Process of Establishing a Company in Turkey

Turkey, with its strategic position bridging East and West and its dynamic business opportunities, is a highly attractive country for foreign investors. But how easy is it for foreigners to do business in Turkey?

First off, the establishing a company in Turkey process is quite straightforward. In fact, the process for foreigners to start a business follows the same rules as for local entrepreneurs. You can choose between different types of companies, such as a sole proprietorship, limited liability company, or joint-stock company.

Typically, the most preferred option is a limited liability company because it’s more flexible and easier to manage. To get started, you need to apply to the Trade Registry Office, but don’t worry, it’s not as complicated as it sounds!

Foreign investors also have some formalities to handle in order to do business in Turkey. For example, to legally work and live in Turkey, you need to obtain a work permit. These permits allow  you to stay in the country and run your business. Usually, this process starts after your company is established, so you can take care of these while focusing on your business. The advantages of doing business in Turkey are countless! A large market, young and dynamic population, affordable labor, and government incentives make Turkey an incredibly attractive place to start a business. Moreover, Turkey’s economic growth potential is truly promising for long-term investments.

In conclusion, for foreigners, doing business in Turkey is not only possible but also filled with opportunities. With the right steps, establishing a company in Turkey can be a smooth process, and you can successfully run your own business in this amazing country.

What Are the Legal Requirements for Establishing a Business in Turkey?

Starting a business in Turkey presents significant opportunities, especially for entrepreneurs coming from abroad. With its strategic location, vast market, and young population, Turkey has become one of the most attractive countries for investors. However, for foreigners looking to establish a business in Turkey, the legal requirements often raise questions.

One of the first steps is deciding which type of company you want to establish. Your options include sole proprietorship, limited liability company, and joint-stock company. The most commonly preferred structure is the limited liability company because it is easy to establish and offers broader management flexibility. We will discuss the characteristics of these company types further in this article.

As for the legal requirements:

• Capital Requirement: Every company needs a certain amount of capital to start operations. For example, the minimum capital for a limited liability company is 50,000 TRY. You need to determine the appropriate capital for your company and if you are establishing a Joint-Stock Company, you need to block this amount in a bank as part of the process.

• Tax and Accounting Process: Tax regulations apply equally to both local and foreign entrepreneurs. After establishing your company, you must obtain a tax number and hire an accountant to regularly prepare tax declarations and manage your accounting processes.

• Work and Residence Permit: If you plan to start a business in Turkey, you will need to get either one of these permits to legally operate your business. Once your company is established, you can apply for a work permit and begin managing your business smoothly.

Which Company Type Should You Choose in Turkey?

If establishing a company in Turkey is among your plans, one of the most important things you’ll need to decide is which type of company to choose. While making this decision, you should align your current plans with your future goals. If you are in the decision-making process for establishing a company in Turkey, you may want to consider the following types of companies.

Sole Proprietorship

Sole proprietorships can be established by foreigners who have residency permits in Turkey. They are preferred by small entrepreneurs, and it is the simplest company type when it comes to establishment and maintenance. No minimum capital is required, and the company can be registered entirely online through e-Devlet, Turkey’s official government portal. The requirements are as follows:

• Citizenship or residence permit in Turkey.
• Registered Address: You need to have a legal address in Turkey in order to register a sole proprietorship. You have 3 options:
• You can rent and use a physical office address. The requirement is to pay withholding tax, which is 25% of the rent price.
• You can use your apartment as your legal address. 25% withholding tax applies and tax inspections will be carried out by visiting your home. If you are not present during the inspection, it may cause issues, and you will need to make sure you receive and follow up your legal notifications and mails.
• You can use a virtual office like Workon as your legal address. This way, you won’t have to pay withholding tax, and you won’t have to worry about tax inspections or following up with your legal notifications. We will follow up with your mails and inform you promptly.

When renting and using a physical office address, it’s important to consider the withholding tax, which is calculated as 25% of the net rent. This rate may seem straightforward, but it often causes confusion because it actually corresponds to 20% of the gross rent.

Here’s an example to make it clearer: if your net rent is 10,000 liras, the withholding tax is 25% of that amount, which equals 2,500 liras. When you add this tax to the rent, the total payment becomes 12,500 liras. At this point, the tax you paid (2,500 liras) corresponds to 20% of the gross rent.

Many entrepreneurs mistakenly think the tax is 20% of the net rent, but this is not accurate. To avoid errors, it’s essential to calculate the tax based on the gross amount. Understanding this distinction will help you manage your finances more effectively.

An alternative to this process is opting for a virtual office service, like the one offered by Workon, which provides a registered business address. One significant advantage of this service is that no withholding tax applies. Instead, the service fee is invoiced to you with VAT (Value-Added Tax). Since withholding tax is only used for payments that cannot be invoiced for taxation purposes, this structure simplifies your financial management.

Moreover, the total amount can be treated as an expense, and you can reclaim the VAT paid on the invoice. In short, this setup eliminates any additional tax burden, offering a more efficient and cost-effective solution for businesses.

Limited Liability Company

A Limited Liability Company (LLC), called “Limited Şirket” in Turkey, is one of the most popular company structures both in Turkey and globally due to its simple setup and low maintenance costs. To establish an LLC in Turkey, you need a minimum of one shareholder, one director, and a capital requirement of TRY 50,000. The LLC allows up to 50 shareholders, and as a foreigner, you can be both the sole shareholder and director without needing a Turkish partner or employee. The liability of shareholders is limited to their capital contribution, and the required capital can be deposited in the company’s bank account within 24 months of establishment. Importantly, this capital is not blocked and can be used for business expenses.

Requirements before company establishment:

1. 2 copies of notarized passport translations.
2. Potential tax numbers of each one of the shareholder(s). These are obtained from the Revenue Administration. Shareholders can either apply for these tax numbers by themselves or authorize a local company, such as Workon, to secure the tax numbers on their behalf through a power of attorney.
3. Registered business address.

These documents are submitted via MERSİS, Turkey’s central company registration system, where your articles of association are also prepared. Once the articles are finalized, they are submitted through the system, and an appointment with the Chamber of Commerce is scheduled. You can either attend the Chamber of Commerce in the city where your company will be based, or authorize us to sign the articles of association on your behalf through a power of attorney. The registration process typically takes just 1 hour.

Requirements after company establishment:

1. Signing a signature circular at a notary public within Turkey, or at a Turkish Consulate in any country: This document must be signed within 15 days after your company is registered, if you do not sign it in time, you receive a penalty from the government. It is a document that proves you have the authority to sign any documents on behalf of your company, and displays your signature.
2. Power of attorney for public accounting: This document is necessary for your certified public accountant to handle the formalities on behalf of your company.

In Turkey, having a certified public accountant (CPA) is mandatory for all company owners, regardless of the business type. CPAs handle crucial responsibilities such as tax declarations, bookkeeping, and providing advice on taxation law and financial matters. For Limited Liability Companies (LLC), the minimum legal fee for a public accountant is 3,096 TL per month, plus VAT.

Joint-Stock Company

A Joint-Stock Company (JSC), known as “Anonim Şirket” in Turkey, is ideal for larger-scale operations, particularly those seeking external investment or planning to issue public shares. To establish a JSC, at least one shareholder is required, along with a minimum capital of TRY 250,000, 25% of which must be deposited into a bank during the registration process. The liability of shareholders is limited to their capital contributions, and the JSC can issue both common and preferred shares.

There is no maximum limit on the number of shareholders, and shares can be transferred easily without disrupting business operations, offering a smoother process compared to LLCs. Like LLCs, the company’s debts are separate from shareholders’ liabilities. Additionally, investors can avoid capital gains tax if shares are sold after two years. However, JSCs are required to hold board meetings and general assemblies every two years, adding a level of operational complexity.

Requirements before company establishment: The requirements are the same as Limited Liability Companies, with the only difference being the depositing of 25% of the capital during the registration stage:

Requirements before company establishment:

1. 2 copies of notarized passport translations
2. Potential tax numbers of each one of the shareholder(s). These are obtained from the Revenue Administration, either by the shareholders themselves or by giving a power of attorney to a Turkish company like Workon to obtain it on behalf of the shareholders.
3. Registered Address.

These documents are submitted via MERSİS, Turkey’s central company registration system, where your articles of association are also prepared. Once the articles are finalized, they are submitted through the system, and an appointment with the Chamber of Commerce is scheduled. You can either attend the Chamber of Commerce in the city where your company will be based, or authorize us to sign the articles of association on your behalf through a power of attorney. After this, 25% of the company capital must be deposited into a bank account and the receipt should be given to the Chamber of Commerce to complete the registration.

Requirements after company establishment:

1. Signing a signature circular at a notary public within Turkey, or at a Turkish Consulate in any country: This document must be signed within 15 days after your company is registered, if you do not sign it in time, you receive a penalty from the government. It is a document that proves you have the authority to sign any documents on behalf of your company, and displays your signature.
2. Power of attorney for public accounting: This document is necessary for your certified public accountant to handle the formalities on behalf of your company.

The minimum legal fee for public accounting for a JSC starts at 4,314 TL + VAT monthly.

Work & Residence Permit Processes

Residence Permit: As a business shareholder, whether your company is a joint-stock company or an LLC, you have the right to apply for either a residence permit or a work permit. To apply for a residence permit, your company must be operational. The application cannot be processed if your company is inactive. After registering your company, you will need to visit Turkey, as you can only secure your appointment with the Ministry of Immigration while you are physically in the country. The appointment can typically be arranged within approximately two weeks. You must not leave Turkey for longer than 15 days after securing the appointment and you must attend the appointment in person with your documents. Following the appointment, you can expect a response from the ministry within one to three months.

Work Permit: For a work permit, the requirement is to employ five Turkish citizens for each work permit granted to a foreigner. However, if your company is less than six months old and you deposit 500,000 Turkish Liras into your company’s bank account, you can easily obtain a work permit without needing to hire five Turkish employees.

Once the deposit is made and your documents are submitted, you can obtain your work permit within 2-3 weeks. The permit will be valid for six months or one year, depending on the ministry’s decision. After this period, you can apply to renew the work permit, but you must hire five Turkish workers and pay their insurance fees during the application process. After securing the renewal, you may then adjust your workforce as needed. If the renewal application is not successful, or if you need an easier option, you may consider turning your work permit into a residence permit.

How can I get permanent residency in Turkey?

For foreign entrepreneurs looking to establish a company in Turkey, one of the most important steps is the processes for obtaining work and residence permits. These processes are crucial for fulfilling legal requirements and ensuring that your business operates smoothly.

Work Permit Application

If you wish to live and work in Turkey or plan to visit frequently, you will need to apply for a work permit. The application for a work permit is made after the establishment of your company. You will submit your application to the Directorate General of Migration Management under the Ministry of Interior in Turkey. During your application, you will be required to prepare documents such as your business plan, the scope of the company’s activities, and proof of financial sufficiency.

Completion of Documents and Information

After you have completed your documents for the work permit you should submit your applications to the relevant institutions. The approval of your applications may take a few weeks, so it’s advisable to be patient.

Receiving Permits

Once everything is completed, and your residence permits are approved, you will be able to legally work and reside in Turkey. These permits provide significant convenience for during the establishment and managing your business.

What Is a Business Bank Account for Company Formation? How Is It Opened?

After registering your business, you will need to open a bank account. The banking system is very advanced in Turkey, offering online banking options and the ability to handle your transactions anywhere in the world smoothly. However, opening business accounts can be very challenging for both locals and foreign investors. This is where Workon can assist you with our experience and expertise, even after the bank account is opened, continuing to support you. You can visit a branch of a bank of your choice to open your account or a trusted partner like Workon can open it remotely for you via a power of attorney.

Establishing a company in Turkey as a foreigner can be complex, but with the right guidance, it can be a seamless process. Workon offers expert support to help you navigate the legal requirements, obtain the necessary permits, and set up your business structure—whether it’s a sole proprietorship, LLC, or JSC. From securing your business bank account to ensuring compliance with local regulations, we provide end-to-end assistance tailored to your needs. Contact Workon today and take the first step toward successfully launching your business in Turkey.

Where to Start?

Starting a business in Turkey involves understanding local regulations and legal procedures, but with expert support, it can be a smooth journey. Whether you’re looking for assistance with company registration, ensuring compliance, or setting up your virtual office, Workon is here to provide the guidance you need. Discover our Business Starter Package to get started and receive a free consultation to help you navigate the company formation process.