is defined, because the person is seen as the activating subject of the economic system.

Requirements for business activity

The legal definition determines the scope of application of the discipline of the enterprise, in the sense that by defining who is an entrepreneur, it identifies the subjects who will be required to comply with the rules set out in Art. 2083 et seq. of the Civil Code.

The civil law notion of entrepreneur introduces three requirements for the activity carried out, if directed at the market, to qualify as entrepreneurial:

a) Professionalism

Professionalism means the stability or non-occasionality of the activity performed. It may also be a periodic activity (e.g. seasonal hotel business) or a secondary activity, as long as it is not occasional. It may possibly also be a single act when it is of such complexity as to exclude the possibility of it being an isolated affair.

b) Economicity

Economic efficiency means the abstract suitability of the income generated by the activity to cover the costs of production on the basis of reasonable ex ante predictability. It is generally referred to as the 'objective cost-efficiency' of the activity. It is therefore not legally necessary for the entrepreneur to pursue a profit-making purpose (the objective of making a profit from the business), it being sufficient that he or she pursues a balanced budget.

The requirement of cost-efficiency marks the boundary between activities that are or are not entrepreneurial in nature, even if they have the same object and are professionally exercised. For example, a company canteen that carries out its activity according to the balanced budget criterion may be considered an undertaking; a charity canteen, even if habitually carried out, is not an entrepreneurial activity.

c) Organization

Article 2082 of the Civil Code refers to an 'organized' activity, i.e. an activity carried out through the coordinated use of one's own or others' factors of production (capital and/or labour). Normally, in fact, the entrepreneur makes use of a stable and complex production apparatus, comprising persons and goods that are organized by the entrepreneur for the purposes of the activity.

However, from a strictly legal point of view, it is now considered that:

• it is not necessary that the entrepreneur's organizational function also involves the labour force of others. Therefore, anyone who operates using only the capital factor and his own labour, provided the other requirements are met, is also an entrepreneur;
• the presence of a material organization is also not necessary: anyone who operates without the creation of a physically perceptible instrumental apparatus (machinery, premises, furniture, ...), but using only financial means, can also be legally qualified as an entrepreneur.

However, it is debated whether anyone who professionally carries out an economic activity using only his own personal labour can qualify as an entrepreneur.

Those who answer the question in the affirmative, believing that an entrepreneur is 'any self-employed person who performs activities of a non-intellectual nature of work or services, even if in the performance of the activity he does not avail himself of anything other than his own labour', conclude that the organization is in reality only a 'pseudo-requisite', useful to distinguish small from non-small enterprise but not to exclude the entrepreneurial character of the activity (Meruzzi, 2019, p. 15, adhering to the thesis of Galgano, 2013, p. 28 et seq.).

This doctrine is contrasted by a different orientation that, by emphasizing the requirement of organization, considers that a minimum amount of organization is always necessary to be an enterprise: what qualifies an enterprise is the use of productive factors and their coordination for a productive purpose even if the type of instrumental apparatus employed by the entrepreneur can be very varied and can also consist of a minimal apparatus (Campobasso, 2022, p. 25 et seq.). According to this approach, the organization requirement would mark the difference between entrepreneurs (even small ones) and the self-employed.

Entrepreneurs and intellectual professionals

Intellectual professionals also engage in activities that produce goods or services. However, for such activities even if professionally exercised, the entrepreneurial qualification is expressly excluded. This follows from Article 2238(1) of the Civil Code for which 'if the exercise of the profession constitutes an element of an activity organized in the form of an undertaking, the provisions of Title II shall also apply'. Therefore, in the Italian legal system, the exercise of an intellectual profession in itself does not constitute a business activity and is therefore not subject to the rules governing businesses. Self-employed persons become entrepreneurs only if and to the extent that the profession is exercised in the context of an activity qualifying as an enterprise. For example, a doctor who manages the private clinic in which he operates is an entrepreneur: in that case, two distinct activities are carried out (intellectual profession and business) and both the specific rules laid down for the profession and the rules on business apply to the same person.

References

F. Galgano, Diritto commerciale, 1, L’imprenditore, 13° ed., Zanichelli, Bologna, 2013, p. 28 et seq.;

G. Meruzzi, Complemento di diritto commerciale, 1, Impresa, società in generale e società di persone, 2° ed., Egea, Milano, 2019, p. 11 et seq.;

G. F. Campobasso, Diritto commerciale, 1, Diritto dell’impresa, 8° ed., Utet Giuridica, Milano, 2022, p. 19 et seq.