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What are Types of Companies in Turkey?

What are the Types of Companies in Turkey?

Turkey is one of the most suitable countries for the most appropriate structuring and planning according to strategic plans. It is necessary to choose the type of company. In Turkey, both local investors and foreign investors are subject to the same rights and obligations. Foreign direct investment in Turkey by foreign investors is free. Net profit, dividends, sales, liquidation and compensation amounts, and similar amounts arising from the activities and transactions of foreign investors in Turkey can be freely transferred abroad through banks or private financial institutions. Correct structuring of the company to be established in terms of legal and it is extremely important to the success of your organization. According to the Turkish Commercial Code, there are five types of companies in Turkey.  These are limited companies, limited partnership companies, cooperatives, collective companies, and Joint Stock companies. The establishment, basic features, and functioning of these companies are regulated in the Turkish Commercial Code No. 6102. The Cooperatives Law No. 1163 applies to the functioning of cooperatives.

1. Limited Company

Limited Liability Company is a type of company established under a trading name by the gathering of one or more real or legal persons. Limited companies can be established with a single partner. The number of partners should not exceed 50. Limited companies cannot be offered to the public. The limited company has 2 authorized and responsible organs, namely the general assembly and the board of directors. The capital of the limited company is at least 10.000 TL (724 USD), and it is valid to share the entire capital within 24 months from the date of registration of the company. The payment schedule can be regulated in contracts and is determined by company managers. Bearer shares cannot be issued or offered to the public in a limited company. The transfer of shares in such companies is subject to the approval of the general assembly. Company establishment procedures are initiated by system users through the Central Registry System Application (MERSIS), an online system. If there is a manager other than the partners, a document of acceptance of the assignment must be prepared. Following the registration of the Articles of Association of the Limited Company at the Trade Registry Office, a circular of signature from the notary public and a power of attorney for the certified public accountant must be issued under the company title. The legal books to be used by the Limited Company must be certified. It is necessary to open a limited liability company at the tax office where the head office is affiliated. By the Social Security and General Health Insurance Law No. 5510, if personnel will be employed in the workplace (established company) belonging to the Limited Company, a workplace number must be created at the institution at the latest on the date the insured is employed. Finally, a municipality business and working license should be obtained. Thus, the establishment of a limited company is completed.

What are The Advantages of a Limited Company?

The most important advantage of limited companies is the low capital required for establishment. Everyone who has a capital share in the debts of the company is responsible according to the share ratio.  The advantages of a limited liability company are as follows.

  • They pay flat-rate tax.
  • There is no need for a ministry representative to attend the general assembly meeting.
  • Value Added Tax is not paid on the sale of company shares that have been held for at least two years.
  • There is no obligation to have a lawyer.

2. Limited Partnership Companies

A limited partnership company is preferred among overseas investors due to the simple steps in the registration process in Turkey and its suitability as a small or medium-sized company. A limited liability company in Turkey can be established with a minimum capital of approximately 10,000 TL (724 USD). A limited partnership company in Turkey can be established by at least one shareholder and there is no nationality restriction as long as the transactions can be made by the Turkish Commercial Code and other laws in force in this country. The Articles of Association, photocopies of identity cards, and the power of attorney of the newly established company representative must be notarized and submitted to the Turkish Trade Registry. Meanwhile, a bank account must be opened in Turkey for the minimum capital required to be deposited.

What are The Advantages of a Limited Partnership Company?

The main advantage for limited partners is that their liability for business debts is limited. A limited partner can only be held personally liable up to the amount he or she deposits. Limited partners know they cannot lose more than they contribute. The investment is sheltered and the risk is low.

The main advantages of limited partnership companies are listed below.

  • No double tax on income crossing borders.
  • The ability of partners to more easily utilize losses.
  • More flexibility in moving profits/losses between partners.
  • More flexibility, generally.

3. Cooperatives

A cooperative company is a type of commercial organization like other types of companies. Cooperatives are established with at least 7 partners, with exceptions. Cooperatives are companies established to provide and protect the specific economic interests and professional needs of the members through mutual assistance and solidarity with their labor and monetary contributions. Cooperatives are established by real and legal persons. They are partnerships with variable partners and variable capital. Each partner takes at least one and at most five thousand shares. The amount of partnership share is 100 TL (7 USD). All partners except those who were not partners, three months before the general assembly, may participate in the cooperative general assembly. This process is not required in building cooperatives.

What are The Advantages of Cooperatives?

Cooperatives ensure that their members meet their needs cost-effectively and most appropriately. Cooperatives shorten the path between producer and consumer, increase quality and reduce costs. Cooperatives encourage their members to work together. They increase their technical knowledge and experience.

The advantages of cooperatives are as follows.

  • Cooperatives allow their members to utilize their small savings most efficiently.
  • Cooperatives increase quality and reduce costs.
  • Cooperatives provide the needs of their members in the most appropriate way.
  • Cooperatives encourage their members to work together. They increase their technical knowledge and experience.
  • Cooperatives provide social balance.

4. Joint Stock Company

A joint-stock company is a type of company whose capital is fixed and divided into shares, and which is liable only for its debts with its assets. Shareholders of the Joint Stock Company are liable only to the capital shares they have committed and to the company. Joint-stock company partners have no responsibilities other than the capital they have committed to putting into the company in terms of public debts. The responsibility arising from the public debts that cannot be collected from the assets of the company belongs to the members of the board of directors. Joint Stock Companies can be structured to do any kind of business that is not prohibited by law in their articles of association. It is possible to establish a joint-stock company with an additional partner. This partner can be a natural or legal person. It has two factors, the general assembly and the board of directors. Conditions for establishing a Joint Stock Company for foreign investors in Turkey are the same as for domestic investors. Joint-stock companies must be established with a capital of at least 50,000 TL (3600 USD) unless there is a contrary provision in special laws. In addition, at least 25% of the shares committed in cash in Joint Stock Companies must be deposited into a bank account opened in the name of the company before the registration of the company. There must be at least one partner in Joint Stock Companies. There is no limitation in terms of the number of partners. However, if the number of partners in joint-stock companies is over 250, the company will be subject to the Capital Market Law. To establish a joint-stock company, an online application is made through the Central Registry System Application (MERSIS). 1/4 of the capital must be deposited into the Bank Account. If there are members of the board of directors who are not shareholders of the Joint Stock Company, written declarations from these members that they accept the duty should be taken. The legal books to be used by the Joint Stock Company are certified. Following the registration at the Trade Registry Office, a circular of signature from the notary public and a power of attorney for the certified public accountant must be issued under the company title. It is necessary to make an opening transaction at the tax office to which the head office of the Joint Stock Company is affiliated. By the Social Insurance and General Health Insurance Law No. 5510, if staff will be employed in the workplace belonging to the Joint Stock Company, a workplace number must be created in the institution on the date the insured is employed. The business license is obtained by applying to the municipality to which the workplace is affiliated.

What are The Advantages of Joint Stock Company?

The most prominent advantage of joint-stock companies is that there is no partner limit. For example, it is possible to establish a joint-stock company with hundreds of partners. 

The advantages for the joint-stock company are listed below.

  • It can be made public.
  • It can sell bonds.
  • A person who has held a share for two years does not have to pay Income Tax if they sell their share.
  • Transfer transactions are easy.
  • If the debt collection from the company does not occur, the partners of the company do not take responsibility.

5. Collective Company

Collective companies are companies that can be established by two partners who must be natural persons. Both partners have the right to manage the company separately. Both partners have responsibilities and management work may be delegated to one or more other partners by the articles of association or by the majority of the partners. These partners are a second-degree unlimited liability to the creditors of the company. In addition, there is no capital requirement for a collective company. Collective companies are regulated under Article 124 of the Turkish Commercial Code. A collective company is a type of company that gains legal personality by registering with the trade registry. During the establishment of a collective company, the name and surname of at least one of the partners must be included in the commercial title to show the company and its type. The company should be registered with the chamber of commerce and industry in the region where the company will be established. An announcement should be made in the Trade Registry Gazette after the establishment of the collective company. Tax office transactions and SSI records should be made.

What are The Advantages of Collective Company

Collective companies are among the companies that are easily established in terms of the establishment. It is an important advantage that the minimum capital amount is not determined in collective companies as in other types of companies.

The advantages of collective companies are as follows.

  • One of the biggest advantages of establishing a collective company is that it is easy to set up.
  • The absence of legal personality in this type of company provides ease of dissolution of the collective company.
  • Company establishment costs are low.
  • It is an important advantage that partners can carry out audit work in collective companies

Which Company Type Has The Most In Turkey?

The number of active limited companies was 906 thousand 200, the number of commercial enterprises 684 thousand 466, the number of branches 212 thousand 723, the number of joint-stock companies 150 thousand 457, the number of cooperatives 31 thousand 741, the number of collective companies 10 thousand 893, the number of limited partnership companies 1932.  Joint-stock companies and limited liability companies are the most common types of companies in Turkey. Approximately 82% of all companies are limited liability companies, 13% are joint-stock companies and 4% are cooperatives. The total of the collective and limited partnership companies is around 1%.  

How To Establish a Company in Turkey?

According to the laws of the Republic of Turkey, to establish a company in Turkey, the head office of the company must be in Turkey. Another option is to acquire a virtual location. It is the legal address given by the state. The capital of the company is an important and decisive point. According to Turkish law, there must be a minimum capital to establish a company. Obtaining a work/residence permit and having the ability to join a commercial organization are other complementary aspects. According to each company type, the criteria and minimum requirements for company establishment may differ.

The most important issues to establish a company are to prepare a business plan, to determine the field of business activity, to rent a workplace, and to have full knowledge of all legal procedures. Preparing a business plan before the establishment of the company starts the businesses to work quickly. In line with this plan, a business field of activity is determined. Thus, the nature of the work and the future goals become clear. By renting a workplace or as the owner of the place, the basic one of the initial procedures is fulfilled. Mastering the legal procedures during this initial phase will prevent all potential problems in advance. It will make the job setup process healthy.

All companies are established with the permission of the Ministry of Customs and Trade of the Republic of Turkey as specified in the Turkish Commercial Code. Limited Partnership Company may be established with one partner or more, but the number of partners may not exceed 50, and they may be real or legal persons. The capital of the limited partnership company is not less than 10,000TL (724USD). Personal identification document, personal photos for each partner in the company, obtaining a personal tax number document in the names of the partners, security approval document from the Security Directorate, copy document of the Articles of Incorporation issued by the Commercial Registry are the required documents for the limited partnership company. To establish a joint-stock company, a minimum capital of 50,000 TL (3600USD) and at least one partner is required. Joint-stock companies can have up to 500 shareholders. A sole proprietorship is a type of company that is established individually and has a lower establishment cost. The cooperative company is established with seven partners at least.  Each partner undertakes at least 1000 shares and at most 5000 shares. The same paperwork is required as in a limited liability company. Preparation of the articles of association for the establishment of all companies, notarization procedures, approval of the articles of association in the trade registry, obtaining the potential tax number, depositing the relevant amount of capital in the bank the process of submitting the relevant documents to the trade registry is followed.

What are The Advantages of Establishing a Company In Turkey?

Turkey is an important and high potential investment country. These are Low Operating Costs, Strong Consumer Spendings, Turkish Citizenship, Authority incentives, Equal Terms and Rights, Local Manufacturers, Existence of Special Economic Zones. 

The advantages in Turkey for establishing a company are listed below.

  • Low Operating Costs: Turkey is a country where the needed materials can be easily found at a low cost. The necessary materials used in production are quite numerous and varied.
  • Strong Consumer Spendings: This is a factor that creates a serious advantage. There is a strong consumer spending advantage at the high potential in Turkey.
  • Turkish Citizenship: It gives the right of citizenship to foreign investors who establish a business in Turkey. The citizenship application process and all procedures are completed in less than 3 months. This has been an important opportunity for foreign investors.
  • Authority Incentive: The Turkish government supports foreign investors. The Republic of Turkey has a comprehensive incentive program in this regard. This program has a low upfront cost and features that facilitate and accelerate investment.
  • Equal Terms and Rights: Foreign investors have the same terms, rights, and advantages in foreign investments to the country as local investments.
  • Local Manufacturers: This opportunity is very common and powerful in the country. It is a factor that increases the efficiency and speed of investment.
  • Existence of Special Economic Zones: Turkey has special economic zones. It provides great flexibility and convenience in enlarging this investment.
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