Choosing the Ideal Business Structure in Turkey
Starting a business in Turkey as a foreign national can be an exciting opportunity, but it requires understanding the legal framework and company structures available. Whether you’re interested in forming a Sole Proprietorship, Limited Liability Company (LLC), or Joint-Stock Company (JSC), this guide will walk you through the process step by step. From meeting residency and capital requirements to securing work and residence permits, we cover everything you need to know to successfully establish your business in Turkey. Whether you’re a small entrepreneur or looking to scale a larger operation, Turkey offers flexible options for foreign business owners.
1. Sole Proprietorship: Simplicity at Its Best
For entrepreneurs seeking a straightforward setup, a sole proprietorship might be the perfect choice. This business type is ideal for small-scale operations and requires minimal paperwork. However, it’s important to note that only individuals with Turkish residency can establish a sole proprietorship.
Key Advantages:
– Easy and quick registration process.
– No minimum capital requirement.
– Total control over business decisions.
Considerations:
– The business owner is personally liable for all debts.
– Requires a physical or virtual office address.
A major benefit is the ability to use virtual office services, like those offered by Workon, which eliminates the need for a physical office and withholding tax while streamlining legal correspondence.
2. Limited Liability Company (LLC): The Popular Choice
The Limited Liability Company (LLC), known as “Limited Şirket,” is one of the most common choices for both local and foreign investors. It strikes a balance between flexibility and legal protection, making it suitable for businesses of all sizes.
Who Should Choose an LLC?
– Businesses looking for liability protection.
– Entrepreneurs planning to operate with multiple shareholders (up to 50).
– Foreign investors who want full control without requiring Turkish partners.
Legal Requirements:
– Minimum capital: TRY 50,000.
– A single shareholder and director are sufficient (can be the same person).
– A registered office address is mandatory.
The LLC structure allows you to expand operations without overwhelming complexity. Additionally, shareholders’ liabilities are limited to their contributions, protecting personal assets.
3. Joint-Stock Company (JSC): Ideal for Growth and Investment
For larger operations or businesses seeking external funding, a Joint-Stock Company (JSC) offers more flexibility and scalability. This structure is favored by companies planning to go public or attract significant investment.
Why Choose a JSC?
– Ability to issue shares to raise capital.
– No maximum limit on the number of shareholders.
– Easier transfer of shares compared to LLCs.
Requirements:
– Minimum capital: TRY 250,000, with 25% deposited upfront during registration.
– Requires a board of directors and regular general meetings.
While a JSC offers substantial advantages, its operational complexity and higher administrative costs mean it’s better suited for companies with long-term growth ambitions.
4. How to Decide on the Right Structure
When deciding which company type is right for your business, consider the following:
– Scale of Operations: Smaller businesses benefit from the simplicity of sole proprietorships or LLCs, while larger companies aiming for investment should consider JSCs.
– Liability Protection: If personal asset protection is important, LLCs and JSCs are better options.
– Capital Requirements: Ensure you meet the minimum capital thresholds for LLCs and JSCs.
5. Practical Insights for Foreign Entrepreneurs
– Residency Matters: Sole proprietorships require a Turkish residence permit, while LLCs and JSCs don’t have this restriction.
– Work Permits: New companies can bypass the 5-to-1 employee rule by depositing TRY 500,000 in their company account for work permit approval.
– Banking Support: Opening a business bank account can be a hurdle, but partnering with services like Workon simplifies the process.
Final Thoughts: Your Business, Your Choice
Selecting the right company type is a critical decision that impacts your business’s operations, liability, and growth potential in Turkey. Whether you’re seeking simplicity with a sole proprietorship, flexibility with an LLC, or scalability with a JSC, understanding the nuances of each structure ensures you make an informed choice.
Where to Start?
Choosing the right company type is crucial when starting a business in Turkey. With various options available, understanding which structure suits your needs is key to success. Whether you’re looking to register a limited liability company, joint stock company, or another type, Workon is here to guide you through the process.
Our Business Starter Package will help you navigate the options, ensuring you choose the best company type for your business goals. Plus, you’ll receive a free consultation to ensure you’re making the right decision from the start.
Choosing the right company type depends on your business goals, size, and future plans. A Sole Proprietorship suits small-scale operations with minimal legal complexity. An LLC is ideal for mid-sized businesses seeking flexibility and liability protection. A JSC is the best choice for larger ventures aiming for scalability or public investment. Understanding your long-term objectives will help you decide the most suitable structure.
In an LLC, the liability of shareholders is limited to their capital contributions, protecting personal assets from business debts. In contrast, a Sole Proprietorship does not offer such protection, as the owner is personally liable for all business obligations, making liability a critical factor in your decision.
Yes, it’s possible to set up a company in Turkey remotely with the help of a local representative or a trusted partner like Workon. Through a power of attorney, professionals can handle registration, documentation, and legal formalities on your behalf, streamlining the process even if you’re abroad.
For Sole Proprietorships, a Turkish residence permit is mandatory. LLCs and JSCs allow greater flexibility as they don’t require residency for establishment. Additionally, foreign employees in LLCs and JSCs can secure work permits with fewer restrictions by meeting certain conditions, such as capital deposits or Turkish citizen employment quotas.
A Joint-Stock Company allows for unlimited shareholders and the ability to issue public shares, making it an excellent choice for businesses seeking external funding or planning an IPO. It also simplifies the transfer of ownership, provides tax advantages on capital gains after two years, and offers robust scalability for ambitious growth plans.
