Company Types in Turkey: Selim Law Firm offers you a unique experience in establishing a company in Turkey.
Company types in Turkey are established and managed as specified in the Turkish Commercial Law and regulations. The management of companies established under Turkish Law requires a very strict follow-up. Especially payroll and accounting processes are quite complex and arduous. However, before talking about these issues, it is necessary to have a good grasp of the details of establishing a company in Turkey.
In order to understand how to establish a company in Turkey, first of all, it is essential to know the company types in Turkey. Because types of companies give different rights and obligations to company owners. For this reason, carefully selecting the type of company before establishing an entity is very important.
Selim Law Firm understands your questions and concerns regarding the establishment of the company. We support you in every way to protect the value of your investment and money. We know that embarking on an unknown adventure in an unknown country is extremely complex. That’s why we work very carefully so that you can choose the best company types in Turkey. We explain your rights and obligations in detail.
Selim Law Firm in Turkey works in a way that protects you. While the sole obligation of any accounting firm or consulting firm is to set up a company for you, it is our duty to protect your rights and interests. That’s why we don’t recommend working with an ordinary consulting firm or an accountant.
What is the difference between a sole proprietorship and a capital company?
Companies in Turkey are divided into two main groups. These are capital companies and sole proprietorships. Equity companies and private companies have different characteristics from each other. Each structure offers different advantages and disadvantages, depending upon your potential risks, liabilities, expenses, investment needs, and income tax situation. For this reason, one of the first steps in esatblisment a company in Turkey is choosing an ownership structure.
Once you understand the differences between sole proprietorships and capital companies, you will better understand the general structure of company types. So, we will explain the difference between these two main groups in detail.
| Sole Proprietorship | Capital Company |
|---|---|
| The business name must contain the name and surname of all partners or at least one partner. | The business name does not require the name and surname of all partners or at least one partner. |
| The partners are liable to everyone for the commercial and tax debts of the counterparty. | The partners are not responsible for the commercial debts of the company against third parties. The partners are indebted to the company only with the amount of capital they have committed. However, they are liable to the state for their tax debts. |
| Company and its partners can not benefit from the company demerger. | Company and its partners can benefit from the company demerger regulated in the Turkish Commercial Code. |
| Decision making is difficult if there is more than one partner. This issue should be carefully prepared in the partnership agreement. | Meeting and decision quorums are regulated in the Turkish Commercial Code. With this aspect, it is easy to manage the company. However, these rates can be changed in the company’s articles of association. |
| The death or bankruptcy of one of the partners terminate the company. In such cases, additional precautions should be taken. | The death or bankruptcy of one of the partners does not terminate the company. |
| Each partner has one vote. | Voting rights are determined according to the nominal value of the capital. |
| A decrease in the number of partners to one does not terminate the company. | If the number of partners drops to one, the company may be terminated depending on the situation. |
| Partners are an income taxpayer. | The capital company is a corporate taxpayer. |
| The sole proprietorship does not allocate reserve funds. | The capital company allocates reserve funds. |
What are the benefits of the establishment of a company in Turkey?
We have examined in detail the differences between a sole proprietorship and a capital company. However, besides the features, we also need to mention the advantages and disadvantages of these two types of companies. Why do people prefer these companies or for what reasons do they turn to other types of companies? In order to fully understand this issue, it would be appropriate to consider the sole proprietorship and the capital company separately.
Pros and Cons of Sole Proprietorship
| Pros | Cons |
|---|---|
| It is easy to establish. | It is subject to progressive income tax. The tax rates continue by searching as 20%, 27%, 35%. |
| Establishment costs are low. | The partner who wants to sell his share has to get the permission of the other partner. |
| Closing processes are easy and happen quickly. | It is not as reputable as a capital company in the eyes of banks and institutions. |
| It is easy to manage. | Credit and virtual pos applications are difficult to approve. |
Pros and Cons of Capital Company
| Pros | Cons |
|---|---|
| The partners are not responsible for the commercial debts of the company. | Certain procedures must be fulfilled for the establishment of a capital company. |
| They hold a more prestigious position than many other companies and businesses. | It is established with high capital. |
| It has the right to vote according to the capital value. | Information is required for accounting and registry transactions. In addition, it is necessary to spend money for these transactions. |
| Corporate tax is payable at a single rate (20%). | In order to manage, it is necessary to get professional support on some issues. |
What are company types in Turkey?
We said that there are basically two types of companies in Turkey. Now, let’s deepen our subject by touching on the sub-branches of these company types.
According to article 124 of the Turkish Commercial Code;
- Collective and limited partnership company is a sole proprietorship. Apart from collective and limited partnership companies, companies opened by individuals on their own behalf are also sole proprietorships.
- Joint stock company, limited liability company and a “commandite company whose capital is divided into shares” is a capital company
We understand that the subject is somewhat complex. So if we show these companies in a table, the problem is solved.
| Sole Proprietorship | Capital Company |
|---|---|
| Companies opened by individuals on their own behalf | Joint Stock Company |
| Collective Company | Limited Liability Company |
| Limited Partnership Company (Komandit) | Commandite Company Whose Capital is Divided into Shares |
Ordinary Partnership and Cooperative are excluded from this distinction. These types of companies are subject to different laws. Ordinary Partnership do not have legal and real personality. Ordinary company is subject to the Turkish Code of Obligations. Cooperative, on the other hand, are governed by their own special law.
As a result, it is possible to list the company types in Turkey in general as follows;
- Company owned by individuals (This company type is often referred to as a sole proprietorship. This is what comes to mind when it comes to a sole proprietorship.)
- Collective Company
- Limited Partnership Company
- Ordinary Partnership
- Joint Stock Company
- Limited Liability Company
- Commandite Company Whose Capital is Divided into Shares
- Cooperative
The most common of these company types are; ordinary partnership, sole proprietorship, joint stock company and limited liability company. It is not possible to see a different type of company other than these companies in Turkey.
Do you need any licences to establish a company in Turkey?
It is not possible to carry out some commercial activities in Turkey by establishing a sole proprietorship. In fact, in order to carry out these activities, only the company defined in the law must be established, not any capital company.
Banking, financial leasing, factoring, consumer finance and card services, asset management services, insurance, foreign exchange kiosk operation, public merchandising, agricultural products licensed warehousing, commodity exchange activities, independent audit studies, works subject to the Capital Markets Law No. 6362, freelance A joint stock company must be established for all activities such as the establishment and management of the region.
In order to carry out these activities, the permission of the Ministry of Custom and Trade must be obtained. Those who want to establish a company for other works do not need to get permission from anywhere.