Why there is increasing discussion today about “transforming” a professional partnership into a Professional Company
A professional company is not an autonomous corporate form but rather a legal qualification that may be applied to one of the corporate structures provided by the civil code, provided that the specific requirements laid down by sectoral regulations are satisfied.
It is precisely this flexibility that, in recent years, has made the professional company a potential organizational framework for professional partnerships seeking a more structured form. This is particularly relevant in view of growth strategies, integration of professional expertise, more sophisticated governance arrangements and generational continuity.
In this respect, the National Foundation of Chartered Accountants already noted in 2015 that one of the recurring needs of professional firms is to “encourage the evolution of the firm toward more structured organizational forms (such as professional companies) […] without necessarily requiring the termination of the professional activity.”
From a civil law perspective, the transaction that most naturally responds to this need for continuity is corporate transformation. In principle, transformation does not result in the extinction of the original entity and the creation of a new one. Instead, legal relationships continue under the same legal entity, albeit in a different legal form. This is what conceptually distinguishes transformation from a contribution of assets, which instead involves the creation or use of a different legal entity and the transfer of assets and legal relationships as a capital contribution.
The legal nature of the professional partnership as the “crossroads” of the transaction
It should be noted that the professional partnership is not an institution expressly regulated by the civil code. Its legal classification is therefore not unequivocal and, for this reason, transformation into a professional company may take the form either of a homogeneous transformation or of a heterogeneous transformation (sometimes considered “atypical”), with significant operational differences.
This issue has long been the subject of scholarly debate.
Legal doctrine and case law have proposed several reconstructions of the professional partnership: it may be considered an unincorporated association under Articles 36 and following of the civil code; a simple partnership or de facto partnership; or an autonomous center of attribution of legal relationships lacking legal personality but nevertheless capable of acting as a subject of legal rights and obligations.
A key reference is the well-known decision of the Supreme Court sitting in Joint Chambers in 1993, often cited for the proposition that the exercise of regulated professions in associated form occurs within the framework of the professional partnership, where the internal partnership agreement coexists with the principle that the professional service must remain personal in relation to the client (Supreme Court, Joint Chambers, 5 November 1993, No. 10942).
On a different level, and with significant practical implications, more recent case law has recognized that the professional partnership may operate as an autonomous center of attribution of legal relationships according to the structure of an unincorporated association (Supreme Court, 15 July 2011, No. 15694; Supreme Court, 28 July 2010, No. 17683).
Homogeneous transformation: when the professional partnership is treated as a partnership
A transformation is considered homogeneous when the transition occurs between organizational forms that remain within the same functional category. In other words, it involves transformations between corporate entities or, more broadly, transformations that do not involve a shift between incompatible legal purposes.
In the debate concerning professional partnerships, transformation into a professional company is often regarded as homogeneous where the professional firm is classified as a simple partnership or as a non-commercial de facto partnership. This interpretation is consistent with the tax assimilation provided by Article 5, paragraph 3, letter c, of the income tax code, which treats professional associations as simple partnerships solely for the purpose of transparent allocation of income.
In this respect, reference may be made to the decision of the Supreme Court (Labour Section, 21 August 2004, No. 16500), which held that the transformation of a de facto partnership — identified in that case as a professional partnership — into a limited partnership does not result in a new legal entity but rather in the continuation of the same entity, including the continuation of employment relationships.
Under this approach, the progressive transformation into a professional company may be structured by applying the general principles governing corporate transformations set out in Articles 2498 and following of the civil code. These principles must then be coordinated, depending on the corporate form chosen for the professional company, with the rules governing transformation into companies limited by shares or with the principles applicable to transformations between partnerships. The deed must of course incorporate the specific regulatory requirements applicable to professional companies.
From an operational perspective, notarial practice is clear regarding the required form of the deed. The notarial council of the north-eastern districts clarified that the transformation of partnerships (including irregular or de facto partnerships) into companies limited by shares requires a notarial deed, whereas the transformation of partnerships into other partnerships may also be executed through an authenticated private agreement.
In addition, specific regulatory requirements applicable to professional companies must be satisfied. Besides registration with the companies register — with the transformation becoming effective upon completion of the final publicity requirement — the professional company must also be registered in the special section of the professional register maintained by the relevant professional body, pursuant to Ministerial Decree No. 34 of 2013.
Heterogeneous transformation (and “atypical” heterogeneous transformation)
If the professional partnership is instead regarded as an unincorporated association or as a non-corporate entity with an associative structure, transformation into a professional company implies a transition from a non-corporate entity to a corporate entity.
The civil code regulates certain forms of heterogeneous transformation, but it does not expressly cover all possible combinations. For this reason, legal doctrine and professional practice have developed the concept of “atypical heterogeneous transformation.”
A key reference is Guideline No. 20 of the Milan Notarial Council (18 March 2004), which states that even in the absence of an explicit statutory provision, a heterogeneous transformation from or into partnerships should be considered admissible. In such cases, the rules governing heterogeneous transformations involving companies limited by shares should apply by analogy, together with the general principle of continuity of legal relationships.
More specifically, the guidelines issued by the north-eastern notarial council address two issues directly relevant to the transformation of professional associations into professional companies.
First, they establish a rule concerning the voting majority required for the atypical heterogeneous transformation of an unincorporated association into a company. Referring to the relevant provisions of the civil code governing heterogeneous transformation and to the rules applicable to associations, they support the application of a three-quarters majority of the members unless otherwise provided in the constitutive agreement.
Secondly, they confirm the legitimacy of transforming professional associations into professional companies on the basis of the principle of contractual autonomy, while clarifying that the applicable rules depend on the legal classification attributed to the professional partnership. The transformation will be heterogeneous if the entity is regarded as an association or autonomous center of attribution of legal relationships; it will instead be a progressive homogeneous transformation if the entity is regarded as a simple partnership adopting another corporate form. Furthermore, adopting the professional company qualification through the simple partnership model might not constitute a transformation but merely an amendment to the partnership agreement.
A further practical distinction between homogeneous and heterogeneous transformation concerns the moment when the transaction becomes effective.
For transformations in general — and therefore typically for homogeneous transformations — the general rule provides that the transformation becomes effective upon completion of the final publicity requirement relating to the deed of transformation.
By contrast, the civil code establishes a special rule for heterogeneous transformations. By way of derogation from the general rule, such transformations become effective only after sixty days from the completion of the final publicity requirement, unless creditors have consented or have been paid. During the same sixty-day period creditors may file an opposition.
Transformation vs contribution of the Professional Firm
From a practical standpoint, professionals often ask not only whether the transaction is possible but what actually changes compared with contributing the professional practice to a professional company.
Transformation is based on continuity: it aims, as far as possible, to preserve the same center of attribution of legal relationships, avoiding transfers and structuring the transaction as a mere change of legal form. This explains the importance of the Supreme Court decision No. 16500 of 2004, which explicitly connects the transformation of a professional partnership or de facto partnership into a limited partnership with the continuation of employment relationships.
A contribution, by contrast, involves a more clearly trilateral relationship: one party (the partnership or the individual professionals) contributes an organized set of assets and relationships to a receiving company, which becomes the holder of the contributed business.
In practical terms, this requires careful management of the scope of the contribution and of the fate of existing contracts, which may require assignment, substitution or consent from counterparties.
In other words, while transformation tends to preserve existing legal relationships, a contribution requires managing their transfer. In professional services this is particularly delicate because client relationships remain influenced by fiduciary considerations and often require the granting of new mandates.
Tax treatment: from historical uncertainty to the neutrality regime introduced by Article 177-bis of the Income Tax Code
A long-standing principle in administrative practice is that the professional company does not represent a distinct tax category: its income is determined according to the rules applicable to the corporate form adopted.
The National Foundation of Chartered Accountants, referring to an interpretative note issued by the tax authority in 2014, observed that according to the position of the tax administration the income of companies limited by shares and of commercial partnerships is classified as business income by virtue of the corporate form, regardless of the professional nature of the activity carried out.
This approach has significant practical consequences with regard to accounting methods, withholding taxes, determination of taxable income and, more generally, the possible change in the category of income that may occur when moving from a professional partnership to a professional company.
The framework has recently changed with the introduction of Article 177-bis of the income tax code, entitled “Extraordinary transactions and professional activities,” introduced as part of the reform of income taxation enacted by Legislative Decree No. 192 of 13 December 2024.
The wording of the provision is particularly relevant.
Paragraph 1 provides that contributions of an organized set of tangible and intangible assets — including client relationships and other intangible assets — together with liabilities, organized for the exercise of professional activities, into a company established to carry out regulated professional activities do not generate taxable capital gains or losses. The rule provides for continuity of tax values and succession by the receiving entity.
Even more significant for the purposes of this article is paragraph 2, letter c, which extends the neutrality regime to transformations, mergers and demergers involving not only professional companies but also associations or simple partnerships established for the joint exercise of professional activities, as well as transactions between professional companies and such associations or partnerships.
The legislator has therefore codified a principle of tax neutrality that, at least from a textual perspective, covers both contributions and transformations and other extraordinary transactions in the professional sector, addressing one of the historical disincentives to the reorganization of professional firms.
Concluding remarks: choosing the appropriate path and safeguarding the transaction
If the objective is to maximize the civil-law continuity of the relationships of the professional partnership, transformation is generally the most coherent instrument.
However, it requires a conscious choice regarding the legal classification of the professional partnership, since this determines whether the transaction should be interpreted as a homogeneous transformation or as a heterogeneous or atypical heterogeneous transformation.
In this perspective, the difference in timing between ordinary effectiveness (upon completion of the final publicity requirement) and deferred effectiveness (after sixty days in the case of heterogeneous transformations) should not be regarded as a mere technical detail but rather as an important element in planning the transaction.
It should finally be noted that the tax framework is now considerably more favourable than in the past, when significant uncertainty surrounded these types of reorganizations. In particular, Article 177-bis of the income tax code now provides a neutrality regime that explicitly extends to transformations, mergers and demergers involving professional companies and, more broadly, associations and simple partnerships established for the joint exercise of professional activities.
