Establishing a company is an important step in business life for many people who act with the spirit of entrepreneurship or who want to put an existing business into a legal framework. The most commonly preferred company types in Turkey are Limited Liability Company (Ltd. Şti.) and Joint Stock Company (A.Ş.). Both company types have their own advantages, disadvantages and establishment processes. Choosing the right type of company and completing the establishment procedures completely is of great importance for the future of the business and legal responsibilities. Company establishment is carried out in accordance with the provisions of the Turkish Commercial Code No. 6102 (TCC) and related legislation.
Legal Framework: Company Types and Legal Basis
The Turkish Commercial Code divides companies into two main categories: sole proprietorships and capital companies. Limited liability companies and joint stock companies are included in the capital companies group. In capital companies, the liability of the shareholders is limited to the capital they have contributed to the company; in other words, the shareholders are not held liable for the debts of the company with their personal assets.
Turkish Commercial Code – Article 329: Joint Stock Company
A joint stock company is a company whose capital is fixed and divided into shares, and which is liable for its debts only with its assets. Shareholders are liable to the company only for the capital shares they have subscribed.
Turkish Commercial Code – Article 573: Limited Liability Company
A limited liability company is a company established by one or more real or legal persons under a trade name, whose capital is fixed and divided into shares, and which is liable for its debts only with its assets. The liability of the shareholders is limited to the capital shares they have subscribed.
Main Differences Between Limited Liability Company and Joint Stock Company
| Feature | Limited Company (Ltd. Şti.) | Joint Stock Company (A.S.) |
|---|---|---|
| Number of Partners | Minimum 1, maximum 50 partners | At least 1 partner (natural or legal person) |
| Minimum Capital | 50.000 TL (not required to be paid in cash, commitment is sufficient) | 250.000 TL (at least 25% of which must be paid at the organisation) |
| Liability of Partners | Only the assets of the company are liable for the debts of the company; shareholders are liable up to their capital share. Shareholders may be liable for public debts (tax, SSI) in proportion to their capital shares. | Only the assets of the company are liable for the debts of the company; shareholders are liable only for their capital shares. Shareholders are not liable for public debts. |
| Governing Body | Director or Board of Managers | Board of Directors |
| Share Transfer | More difficult with notarisation and decision of the shareholders’ meeting | Easier with share certificate transfer |
| Establishment Cost | Usually lower | Usually higher |
| Prestige | Less than a joint stock company | Higher prestige and corporate image |
Company Establishment Process (General Steps)
Limited and joint stock company incorporation processes include similar steps, but there are some differences:
- Determination of Company Type: The type of limited liability or joint stock company is selected in line with the nature of the business, number of partners, capital needs and objectives.
- Preparation of the Articles of Association: The “articles of association” containing basic information such as the company’s title, head office, field of activity, capital, shareholders, share ratios, management bodies and representation form is prepared. This agreement is a constitution for the company. It is very important that the articles of association comply with the legal legislation and be complete.
- Application via MERSIS: The articles of association is prepared and approved online through the Central Registry System (MERSIS) of the Ministry of Trade.
- Notary Approval: The articles of association is signed and approved by all partners or their authorised representatives at a notary public.
- Competition Authority Share Payment: The share of the Competition Authority at the rate of four per thousand of the company capital is deposited into the relevant bank account.
- Opening a Bank Account and Blocking the Capital (For Joint Stock Companies): In joint stock companies, at least 25% of the subscribed capital is deposited into a bank account opened in the name of the company and a letter is received from the bank stating that the capital is blocked. In limited liability companies, it is not compulsory to pay the capital at the time of incorporation, the commitment is sufficient.
- Registration and Announcement to the Trade Registry Office: Notarised articles of association, bank blocking letter (for A.Ş.), Competition Authority share receipt and other necessary documents are submitted to the Trade Registry Directorate in the place where the company’s head office is located. After examining the documents, the Directorate registers the company and announces it in the Turkish Trade Registry Gazette. With the registration, the company becomes a legal entity.
- Tax Office and SSI Transactions: After the company is registered, the tax plate is obtained and the workplace notification is made to the Social Security Institution (SSI).
- Book Certification: Legal books (journal, general ledger, inventory book, etc.) are notarised.
Things to Consider When Establishing a Company
- Choosing the Right Company Type: The most appropriate company type should be selected by taking into account the size of the business, number of partners, capital requirement, liability risk and future growth targets.
- Detailed Preparation of the Articles of Association: The articles of association is the basic document that determines the entire functioning of the company. Clear regulation of issues such as relations between partners, profit distribution, share transfer, management powers prevents future disputes.
- Tax and Legal Consultancy: Company establishment and subsequent processes involve many details in terms of tax and law. Getting professional support from a financial advisor and a lawyer is critical in terms of managing the process correctly and preventing possible mistakes.
- Trade Name Research: The chosen company name must not have been registered before and must be in accordance with the law. A title search can be made from the Turkish Patent and Trademark Office.
- Capital Adequacy: Especially in joint stock companies, it is important to comply with the minimum capital requirement and to pay the capital on time.
Establishing a company is an exciting process for those who want to start a commercial life, but it is a process that requires legal and administrative caution. Limited liability companies and joint stock companies are the most preferred capital companies in Turkey and each has its own advantages and establishment procedures. Preparation of the articles of association in full and in accordance with the law, application through MERSIS, notary approval, registration with the Trade Registry Directorate and tax / social security transactions are the basic steps of the establishment process. Choosing the right type of company, preparing the articles of association in detail and obtaining professional legal and financial advice are vital for the establishment of the company on solid foundations and its future success.