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Company & Business Formation

The Complete Guide to Company Formation in Turkey

When it comes to establishing a business in Turkey, the process of company formation is crucial. Whether you are a foreign investor or a local entrepreneur, understanding the steps and requirements for setting up a company in Turkey is essential. In this comprehensive guide, we will explore the various types of companies, the necessary steps for company formation, and the ongoing compliance obligations. By the end of this guide, you will have a clear understanding of the company formation process in Turkey and be well-equipped to start your own business.

Types of Companies in Turkey

Before diving into the company formation process, it's important to familiarize yourself with the different types of companies that can be established in Turkey. The two most common legal structures for company formation in Turkey are limited liability companies (LLCs) and joint-stock companies (JSCs). Let's take a closer look at each of these company types:

Limited Liability Companies (LLCs)

A limited liability company is a popular choice for small to medium-sized businesses in Turkey. It offers flexibility, simplicity, and limited liability for its shareholders. To establish an LLC, a minimum of one shareholder is required, and the company must have a minimum capital of TL 10,000. At least 25% of the capital must be paid during incorporation. LLCs are corporate taxpayers in Turkey, and the liability of the shareholders is limited to their investment in the company.

Joint-Stock Companies (JSCs)

Joint-stock companies are more suitable for larger businesses with publicly traded shares. They require a minimum of one shareholder and a minimum capital of TL 50,000. Similar to LLCs, at least 25% of the capital must be paid during incorporation. JSCs are also corporate taxpayers in Turkey. One key advantage of JSCs is that they allow for easier access to capital through the issuance of shares.

Apart from LLCs and JSCs, there are other business setup options in Turkey, such as branch offices and liaison offices. These types of companies have their own specific requirements and advantages, which we will explore later in this guide.

Determining the Type of Company

One of the first steps in the company formation process is determining the type of company you wish to establish. This decision will depend on factors such as the size of your business, the nature of your activities, and your long-term goals. Here are the main types of companies to consider:

Sole Proprietorship: This is the simplest form of business structure, where an individual owns and operates the business. The owner has unlimited liability and is personally responsible for all debts and obligations.
Partnership: A partnership is a business structure where two or more individuals share ownership and responsibilities. There are several different types of partnerships, including general partnerships, limited partnerships, and limited liability partnerships.
Limited Liability Company (LLC): As mentioned earlier, an LLC offers limited liability to its shareholders. It is suitable for small to medium-sized businesses and requires a minimum capital of TL 10,000.
Joint-Stock Company (JSC): JSCs are more suitable for larger businesses and allow for the issuance of publicly traded shares. They require a minimum capital of TL 50,000.
Branch Office: Foreign investors can establish a branch office in Turkey to engage in activities within the country. Branch offices are extensions of their parent companies and operate under their name. They have no separate legal personality.
Liaison Office: A liaison office represents its parent company's business activities in Turkey. It is not allowed to engage in profit-generating activities but serves as a practical way to enter the Turkish market.

Company Formation Roadmap in Turkey

Now that you have a clear understanding of the different types of companies, let's delve into the step-by-step process of company formation in Turkey. This roadmap will guide you through the necessary procedures and requirements to establish your business successfully.

Determine the Company Name: Select a unique and distinguishable name for your company. Check the availability of the chosen name with the appropriate government authorities, such as the business registrar or corporate filing office. Make sure the name complies with naming guidelines, which may include restrictions on the use of certain words or the requirement to include specific terms based on the company type.
Registered Office and Address: Determine the registered office address for your company. This is the official address where legal notices and correspondence will be sent. In Turkey, you are required to have a physical address within the jurisdiction. You should also appoint a registered director or agent who will receive official communications on behalf of the company.
Prepare Articles of Incorporation or Formation: Prepare the necessary legal documents, such as articles of incorporation. These documents outline the basic structure and characteristics of the company. Include information such as the company name, registered office address, purpose of the company, details of shareholders/members, share/membership structure, and any other required information. The articles of incorporation must be notarized and filed with the Trade Registry Office.
Identify Shareholders or Members: Identify and document the shareholders/members of your company. Specify the ownership percentages or units held by each shareholder/member and outline the rights and responsibilities associated with their ownership.
Register with Government Authorities: Register your company with the appropriate government authorities or regulatory bodies. This typically involves submitting the necessary incorporation documents, along with the required fees, to the relevant business registrar or corporate filing office. In Turkey, the company formation process involves registering the company with the local Trade Registry Office, which operates under the Ministry of Commerce.
Obtain Business Permits and Licenses: Research and obtain the necessary permits, licenses, or certifications required to operate your business legally. The specific requirements vary depending on factors such as the nature of your business, industry, location, and applicable regulations. Certain sectors, such as defense, energy, and finance, may have additional regulations and restrictions on foreign ownership. It is essential to research and understand the specific regulations that apply to your industry or sector.
Intellectual Property Protection: Protecting intellectual property (IP) rights is important for businesses in Turkey. Trademarks, patents, copyrights, and industrial designs can be registered with the Turkish Patent and Trademark Office to safeguard your company's unique assets and innovations.
Tax Registration: Register your company for taxation purposes with the appropriate tax authorities. Obtain a tax identification number or any other required tax registrations based on the tax laws of your jurisdiction. Companies in Turkey are subject to various taxes, including corporate income tax, value-added tax (VAT), and payroll taxes. It is crucial to understand the tax obligations, maintain proper accounting records, and file tax returns accurately and on time.
Social Security Registration: Companies must register their employees for social security with the Social Security Institution (SGK) and make regular contributions on their behalf.
Open Bank Accounts: Open a business bank account in the name of your company. This account should be separate from your personal accounts to maintain clear separation between personal and business finances.

Ongoing Compliance and Obligations

Once your company is successfully formed, you must comply with ongoing legal and regulatory obligations to operate your business legally and avoid any penalties or fines. These obligations include:

Annual Reporting: File annual reports with the relevant authorities, such as the Trade Registry Office. These reports provide updates on the company's financial status, ownership structure, and any changes in its operations.
Corporate Governance: Comply with corporate governance requirements, such as holding shareholder or member meetings, maintaining company bylaws or operating agreements, and documenting major decisions or resolutions.
Renewal of Permits and Licenses: Renew business permits, licenses, and registrations as required by the relevant authorities. Stay informed about changes in laws, regulations, or compliance requirements that may affect your business and take appropriate actions to remain compliant.
Employment Compliance: When hiring employees in Turkey, it is important to comply with labor laws and regulations. This includes adhering to employment contracts, minimum wage requirements, working hours, employee benefits, termination procedures, and occupational health and safety standards.
Sector-Specific Regulations: Comply with any industry-specific regulations or licensing requirements that apply to your business. Depending on the nature of your business activities, you may need to obtain specific licenses or permits from industry-specific regulatory authorities. This can include sectors such as construction, healthcare, tourism, manufacturing, and transportation. Compliance with relevant regulations is crucial to operate legally and avoid fines.
Tax Compliance: Fulfilling tax obligations is essential for ongoing compliance. This includes filing regular tax returns, making tax payments, and maintaining proper accounting records. Stay updated on changes in tax laws and regulations to ensure accurate and timely tax compliance.

Conclusion

In conclusion, the process of company formation in Turkey involves several important steps and requirements. From determining the type of company to registering with government authorities, obtaining permits and licenses, and ensuring ongoing compliance, each stage plays a crucial role in establishing and operating a successful business in Turkey. By following this comprehensive guide, you will be well-prepared to navigate the company formation process and embark on your entrepreneurial journey in Turkey. Remember to consult legal professionals, such as Lex Lata Consulting and Law Firm Turkish lawyers, who have extensive experience in company formation and can provide valuable guidance throughout the process.