10.07.2023

Tips for Choosing the Right Legal Entity in Turkey


When registering your company with the authorities, multiple pointers must be kept in mind before deciding the right legal entity that best suits your business. Getting professional help is the most sensible thing one can do and investing in this service can reduce the complexities and stress of such a process.

Decide on The Company Type You Want to Create

This article will weigh the pros and cons of limited liability companies (LLCs) and joint stock companies. These are the most common types of companies.

Without any Turkish members contributing any cash or management, a Turkish firm may be founded with 100% foreign capital.  All corporate structures are available to foreign investment; however, joint stock or limited liability firms, together with branches and liaison offices, are frequently favoured by foreign investors. The company would be considered Turkish and hence free from any kind of regulatory discrimination.

Limited Liability Companies (LLC)

An extremely common company structure, particularly for new firms, is the limited liability corporation (Ltd.). This is best for small to medium-sized businesses. An LLC includes a minimum of one to fifty shareholders and liability is measured according to shares in the company. The same goes for dividends. To develop an LLC in Turkey, the minimum required capital is TRY 50,000 and the value per share cannot be less than TRY 25. This figure must be paid with a time period of 24 months.

When developing a company, certain documentation must be completed. In Turkey, an Article of Association is required. This covers all details such as the title of the company, business purpose, list of shareholders, address, the amount of capital, and finally the amount subscribed by each shareholder. An LLC is run by managers, and at least one partner must legally represent the company to ensure smooth business functioning.

Joint Stock Companies

Joint stock firms offer several noteworthy benefits, such as the ability to transfer shares tax-free under certain circumstances. An Article of Association must also be signed here however more terms need to be covered. The Article of Association includes all the terms mentioned above when LLCs were talked about along with the following ones, the nominal value of each share, the mode and terms of payments, the mode of convening the general meetings, dates and times of meetings, and conditions concerning voting. This must be signed by the shareholders in the presence of a trade registry officer.

At least 50.000 Turkish Liras are required, and the value of a share cannot be less than 0.001. Before registration with the Trade Registry, at least 25% of the subscribed shares' nominal value must be paid in cash, and the rest like mentioned above, with the two year time frame. A point to be remembered here is that partner is responsible for company debt according to share of capital invested into the company. Furthermore, If the shareholder holds shares for 2 years, the partner does not need to pay any income tax for selling his shares.

Joint stock companies are preferred by start-ups and those planning exit or share transfer in the future. Simply because it is easier to transfer shares while also maintaining the anonymity of its partners as the company can create stock certificates.

Tips When Deciding What Company Type to Open

An operating bank account is vital when opening a joint stock company as without that you won't be able to open a joint stock firm. If you don't have one then perhaps go for an LLC instead. Joint stock companies have more difficult criteria to meet as they ask for a lot more. Consider this when registering your company.

Once the company is formed, having someone on board who has financial expertise on these things, we'll be happier to help. Ready to register your company hassle-free? Start with our Turkish Business Starter today and let our experts handle the process for you!

When registering your company with the authorities, multiple pointers must be kept in mind before deciding the right legal entity that best suits your business.