COMPANY TYPES IN TURKEY: A GUIDE TO BUSINESS STRUCTURES

WHAT ARE THE ELEMENTS OF A COMPANY?

The elements of a company, determined within the framework of company law in Turkey, generally include four main components:

1. Personal Element: The partners who want to establish a company in Turkey can be either natural or legal persons, except for the limitations specified in the Turkish Commercial Code. To be a partner in a company, one must have legal capacity, meaning that the founders of the company are personally responsible and must be legally competent.
2. Contract Element: According to Article 520 of the Code of Obligations, “a company is a contract,” indicating that a contractual relationship is at the core of a company. The presence of a contract at the establishment of the company is essential, and this contract outlines the rights and responsibilities of the partners, profit sharing, the management structure, and other important matters. However, a company contract may have characteristics different from other types of contracts.
3. Capital Element: Partners in a company are required to contribute capital (shares) to the company. Capital does not have to be in cash; it can include assets, rights, receivables, labor, commercial reputation, and anything of economic value. However, there are certain legal or practical exceptions. For example, in a publicly traded joint-stock company, the collected capital must be in cash.
4. Common Purpose Element: Establishing company in Turkey is done to achieve a specific goal. In an ordinary partnership, the purpose generally includes profit sharing, while a limited partnership may be established with the aim of operating a commercial enterprise. Joint-stock and limited liability companies can be established for any purpose. It is important to determine the type of partnership based on the intended goal.

These elements form the fundamental principles in the process of forming a company and determine the legal status of companies.

WHAT ARE THE COMPANY TYPES IN TURKEY?

Choosing one of the company types in Turkey during the establishment phase is the most challenging and crucial part. The company’s area of activity, the scope of operations, whether it will own a commercial enterprise, the amount of capital, growth targets, the number of partners, and many other criteria will influence the selection of the type of company. It is of great importance to thoroughly analyze these criteria and choose the most suitable type of company within the framework of Turkish Commercial Law.

• Sole Proprietorship

Although a sole proprietorship is not technically one of the types of companies, it is very commonly preferred in Turkey and therefore should be briefly mentioned. Sole proprietorships can be established the quickest. Because no capital is required to set up a sole proprietorship, it can be established with much lower costs. Forming a company as sole proprietorship is straightforward, and its management is free from complex procedures. Professions such as tradespeople, lawyers, doctors, dentists, and certified public accountants generally prefer sole proprietorships.

However, sole proprietorships are subject to a progressive tax system, which means that the tax rate for sole proprietorships can vary between 22% and 40%. This means that as the income of a sole proprietorship increases, the amount of tax paid also increases, unlike joint-stock or limited liability companies. Additionally, since sole proprietorships do not have legal personality, the owner is personally liable for all debts with their personal assets.

• Ordinary Partnership

An ordinary partnership is a type of company that can be encountered in various forms, from the simplest daily relationships to the most complex ones. It can include partnerships ranging from individuals operating a commercial taxi together, to relationships between people creating intellectual and artistic works together, to consortiums and multinational joint ventures.

Since an ordinary partnership does not have legal personality, its establishment is quite easy. When an ordinary partnership agreement is made, the partnership is formed without the need for additional permissions or registration. If an ordinary partnership operates a commercial enterprise, the partners gain the status of merchants.

As the ordinary partnership lacks legal personality, the contributed capital belongs to all the partners. In addition to the partnership’s assets, the partners are also personally liable with their own assets for the partnership’s debts.

• Collective Company

Although not as common as before, collective companies are still widely used. A typical example of personal companies, the establishment of a collective company is relatively easy and inexpensive. According to Article 153 of the Turkish Commercial Code, a collective company is a company established to operate a commercial enterprise under a trade name, where the partners’ liability for the company’s debts is not limited. The establishment of a collective company involves preparing and signing a partnership agreement, followed by registration and announcement.

• Joint-Stock Company

A joint-stock company holds significant economic and legal importance and is considered one of the cornerstones of commercial life. It is a type of company widely used in many countries where the capitalist system prevails. Key features of a joint-stock company include capital divided into shares, limited liability of shareholders, and legal personality status.

• Limited Liability Company

The most preferred type of company in practice, a limited liability company is generally defined as a commercial company established under a trade name, operating in economic matters, with its capital divided into shares, and where the liability of the partners is limited to the amount of their committed capital shares and is only towards the partnership. The company has a specific capital and the number of partners is limited.

HOW TO ESTABLISH A COMPANY IN TURKEY?

The process of establishing company in Turkey is carried out by submitting the necessary documents to the relevant Trade Registry Office. Foreign natural and legal persons are subject to the same rules as Turkish investors when forming a company in Turkey. However, specific laws may contain provisions that restrict foreign investors or specially regulate investment conditions. The required documents for starting a company in Turkey can be found in the guide prepared by the Turkish Ministry of Trade.

The process of how to establish a company in Turkey involves several steps, including:

1. Choosing a Company Name: The first step is to choose a company name. The name must not already be in use by another company.
2. Obtaining a Tax Number: The next step is to obtain a tax number from the Turkish tax authorities. This can be done online or in person.
3. Opening a Bank Account: Opening a bank account is necessary to deposit the share capital.
4. Preparing the Articles of Association: The Articles of Association must be prepared by a notary and notarized. This document, prepared within the framework of Contract Law, contains the rules and regulations governing the company.
5. Obtaining a Trade Registry Certificate: The Trade Registry Certificate is obtained from the local Trade Registry Office. This certificate confirms the company’s registration.
6. Obtaining a Work Permit: If the shareholders or directors are not Turkish citizens, they must obtain a work permit from the Ministry of Labor and Social Security.
7. Registering with the Social Security Institution: The company must register with the Social Security Institution and obtain a social security number.
8. VAT Registration: If the company’s annual turnover exceeds a certain threshold, it must register for Value Added Tax (VAT).

WHAT IS NEEDED TO STARTING A COMPANY IN TURKEY?

The process of starting a company in Turkey can be detailed and time-consuming. Here’s a summary of the requirements for establishing company in Turkey:

1. Determining the Type of Company: The first requirement is to decide on the type of company to be established. Subsequently, an application must be made to register with the relevant Chamber of Commerce and to open a tax liability with the relevant Tax Office.
2. Address and Contract Preparation: Determine the address to be shown as the company’s headquarters and prepare documents such as the lease agreement.
3. Notary Procedures: Obtain notarization of the articles of association. Open a bank account in the company’s name and deposit a portion of the capital.
4. Application to the Chamber of Commerce: Apply to the Chamber of Commerce with the necessary documents. If there are no deficiencies in the documents, the registration process will be completed within a few days.
5. Second Notary Procedures: Prepare the company’s signature circular and grant power of attorney to the financial advisor at the notary. Additionally, notarize the identity cards or birth certificates of the managers for the tax office application.
6. Tax Office Procedures: The financial advisor will collect the company’s official books from the Trade Registry and apply for registration with the tax office. The tax certificate will be obtained, and necessary inspections will be conducted.

Professional assistance can make the company establishment process in Turkey faster and smoother.

WHAT IS THE COST OF ESTABLISHING A COMPANY?

The cost of establishing a company in Turkey can be categorized into two main types:

Initial Costs:

• Initial costs cover one-time expenses incurred during the company formation process in Turkey.
• These costs include application, registration, and document procurement fees for forming a company in Turkey.
• For company types in Turkey like sole proprietorships, commandite, and collective companies, initial costs are generally lower because they do not require founding capital.
• However, for limited and joint-stock companies, founding capital is required. As of 2024, the minimum founding capital for limited companies is 10,000 TL, while for joint-stock companies, it is at least 50,000 TL. For non-public joint-stock companies, this amount is generally 100,000 TL.

Ongoing Costs:

• Ongoing costs are the expenses that must be regularly met to sustain the company’s operations.
• These typically include employee salaries and insurance payments, taxes, office rent and utility bills, product supply expenses, machinery and equipment costs, advertising and marketing expenses, and dividends paid to partners.

When starting a company in Turkey, it is important to consider both the initial and ongoing costs. Each company’s costs can vary depending on the size of the business, the sector, and the business model. Taking all these costs into account, the cost of establishing a company in Turkey in 2024 can be estimated to range between approximately 15,000-20,000 TL. However, these costs can increase or decrease depending on the type and size of the company.

HOW LONG DOES IT TAKE TO FORMING A COMPANY IN TURKEY?

The time required to establish a company in Turkey varies based on the legal structure of the company and the country’s legal regulations. While the preparation process progresses at the pace determined by the founder, the official establishment times are usually standardized. Here are some examples:

• Sole Proprietorship: Typically, it can be established within 1 to 2 days. This time is limited to collecting the necessary documents and submitting the application.
• Limited Company (Ltd.): After completing the necessary procedures for the establish a limited company in Turkey, the process can take approximately 4 to 5 days. This period includes steps such as registering the company with the Chamber of Commerce, preparing the articles of association, and obtaining notary approval.
• Joint Stock Company (A.Ş.): Similarly, the establishment of a joint-stock company can take between 4 to 5 days. Similar steps to those for a limited company need to be followed.

These times represent a general standard and can vary. Especially during legal procedures or periods of high demand, the durations may be extended. Therefore, consulting professionals before starting a company in Turkey is important.

CHARACTERISTICS OF COMPANY TYPES IN TURKEY

There are various company types in Turkey, including joint-stock companies, limited companies, collective companies, cooperatives, and sole proprietorships. The features and characteristics of company types vary, offering different advantages to business owners.

A) What is a Sole Proprietorship?

A sole proprietorship is a type of company where the element of partnership is prominent, and each partner has unlimited liability. According to the Turkish Commercial Code, there are two types of sole proprietorships: Collective Company and Ordinary Limited Partnership.

• Collective Company: A type of company that can be established with at least two natural persons. The partners have equal rights to manage the company. If desired, through a company agreement or majority vote, the management rights can be transferred to one or more partners.
• Ordinary Limited Partnership: A type of company that can be established by at least two persons. The active partner has unlimited liability and can only be a natural person. The limited partner has limited liability and can be either a natural or legal person.

Company types in Turkey as sole proprietorships involve simple processes for establishment, making them among the types that entrepreneurs can establish quickly. The closure process for sole proprietorships in Turkey is also as simple as the establishment process. The closure of the company can be easily carried out with a petition prepared by financial advisors.

In sole proprietorships, the transfer of partnership shares is also significant for entrepreneurs. The transfer of partnership shares requires the consent of all partners. If there is no unanimous consent from all partners, the sale or transfer of partnership shares cannot be carried out.

Characteristics of Sole Proprietorships

Sole proprietorships have several distinguishing features that set them apart from other types of companies:

1. Easy Establishment: Sole proprietorships are the easiest type of company to set up. The formalities are minimal, allowing for quick and straightforward establishment.
2. No Minimum Capital Requirement: There is no minimum capital requirement for sole proprietorships. This means that no specific amount of capital is needed to establish the company.
3. Number of Partners: A sole proprietorship can be established by one or more individuals. If there are multiple partners, a partnership agreement is drawn up between them.
4. Income Tax Liability: All partners in a sole proprietorship are subject to income tax. The income generated by the company is taxed as the personal income of the partners.
5. Unlimited Liability of Partners: The partners have unlimited and joint liability for the debts of the sole proprietorship. This means that partners may have to use their personal assets to cover the company’s debts.
6. Difficulty in Transferring Partnership: If a partner wishes to transfer or sell their share in the company, the consent of the other partners is required. This makes the process of transferring partnership shares quite challenging.

These features highlight the simplicity and the personal liability involved in operating a sole proprietorship, making it an attractive option for small businesses and individual entrepreneurs while also presenting some significant risks and limitations.

B) What is a Limited Company?

A limited company is a type of company established under the Turkish Commercial Code, bearing a commercial name and formed by at least one natural or legal person. Limited companies are generally preferred for medium-sized enterprises and are one of the most common company of types in Turkey.

One of the features of a limited company is transparency in its equity. These companies can be established with a minimum capital of 10,000 TL and can have a maximum of 50 partners. The liability of partners is limited to the capital they commit, and while the capital can be divided, shares cannot be divided into fractions.

Limited companies, abbreviated as “LTD. ŞTİ.”, are subject to corporate tax at a fixed rate of 23% and are classified under the Corporate Tax regime. While any professional field can operate under a limited company structure, sectors such as banking and insurance tend to avoid this type of company. Limited companies cannot be publicly traded or issue bonds.

There is no requirement to have a lawyer in limited companies, but it is mandatory to have directors and a general assembly. A manager is appointed through a general assembly decision, and all representation and management authority of the company are under the responsibility of this manager. The appointed company manager may also be someone from outside the partners.

Characteristics of a Limited Company

Here are the characteristics of a limited company listed in bullet points:

• Limited Liability: Owners of a limited company do not risk their personal assets for company debts. The liabilities of the company are limited to its assets, safeguarding the personal assets of the owners.
• Flexible Capital Requirement: There is no maximum capital requirement for a limited company, but according to the Turkish Commercial Code, it can be established with a minimum capital of 10,000 TL.
• Business Opening and Activity Certificate from the Ministry of Trade: The establish a limited company in Turkey requires obtaining an operation and activity certificate from the Ministry of Trade of the Republic of Turkey. This document is necessary for the company to operate legally.
• Profit Distribution: The profit of a limited company is distributed among the partners. The distribution is determined and distributed according to the partnership structure and the provisions of the articles of association. Profit shares are allocated based on the capital contributions of the partners.
• Suitability of Name and Trade Name: The names and titles of limited companies must comply with the Turkish Commercial Code. The phrase “Limited Company” or its abbreviation “Ltd. Şti.” must be included in the trade name. This indicates the legal status of the company and is used in commercial relationships.

These features encompass the fundamental elements essential for the structuring and operation of a limited company.

How to Establish a Limited Company in Turkey?

To summarize the steps for establishing a limited company in Turkey:

1. Collecting Documents: Gather the necessary documents for the establishment of the limited company in Turkey, typically including identification documents of partners, address declarations, the company’s articles of association, and other required documents.
2. Preparing the Articles of Association: The articles of association detail the company’s objectives, the rights and responsibilities of partners, the capital structure, and other critical details. The articles prevent disputes among partners and regulate the management of the company.
3. Tax and Banking Processes: Obtain a tax identification number for the company and open a bank account. Apply to the relevant tax office for the tax identification number and proceed with opening a bank account.
4. Registration in the Trade Registry: The company must be registered in the trade registry. Submit the necessary documents along with the application to the relevant trade registry directorate.
5. Declaration and Accountant: Complete tax declarations and engage an accountant during the establishment phase. An accountant is crucial for organizing the company’s financial transactions and fulfilling tax obligations.
6. Notification to the Tax Office: Notify the tax office of the company’s establishment. Provide information about the establishment and the tax identification number to the tax office.
7. Chamber and Municipality Procedures: Depending on the business activities, complete the relevant chamber and municipality procedures. These procedures vary according to the sector in which the business operates and local regulations.

Following these steps ensures that the establish a limited company in Turkey is carried out correctly and comprehensively, providing a solid legal and financial foundation for the company

Considerations When Establish a Limited Company In Turkey

When establish a limited company in Turkey, the following considerations are important:

1. Business Plan Preparation: The business plan should outline how your business will operate, its objectives, and financial projections. Additionally, conducting market research to study the industry and your competitors is crucial. This helps in defining strategic goals and effectively managing your business.
2. Selection of Partners and Partnership Agreement: It is important to carefully select your partners when establishing your limited liability company. Prepare a partnership agreement to define roles, responsibilities, capital contributions, and profit sharing among partners. This agreement is essential to prevent disputes and ensure the smooth operation of the business.
3. Business Name and Registration with the Trade Registry: Choose a business name and register it with the trade registry. When selecting a business name, ensure it complies with the Turkish Commercial Code and the Trade Registry Regulation. A correct and descriptive business name can enhance the reputation and recognition of your business.
4. Tax Obligations: Register your company as a taxpayer and handle the necessary tax obligations for your business. Contact the tax office to fulfill your tax liabilities and follow the required procedures.
5. Legal Consultancy: Establish a limited company involves legal complexities. Therefore, seeking assistance from a legal advisor or financial consultant is important. An expert advisor can provide proper guidance and direct your steps to meet legal requirements.
6. Regular Maintenance of Financial Records: Regularly maintain the financial records of your company and ensure timely compliance with tax obligations. This promotes transparency and helps you monitor the financial status of your business. Additionally, conducting regular financial analysis allows you to evaluate the performance of your business.

These considerations are important steps to successfully establish a limited company in Turkey.

Can Limited Liability Companies Establish A Home Office?

Limited liability companies can be established as a home office or operated from home. A home office is generally preferred in fields such as software development, consultancy, real estate, event organization services, and especially e-commerce. Requirements to establish a company as a home office include:

• Obtaining Household Documents: Initially, obtain documents related to the residence, such as a lease agreement or photocopy of the title deed.
• Issuing Power of Attorney: From the nearest notary, issue a power of attorney for the establishment of the company and accounting procedures.
• Registration with the Tax Office: Register with the tax office and create a password. You will need to obtain a tax identification number. After establishing tax registration, you can track transactions through the Interactive Tax Office.
• Company Establishment and Tax Registration Certificate: The remaining procedures include establishing the company and obtaining the tax registration certificate. These procedures are generally completed within a short period.

Establishing a company as a home office provides flexibility to business owners. However, it is important to comply with legal and regulatory requirements. Therefore, following these steps correctly and obtaining the necessary documents are crucial.

C) WHAT IS JOINT STOCK COMPANY?

Joint-Stock Company is a type of commercial company where the capital is divided into shares and the liability of shareholders is limited to their share capital contributions. According to the Turkish Commercial Code, there is a minimum capital requirement for establishing joint-stock companies in Turkey. These companies can be publicly traded on the capital markets and are typically preferred for conducting large-scale business operations. Additionally, the trade name of joint-stock companies ends with “Anonim Şirket” or its abbreviation “A.Ş.”

In the past, joint-stock companies were required to have a minimum of 5 shareholders, but with recent updates, they can now be established by a single natural or legal person. There is no upper limit on the number of shareholders, but companies with more than 500 shareholders must comply with regulations set by the Capital Markets Board.

In joint-stock companies, shareholders are only liable for company debts up to the amount of their share capital contributions. For detailed information regarding shareholders’ rights to information and inspection, relevant laws and regulations should be consulted.

There is no requirement for the founder of a joint-stock company to be a natural person. Legal entities and natural persons alike can establish and become shareholders in joint-stock companies. Foreign individuals can also establish and become shareholders in joint-stock companies.

How To Establish A Joint-stock Company In Turkey?

Establishing a joint-stock company involves following specific steps. The general steps to how to establish a joint-stock company in Turkey include:

1. Decision Making and Planning: The first step is to decide on establishing the company and plan the incorporation process. Basic elements such as the company’s purpose, capital, and management structure are determined at this stage.
2. Company Name and Examination: Selecting an appropriate company name is crucial. This name will be published in the Trade Registry Gazette. The name must be unique and comply with legal requirements.
3. Drafting the Articles of Association: The Articles of Association, which define the company’s operational and management principles, are prepared. It includes details such as the company’s purpose, headquarters, capital, management bodies, and other important provisions.
4. Capital Contribution: The specified capital amount for the joint-stock company must be deposited by shareholders or founders. This capital is blocked in a bank during the establishment phase.
5. Notarization: The Articles of Association, signed by all shareholders or founders, are submitted for notarization.
6. Registration with the Trade Registry: The notarized Articles of Association are then filed with the relevant Trade Registry Directorate. Required documents and application fees are submitted during this stage.
7. Tax Liability: After registration with the Trade Registry, the company must apply for tax liability at the relevant tax office. Required documents are submitted, and a tax number is obtained.
8. Preparation of Official Books: Official books of the company are prepared based on documents obtained from the Trade Registry.
9. Publication and Obtaining Documents: After completion of registration in the Trade Registry, the establishment of the company is announced. Additionally, necessary documents for commercial activities are obtained.

The process of establishing a joint-stock company in Turkey can be complex, and seeking expert assistance from a commercial lawyer in Turkey or business consultant to fulfill legal requirements is advisable. This ensures compliance with regulations and smooth establishment of the company.

Things To Consider When Establishing A Joint Stock Company In Turkey

Establishing a joint stock company requires adherence to regulations and provisions outlined in the law.

• Company Articles of Association: The articles of association determine the fundamental operations of the company and the rights and responsibilities among shareholders.
• Trade Name and Registration: Joint stock companies are established under a trade name, which must be registered in the Trade Registry. The name should reflect the company’s scope of activities.
• Details of Shareholders and Executives: The articles of association should include detailed information about shareholders, members of the board of directors, and managers, including their full names, addresses, and identification numbers.
• Capital and Shares: Capital shares are represented by shares. The minimum value of a share can be as low as 1 cent (kuruş), and shares must be issued.
• Document Printing: Necessary documents for commercial activities, such as invoices and delivery notes, should be printed by a printing service.
• Shares: Joint stock companies have the right to issue shares and bonds. However, they cannot issue bearer shares until the entire company capital is paid.
• Transfer of Shares and Securities: Shares are considered securities and their transfer is subject to specific procedures. In joint stock companies, the transfer process of shares occurs through the transfer of securities.
• Contribution of Capital in Kind: Capital can be contributed in kind under real estate law. It should be noted that capital contributions in kind cannot be sold for two years.

When establishing a joint stock company in Turkey, it is important to adhere to the above points and act in accordance with legal regulations.

ADVANTAGES AND DISADVANTAGES OF COMPANY TYPES IN TURKEY

Advantages of Sole Proprietorship :

• Flexible Decision-Making: Sole proprietorships are not required to answer to a board of directors or shareholder groups, allowing business owners to make decisions independently.
• Simplicity: Sole proprietorships are not obligated to disclose detailed financial information like public companies. Additionally, their tax structures are simpler, and management is less complex.
• Vision Setting: Unlike public companies, which must adjust their course according to shareholder will, sole proprietorships can adhere to the founder’s vision without external interference.

Disadvantages of Sole Proprietorship :

• Personal Income Tax Payment: Sole proprietors are required to pay personal income tax separately from their business income, potentially adding an extra tax burden on personal incomes.
• Limited Income Potential: Sole proprietorships may be disadvantaged for high-income businesses due to limited resources and growth potential compared to other company structures.
• Legal Processes: Closing a sole proprietorship may involve legal processes such as formal document preparation, notifications to tax authorities, and deregistration from the Trade Registry, which can be cumbersome.

Advantages of Establishing a Joint-Stock Company:

1. Formation of Large Capital: Joint-stock companies aggregate small savings that individually may not be significant, thereby creating large capital pools. This provides a significant advantage in financing large-scale projects.
2. Establishment with Minimum Capital and Limited Liability: Joint-stock companies can be established with minimum capital, and shareholders’ liability is limited to the amount of capital they contribute. Additionally, the transfer of shares is generally easier compared to partnerships.
3. Ability to Issue Shares and Bonds: Joint-stock companies can easily issue shares and bonds, facilitating rapid capital accumulation through capital increases or borrowing. They can also increase capital through public offerings.
4. Limited Liability of Shareholders: Shareholders in joint-stock companies are only liable for debts up to the amount of capital they contribute; their personal assets are typically not used as collateral for company debts.
5. Widening of Private Ownership to the Public: Joint-stock companies contribute to the spread of private ownership to the public. Small savers become partners in large ventures by investing in joint-stock companies.
6. Ease of Entry and Exit: Entering and exiting joint-stock companies is generally straightforward and cost-effective. While share transfers and changes in partnership require specific procedures, they are typically executed quickly and smoothly.

Disadvantages of Establishing a Joint-Stock Company:

1. Shareholder Disinterest and Power Vacuum: Despite having numerous shareholders, many may show little interest in general meetings. This can lead to significant power vacuums and weaknesses in management.
2. Tendency towards Monopoly: Due to their substantial economic power, joint-stock companies may incline towards monopolistic practices. This can hinder competition and lead to market imbalances, prompting regulatory authorities to enact measures to prevent monopolies and preserve competition.
3. Complexity of Decision-Making Processes: With a large number of shareholders, reaching consensus on decisions and management matters can be challenging. This formalizes decision-making processes and may introduce uncertainties in management. Additionally, the management structure is subject to stricter legal regulations.
4. Difficulty in Company Closure and Liquidation Processes: The closure and liquidation of a joint-stock company involve lengthy and procedural steps. It includes safeguarding shareholder rights, satisfying creditor claims, and fulfilling legal obligations, which can be time-consuming and costly.

Advantages of Establishing a Limited Company:

1. Fixed Rate Tax Payments: Limited companies generally pay taxes at a fixed rate. This makes the company’s tax payments predictable and facilitates financial planning.
2. Limited Liability: In limited companies, shareholders’ liability for debts is limited to the amount of capital they committed to during the company’s establishment. Shareholders are not personally liable for the company’s debts.
3. Flexible Partnership Structure: Limited companies offer a more flexible partnership structure among shareholders. Shareholders can freely negotiate terms regarding profits and management matters.

Disadvantages of Establishing a Limited Company:

1. Limited Number of Shareholders: Limited companies can have a maximum of 50 shareholders. This limitation can be restrictive for large-scale businesses and may constrain growth potential.
2. Liability for Public Debts: Limited company shareholders can be held liable for the company’s public debts up to the proportion of their share capital. This can expose shareholders’ personal assets to risk.
3. Inability to Issue Bonds and Debentures: Limited companies cannot issue capital market instruments such as bonds and debentures. This limits the company’s financing options and can restrict capital expansion.

THE DIFFERENCES BETWEEN TYPES OF COMPANIES IN TURKEY

To establish a company in Turkey, it is crucial to understand the differences between types of companies in Turkey and choose the most suitable one for your operations. These differences between types of companies are outlined below:

ARE VIRTUAL COMPANIES LEGAL AND HOW IS A VIRTUAL COMPANY IN TURKEY ESTABLISHED?

Virtual companies become tax payers by invoicing for the services they provide. Therefore, establishing a virtual company in Turkey is completely legal.

For virtual companies to operate, tax notification must be made for employees who are tax payers. If an existing office is moved to a virtual address, the tax number generally remains the same, and only the address changes. In this case, it is necessary to apply to the tax office to which the virtual office is affiliated.

The process of establishing a virtual company in Turkey includes the following steps:

• Determining the Company Type: The first step in establishing a virtual company in Turkey is determining the type of company. Options such as limited company, joint stock company, or sole proprietorship should be considered.
• Chamber of Commerce Registration and Taxpayer Registration: Registration must be made with the Chamber of Commerce and taxpayer procedures must be completed at the relevant tax office.
• Obtaining Necessary Permissions: Capital companies may need to obtain company establishment permits from the relevant ministry.
• Document Preparation: Necessary documents should be prepared in accordance with the establishment procedures for establishing a virtual company in Turkey.
• Collecting Documents: Documents required for a newly established company to open a virtual office typically include: photocopy of ID, stamp stating “in the establishment phase,” residence certificate, and corporate email information.
• Signing Contract and Notarization: A contract should be signed with the virtual office company to establish a virtual company. The contract, signed by the financial advisor with NACE code and company title, is certified by a notary.
• Obtaining Tax Number: After notarization, the financial advisor obtains a tax number from the tax office to which the virtual office is affiliated.
• Audit and Commencement of Operations: Tax officials inspect the company according to the registration certificate issued by the Chamber of Commerce, and the process to establish a virtual company in Turkey is completed.

IS IT NECESSARY TO ESTABLISH A COMPANY FOR E-COMMERCE IN TURKEY?

E-commerce is a rapidly growing sector today, starting from home or small-scale businesses and accessible to many individuals. However, the necessity of establishing a company for e-commerce in Turkey is an important consideration for business owners.

Sales conducted over the internet are subject to tax legislation, and any commercial profits must be taxed accordingly. Therefore, individuals engaged in e-commerce must comply with income tax laws governing commercial profits and become taxpayers, necessitating the establishment of a company. A commercial structure, such as a company, is required for tax purposes.

Moreover, establishing a company for e-commerce in Turkey provides a legal status for the business. This ensures that the business operates on a legal basis and conducts commercial activities in accordance with the law. From the perspective of customers, a company status enhances trust and credibility. Additionally, it helps the business acquire a corporate image and establishes a solid foundation for long-term success.

For these reasons, individuals interested in e-commerce in Turkey should consider the necessity of forming a company in Turkey and create an appropriate company structure to operate their business within a legal framework. Seeking professional advice to determine and establish the most suitable company structure for the business needs is a crucial step towards long-term success.

Which type of company is most suitable for e-commerce in Turkey?

The question of which type of company to establish for e-commerce in Turkey requires consideration of various factors such as income level, business volume, future plans, and legal regulations. Therefore, it is not possible to determine a definitive “most suitable” company type for e-commerce in Turkey. However, business owners typically evaluate the following company types based on the size of their operations and commercial objectives:

• Sole Proprietorship: If the e-commerce business is small-scale with low income, establishing a sole proprietorship may be logical to benefit from tax advantages. In this case, there is no distinction between personal assets and business assets.
• Limited Liability Company (Ltd.): If the e-commerce business is growing in size and income level, and there is a desire to separate personal assets from business risks, forming a limited liability company may be more appropriate.
• Joint Stock Company (JSC): If the e-commerce business operates on a large scale, plans to go public, or operates internationally, establishing a joint stock company may be sensible. A joint stock company is a type of commercial entity where capital is divided into shares represented by stock certificates. This company type can offer advantages in terms of corporate image and international business relations.

The decision on which company type to establish for e-commerce in Turkey should be made based on these criteria.

Where to Obtain Permits for Establishing an E-commerce Company?

In the process of establishing an e-commerce company in Turkey, the places where permits are required are generally similar to those for general company formation. However, due to their simpler operational structures, e-commerce firms often undergo shorter bureaucratic processes. The first step in opening a business location is applying to the tax office. For sole proprietorships, this may involve applying to trade or professional chambers, while for capital companies, it typically requires application to a chamber of commerce.

In cases where personnel are employed, it is crucial to complete Social Security Institution (SGK) applications in accordance with Labor Law in Turkey. The opening of a business location and insurance procedures for employees must be conducted in compliance with legal regulations.

Additionally, depending on which e-commerce platform will be used to offer services, registration must also be completed with the relevant platform. During this registration process, documents such as the company’s trade registry certificate, signature circulars, and articles of association may need to be submitted. Platforms generally request these documents to verify that businesses are legally established and operational.

WHAT ARE THE REQUIREMENTS FOR STARTING A STARTUP COMPANY IN TURKEY?

A startup company typically involves a new business idea or product, aiming for rapid growth, often focused on technology and innovation. The term “startup” is commonly used to describe newly established companies with growth potential.

Startups often begin with limited funding, seeking investment to expand and grow their markets. The primary requirement to start a startup is a viable business idea. Startups offer innovative products or services that have the potential to fill a gap in an existing market or fulfill a new need.

Success for a startup company is generally measured by its growth potential, market fit, and sustainability. In the initial stages, startups typically test their business models, develop their products, build customer bases, and work on marketing and business development strategies to expand.

Differences Between Startup Companies And Other Businesses

There are several significant differences that distinguish startup companies from other businesses:

• Innovation and Originality: The first requirement to start a startup is finding an innovative idea. While other businesses typically operate based on existing markets, startups adopt a completely new approach.
• Rapid Growth and Progress: Startups aim for rapid growth and development. They focus on quickly launching their products to market, expanding their customer base, and increasing their revenues. This often requires innovative business models and marketing strategies.
• Flexibility and Adaptation: Startups have the ability to adapt to rapidly changing market conditions. Their flexibility allows them to make quick decisions and change strategies when necessary, which supports growth and provides a competitive advantage.
• Risk-taking and Trial-and-error Process: Startups often embrace risk-taking and a trial-and-error approach. They test new ideas, learn from failures, and continuously improve their products or services with a flexible mindset.
• Global Impact: Startups typically aim to create a global impact. They strive to gain a significant market share and achieve international recognition. Therefore, they often target international markets for expansion and growth.

These differences are key characteristics that set startups apart from other businesses, creating an innovative and dynamic business environment.

How To Start a Startup Company in Turkey?

Starting a startup company in Turkey can be a complex process, but below is a step-by-step roadmap for how to start a startup company:

• Develop an Original Idea: The foundation of how to start a startup company lies in having an original idea that addresses a need in the market, improves daily life, solves a problem, or offers a new experience.
• Conduct Market Research and Competitor Analysis: Conduct market research to evaluate your idea. Perform competitor analysis to understand which market gaps you can fill and what solutions existing competitors offer. Market research is crucial to identify what is needed to start a startup company.
• Create a Business Plan: A business plan summarizes your company and its objectives. Your business plan should include your company structure, marketing strategies, revenue model, and long-term goals.
• Raise Funds: A startup needs funding to grow and develop. This funding can come from personal savings, family and friends, angel investors, or venture capital firms.
• Build a Team: A strong team will greatly influence the success of your startup. Create a team of individuals with diverse skills who can collaborate and share the same vision.
• Develop and Market the Product or Service: Develop your product or service to bring your idea to life. Then, strive to reach your target audience through marketing and promotional activities.
• Focus on Growth: Continuously work to grow and improve your startup. Take customer feedback into account to constantly enhance and develop your product or service.
• Define an Exit Strategy: It is important to define an exit strategy early on. This could involve selling or merging a temporarily established startup into a larger company.

Startup founders should demonstrate flexibility and determination to quickly bring their ideas to life and grow them. Along this journey of what is needed to start a startup company in Turkey, experiences of both success and failure are common, but determination and the learning process increase the chances of success.

ESTABLISHING A COMPANY BY FOREIGNERS IN TURKEY

Globalization has facilitated foreign companies to establish themselves across different countries worldwide. Turkey is among these countries, offering opportunities for foreigners to establish companies.

Turkey has become a significant business center for foreign investors due to its strategic geographical location, large market, advanced logistics infrastructure, and skilled workforce. Consequently, the establishment a company by foreigners in Turkey has increased in recent years. To establish a company in Turkey, foreigners must adhere to Turkish business and commercial laws, conduct company activities in accordance with Turkish Corporate Law, comply with tax regulations, and maintain accurate and regular accounting records.

There are specific conditions and procedures for foreigners to establish companies in Turkey. Foreign investors can establish various types of companies such as Limited Liability Company (Ltd. Şti.) or Joint Stock Company (A.Ş.) in compliance with the Turkish Commercial Code.

Foreign investors must have a certain amount of capital to establish a company in Turkey, which varies depending on the type of company and the sector in which they operate. Additionally, foreign investors are required to allocate a portion of their investments in Turkey for employment and investment purposes to Turkish citizens and residents.

Furthermore, foreign investors can benefit from investment incentives when they establish companies in Turkey. Investment incentives in Turkey vary based on the sectors invested in, the region where companies operate, and the amount of investment. To benefit from investment incentives, companies must meet specific criteria and complete the application process.

Foreign legal entities and individuals can either establish companies in Turkey or become partners in existing capital companies. Depending on the sector of operation, there may be restrictions on foreign investors, as well as sector-specific incentives. Therefore, foreign investors should seek legal and sectoral consultancy before establishing companies or making investments in Turkey.

PROTECTION AND SAFEGUARDING OF LEGAL RIGHTS OF FOREIGN COMPANIES IN TURKEY

Both the Turkish Civil Code No. 6098 and the Turkish Commercial Code No. 6102, along with other regulations and notifications, legally safeguard the rights of foreign companies in Turkey. In case of disputes concerning companies, specialized Commercial Courts (Asliye Ticaret Mahkemeleri) have jurisdiction, and resorting to arbitration is also possible. Furthermore, from an administrative perspective, organizations such as Chambers of Commerce, Industry Chambers, professional associations, and others aim to standardize companies according to sector, thereby enhancing the reliability and quality of commercial life.

It is crucial for companies to protect and safeguard their legal rights while conducting their operations. Therefore, taking correct steps in legal processes is essential to protect and secure a company’s rights.

Here are some measures companies can take to protect and safeguard their legal rights under company law in Turkey:

• Preparation of Articles of Association: The articles of association document details the entire operation and legal status of the company from its establishment onward. It is a fundamental document that defines the rights and responsibilities of the company. Therefore, the articles of association should be prepared correctly and comply with the necessary legal standards under company law.
• Trademark Registration: Company trademarks are crucial assets that enhance the company’s recognition and reflect its image. Therefore, companies should register their trademarks to protect their right to use the brand and secure their legal rights under intellectual property laws.
• Contract Drafting: Companies engage in contracts in commercial transactions. Contracts are documents that define the rights and responsibilities of the parties involved and serve as references for dispute resolution. Therefore, companies should draft their contracts correctly and comply with the necessary legal standards.
• Compliance with Personal Data Protection Law (KVKK): Protecting and maintaining the confidentiality of personal data of customers, employees, and business partners is crucial in the modern business world. According to GDPR, companies are obliged to meticulously protect personal information.
• Taking Correct Steps in Legal Processes: Companies can successfully protect their legal rights by taking correct steps in legal processes in Turkey. It is important to seek support from a Commercial Law Attorney to take the right steps in legal processes.

Protecting and safeguarding the legal rights of foreign companies in Turkey is important for them to operate successfully. The measures mentioned above are some steps companies can take to protect and safeguard their legal rights. However, since every company’s needs may differ, it is important for companies to develop legal protection plans tailored to their own needs.

Furthermore, due to the complexity and variability of legal processes, it is recommended that companies seek legal consultancy services to take correct steps and obtain expert support in protecting their legal rights. This way, companies can effectively protect their rights and secure their operations during legal processes.

Lastly, protecting and safeguarding the legal rights of foreign companies in Turkey is not only crucial for the companies themselves but also for other parties associated with the companies. Therefore, managing company legal processes correctly under company law and protecting their rights are essential for both the company and other associated parties’ safety and legal protection.