Starting a business in Turkey can be an exciting and profitable venture, but it’s essential to understand the process and legal requirements. Opening a company in Turkey offers numerous opportunities, thanks to its strategic location between Europe and Asia, a large consumer market, and a growing economy. However, understanding the types of companies available is crucial to setting up the right structure for your business.
Once you’ve decided on the type of company, the process involves meeting several legal and administrative requirements. These include preparing a company name, drafting the articles of association, registering with the trade registry, and obtaining a tax identification number. Additionally, you must register with the Social Security Institution to comply with employment laws if you plan to hire staff. Completing these steps ensures your business operates legally and avoids future complications.
Our law firm specializes in helping entrepreneurs and businesses navigate the complexities of starting and managing a company in Turkey. From selecting the right business type to handling registration and ongoing compliance, we provide expert guidance to ensure a smooth and successful start. Whether you’re a local or a foreign investor, our team is here to simplify the process and help you focus on growing your business.
Under the Turkish Commercial Code (Law No. 6102), there are five types of companies recognized in Turkey. These are categorized into capital companies and partnership companies based on their legal and financial structures.
Joint Stock Company (Anonim Şirket – A.Ş.):
A joint stock company is a type of capital company where the liability of shareholders is limited to their subscribed capital. It is ideal for large-scale investments and businesses intending to go public. Shares can be freely transferred, and the company is subject to corporate income tax.
Limited Liability Company (Limited Şirket – Ltd. Şti.):
A limited company is suited for small and medium-sized businesses. It requires a minimum of one shareholder and allows up to fifty shareholders. Shareholders’ liability is restricted to their capital contributions. Due to its simple structure and lower costs, it is the most popular company type in Turkey, representing about 82% of all companies.
Partnership Limited by Shares (Sermayesi Paylara Bölünmüş Komandit Şirket):
This is a capital company where the capital is divided into shares, but one or more partners have unlimited liability for the company’s debts. It is less common and is often used for specific purposes.
Ordinary Limited Partnership (Adi Komandit Şirket):
In this structure, at least one partner has unlimited liability, while other partners’ liability is limited to their capital contributions. This is considered a partnership company, and partners are personally responsible for company debts as secondary obligors.
General Partnership (Kollektif Şirket):
In a general partnership, all partners have unlimited liability for the company’s debts. This type of company is typically formed among individuals with close business relationships and is less common, representing only a small fraction of businesses in Turkey.
Choosing the right type of company in Turkey depends on your business size, objectives, and future goals. Each company structure offers unique features that cater to different types of entrepreneurs and ventures. By understanding the advantages and limitations of each, you can make an informed decision to support your business’s success.
1. Sole Proprietorship for Simplicity and Control
If you’re an individual looking to start a small business or freelance operation, a sole proprietorship is the simplest choice. It requires minimal paperwork, offers complete control over decision-making, and is cost-effective to establish. However, keep in mind that you will be personally liable for all debts and obligations, which can be a significant risk for high-stakes businesses.
2. Limited Liability Company (LLC) for Small to Medium Businesses
For entrepreneurs planning to scale their business, a limited liability company (Ltd. Şti.) is the most popular option. It provides flexibility with a minimum of one and a maximum of fifty shareholders.
Shareholders’ liability is limited to their capital contributions, offering financial protection. LLCs are well-suited for small and medium-sized businesses, startups, and family-run enterprises due to their cost-effective setup and straightforward management.
3. Joint Stock Company (JSC) for Larger Enterprises
For large-scale businesses, especially those considering raising capital or going public, a joint stock company (A.Ş.) is ideal. It allows for the issuance of shares and provides ease of ownership transfer, making it attractive to investors.
Shareholders’ liability is limited to their shares, reducing personal financial risk. JSCs are commonly used by corporations seeking substantial funding or operating in industries with high investment needs.
4. Specialized Structures: Partnerships, Branches, and Liaison Offices
General partnerships and ordinary limited partnerships are suited for ventures involving close partners with shared responsibilities and trust. They work well for specific, low-risk businesses.
If you are a foreign investor, branch offices provide an opportunity to test the Turkish market while remaining an extension of the parent company. Alternatively, a liaison office is excellent for research or promotional activities without engaging in commercial transactions.
5. Cooperatives for Shared Goals
For groups with shared economic or social objectives, cooperatives are a suitable structure. They are commonly used in sectors such as agriculture, housing, or education, where pooling resources benefits all members.
Cooperatives foster collaboration and ensure shared success, but their collective decision-making process may require additional effort to manage.
Authorized company representatives must sign under the company name, and these signatures must be certified by the trade registry office.
The process of establishing a company involves several stages. First, draft and notarize the company’s Articles of Association, detailing the company’s purpose and structure. Next, open a bank account to deposit the minimum share capital.
Register the company with the Trade Registry, providing all required documents such as shareholder details and the Articles of Association. Then, apply for a tax identification number and ensure your workplace address is registered.
Once your company is established in Turkey, there are several key responsibilities to ensure compliance with local regulations. Registering with the tax office to obtain a tax identification number is essential, along with adhering to corporate income tax, value-added tax (VAT), and other tax obligations. You are required to submit regular tax declarations and register with the Social Security Institution (SGK) to provide social security benefits for employees. Opening a business bank account in the company’s name is also necessary for financial transactions and tax payments.
Engaging a certified public accountant (CPA) or accounting firm is crucial for managing bookkeeping, payroll, and tax filings while maintaining accurate financial records. Employers must comply with labor laws, paying at least the statutory minimum wage and securing work permits for foreign employees.
Any changes in the company’s structure, such as shareholder details, capital, or address, must be reported to the trade registry and, in some cases, published in the Turkish Trade Registry Gazette. For regulated industries, obtaining and maintaining specific licenses is required to operate legally.
Additional obligations include holding annual general assembly meetings for joint-stock companies and submitting financial reports to the trade registry, especially for larger companies. Businesses must comply with competition laws, consumer protection standards, and environmental regulations where applicable. Ensuring adherence to these responsibilities is important for avoiding legal penalties and fostering sustainable operations.
Non-compliance with legal obligations in Turkey can lead to significant consequences for businesses. Failing to meet tax, labor, and regulatory requirements can result in fines, penalties, and interest charges.
The Turkish tax authority, for instance, imposes fines for late tax filings, underreporting of income, or failure to pay taxes. Additionally, businesses may face administrative sanctions, including the suspension of business activities or closure, if they neglect to register or update their legal information with the relevant authorities.
Continuous violations could even result in the cancellation of licenses or permits required to operate in regulated industries, thus halting business operations entirely. Ensuring timely and thorough compliance is essential to avoid these risks and maintain the company’s legal standing in Turkey.
Our law firm offers end-to-end support for entrepreneurs looking to establish a business in Turkey. We provide expert legal advice tailored to your business needs, handle all necessary documentation, and ensure your company complies with Turkish laws. Additionally, we offer ongoing support for accounting, tax filing, and regulatory compliance, so you can focus on growing your business.
By partnering with us, you gain access to seasoned legal professionals who understand the intricacies of Turkish business law. Our comprehensive services ensure that your company is set up correctly and operates smoothly. Let us handle the complexities so you can focus on achieving your business goals.
Opening a company in Turkey involves various steps and legal considerations, but with the right guidance, the process can be seamless. Our law firm is here to support you every step of the way, ensuring that your business complies with Turkish laws and regulations. Contact us today to get started on your entrepreneurial journey in Turkey!
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