Turkey: Setting Up A New Company And Company Types In Turkey

Last Updated: 10 July 2017
Article by Canan Sahin

COMPANY TYPES

There are corporate and non-corporate forms for companies under the Turkish Commercial Code (TCC), which indicates that companies may be established under the following types:

a. Corporate forms


1.    Joint Stock Company (JSC)
2.    Limited Liability Company (LLC)
3.    Cooperative Company

b. Non-corporate forms

1.    Collective Company
2.    Commandite Company

Companies may be established according to these five different types, JSC and LLC are the most common types chosen not only in Turkey, but also in the global economy.  Therefore we will explain the details of the most commonly preferred types of companies which are 'Joint Stock Company' and 'Limited Liability Company'. 

The liability of shareholders is limited to the share capital subscribed to in the capital companies. In both JSC and LLC types, fields of activity, operations, and other corporate matters are governed by their articles of association (similar to certificate of incorporation and bylaws in Europe) within the framework set out in the Turkish Commercial Code (the "TCC").

The main difference between the two company types lies in liability perspective. Although they are both capital companies with responsibility limited with their capital payments of their shareholders, the LLC shareholders are also liable with their personal assets for State related debts such as taxes and social security premium payments for employees. 

Joint Stock Company (JSC);

At least one shareholder that can be real person or legal entity and a minimum capital of TRY 50,000 are mandatory. At least 25 % of the nominal value of the shares subscribed in cash must be paid before registration with Trade Registry.

Joint Stock Company is governed by board of directors and they have been granted the authority to represent and bind the company. Board of directors can be constituted by one or more member and board members no longer need to be shareholders. Legal entity can be a board member too, but it must be represented by real person. There are no restrictions on nationality or residence of board members.

Limited Liability Company(LLC);

It is the company established with participation of minimum 1 and maximum 50 real person or legal entities. The liability of the shareholders is restricted only to the capital subscribed by the shareholder however representatives and shareholders could be held liable personally concerning uncollected public debts (e.g. social security premiums, taxes and etc.) of the company. Minimum capital of 10,000 TL is mandatory.

Limited Liability Company is governed by managers. At least one member of the partners must have right to represent and bind the company. Legal entity can be a manager, but must be represented by real person and that person must be registered. There are no restrictions on nationality or residence of manager. 

TAXATION;

Dividends distributed to individuals and non-resident corporations which have interest in Turkish companies are subject to withholding tax at % 15. Non-resident shareholders can benefit from reduced withholding tax on dividends if they qualify to benefit from double taxation treaty provisions that prevail for a lower withholding tax than 15%. Dividend distributions to Turkish resident companies are not subject to withholding tax.

Tax losses can be carried forward for five years as long as they have been shown in corporate tax return separately for each year, but they are not carried back except in the case of liquidation.

PROCEDURE OF ESTABLISHING A COMPANY 

Despite the fact that company establishing procedure may vary due to the type of entity (especially for branch and liaison offices) the procedure for incorporation may be summarized below:

1.    Submit the memorandum and articles of association online at MERSIS and obtain a potential TIN (MERSIS),
2.    Execute and notarize company documents (NOTARY),
3.    Deposit a percentage of capital to the account of the Competition Authority (HALK BANKASI), 
4.    Deposit at least 25% of the startup capital in a bank and Obtain proof thereof (BANK),
5.    Apply for registration at the Trade Registry Office (COMMERCIAL REGISTRY),
6.    Certify the legal books by a Notary Public (NOTARY),
7.    Follow up with the tax office on the Commercial Registry's company establishment notification (TAX OFFICE). 

It should be noted that all the necessary documents issued and executed outside Turkey must be notarized and apostilled or alternatively ratified by the Turkish consulate where they are issued. The original executed, notarized and apostilled documents must be officially translated and notarized by a Turkish notary.
Commercial Title of the Company;

When you decide to set up a new company, you need to determine the commercial title which has to be distinguishing from other companies . The corporate title is also similar and it consists of two parts which are the core and the annexes. The core is the mandatory wording pointing out the type of the company and the subject matter (e.g. Tourism, Construction). 
Annexes are additional words and expressions subject to discretion of a merchant and/or shareholder (e.g. Ahmet Kalın Construction Joint Stock Company).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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