Turkey welcomes foreign investments and entrepreneurs can choose from several types of Turkish companies which can serve their business needs. The limited liability company and the joint stock company are the most common types of legal entities.
When choosing to open a company in Turkey, the investor must take into consideration the particularities of the company types. While some are more suited for small and medium-sized companies, others will be more appropriate for larger corporations. Our company formation agents in Turkey can give you detailed information about the local regulations for incorporating companies.
The types of companies in Turkey are presented in the infographic below:
Characteristics of Turkish companies
The limited liability company is best suited for small and medium-sized companies. The incorporation procedure is straightforward, and its characteristics make it a favorite among foreign investors. At least one shareholder is required for this business form and a minimum share capital of 5,000 TRY. The company is managed by a board of directors.
Among the advantages of limited liability companies in Turkey is also the fact that they can be used for various activities. Among these, they can be set up as holding companies and thus make a great tax optimization solution. Also, shelf companies which are quite common in Turkey are usually created as limited liability companies and then sold to those seeking to spend the least amount of time possible with the registration of a new company.
The joint stock company is used by those who want to start large businesses. At least one shareholder is needed to incorporate this company type and the requirements for the minimum share capital are larger than for the limited liability company, at 50,000 TRY. The management of the company is also foreseen by a board of directors, together with a supervisory board.
The commandite company does not require a minimum share capital and this company is used to operate a commercial enterprise under a trade name. Shareholders can have either a limited or unlimited liability. The collective company is similar to the commandite, however, the liability of the shareholders is limited in this case to the number of contributions made to the share capital.
Companies in Turkey must draw up the articles of association according to the Turkish Commercial Code. Before beginning the company registration procedure, applicants should check if their desired business name is available. This can be done at the Trade Registry Office.
Business forms for foreign companies in Turkey
As mentioned in the beginning, foreign companies can set up business operations in Turkey through subsidiaries and branch offices. They can also temporarily create liaison offices with the purpose of prospecting the market and promoting the foreign company’s activities. However, most of the times, foreign enterprises decide directly for branches and subsidiaries.
The branch office will act as a dependent business structure which will complete the same activities as the parent company. Most of the times, the branch office is the solution employed by foreign banks and other types of financial institutions operating in Turkey. These are also covered by Turkey’s double tax treaties.
Compared to the branch, the Turkish subsidiary will be registered as an independent company and can be used for completing the activities of the parent company, but other undertakings are also permitted. Subsidiaries usually take the form of limited liability companies and are treated as domestic companies from a taxation point of view.
If you have trouble deciding for the besttype of company, our Turkish company formation specialists can help you choose in accordance with your business needs.
The registration of a branch and subsidiary in Turkey is similar from a documentation point of view, however, it is easier and less expensive to set up a branch office.
Registering a company in Turkey
No matter the type of company one wants to open in Turkey, there are several steps which must be completed. These are:
verifying the company name with the Trade Register (the company name must be unique);
having the Articles of Association drafted and notarized by a Turkish public notary;
filing the Articles of Association and other supporting documents with the Companies Registrar;
registering for taxation, VAT and social contributions with the tax authorities;
applying for the business licenses – these permits are issued in accordance with the activities of the company.
The Articles of Association in Turkey
All companies in Turkey must have their Articles of Association drafted. These must contain the following information:
- the company’s name, object of activities, share capital and legal address;
- information about shareholders and their contribution to the company’s capital;
- how the shares are divided among the shareholders and how the share capital can be altered;
- information about the company’s managers and directors, their appointment and dismissal;
- information about the annual general meeting and other specials provisions.
The share capital of companies in Turkey
Each company registered in Turkey needs to have a share capital, according to the Company Law. Even if not all business forms must have a specific minimum amount deposited in a bank account, the founders are required to deposit a minimum sum of money based on the activities the company will carry out.
As we’ve seen above, joint stock and the private limited liability companies are subject to a few requirements when it comes to the share capital, however, no amount of money is forwarded by the law when it comes to commandite companies and sole traders. However, in their case, the law requires for the share capital to be determined by the owner.
Another aspect which needs to be considered by those who register joint stock companies and limited liability companies is to divide the capital into shares. The requirements are different here because, joint stock companies can list their shares on the Stock Market, while private companies are not allowed to do that.
The following requirements apply in the case of Turkish joint stock companies:
- at least 0.04% must be deposited with the Competition Authority in Turkey;
- at least 25% of the whole amount must be deposited in the corporate bank account;
- the remaining 75% can be added within a maximum of 2 years after the company was registered.
There is also the possibility of depositing the whole amount prior to company registration.
Joint stock companies can list their shares on the Stock Exchange and are also allowed to issue bonds compared to private companies.
You can also watch our video on the types of companies in Turkey:
Taxation of companies in Turkey
One of the most important aspects related to choosing a type of Turkish company is related to the taxes it will pay. The taxation system in Turkey is a 3-tiered one under which the following taxes apply:
- the direct taxes which apply to individuals and companies;
- the taxes on expenditure;
- the taxes on wealth.
Out of these, companies will be imposed with the corporate tax which is levied at a rate of 20%. Sole traders and the partners in commandite companies, on the other hand, will be levied the personal income tax which applies progressively and ranges between 15% and 35%.
We mentioned earlier that Turkey has signed various double taxation treaties which are meant to protect foreign investors doing business here from paying the same tax twice: once in Turkey and once in their country of residence. These treaties usually provide for various tax exemptions and reductions and thus contribute to a very advantageous taxation system imposed on foreign entrepreneurs with businesses here.
Our company registration agents in Turkey can help you incorporate a company and register it for VAT purposes. If you would like to buy a shelf company in Turkey, our experts can provide you with special services for this purpose, so do not hesitate to contact us. You can rely on us for more information on the available types of Turkish companies and assistance in selecting the right business entity based on your needs and requests, as well as for tailored services for registering a company.
Call us now at +90 532 351 66 77 to set up an appointment with Cagatay Altunsoy, one of our specialists in company formation in Istanbul, Turkey. Alternatively you can incorporate your company without traveling to Turkey.
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