Company Types in Turkey
The first thing an entrepreneur should be aware when entering Turkish business life is the types and main characteristics of different types of the companies in Turkey. Turkish Commercial Code (‘TCC’) defines five different company structures and they are classified in a restrictive manner: 1) Limited Liability Company 2) Joint Stock Company 3) Commanded Company 4) Collective Company and 5) Ordinary Partnership.
Joint stock companies and limited companies are the most common type of companies in Turkey. Approximately 82% of all companies are limited companies, while 13% are joint stock companies and 4% are cooperatives. The total of collective and limited partnership companies is around 1%. The reasons why limited liability companies and joint-stock companies are preferred more as in the whole world are various tax advantages and limited liability of the shareholder on the company. The ordinary partnerships are not considered legal entities even though their existence is not forbidden. Therefore, in this article, we will examine the two most common types of companies in Turkey.
In terms of application for the establishment the company, the processes are similar for Joint Stock Company and Limited Liability Company. In both company types, after the arrangement of the Company contractor Articles or Association (explaining their will to establish a company), the registration application is made to the Trade Register, in the place where the company's headquarters are. Company obtains legal personality by registering with the trade registry.
Differences Between a Joint Stock Company and a Limited Liability Company
1-) Number of Shareholders
Joint stock companies and limited liability companies may both be established with a single shareholder. In joint stock companies, there is no limitation as to the number of partners however limited liability companies are restricted by 50 maximum partners.
2-) Responsibilities of Shareholders
In joint stock companies, shareholders liabilities regarding corporate debts are limited. The partners are responsible according to the ratio of capital they have committed and only to the company. The shareholders of joint stock companies which are not members of the board of directors cannot be held responsible of the companies’ tax and/or Social Security Institution premium debts which could not be collected from the company itself.
Limited Liability Company shareholders, unlike Joint Stock Company shareholders, may be liable (with their personal assets) according to ratio of the capital they are committed to invest to government authorities for taxes, duties and charges without any limitation with proportion to their capital contribution if the company cannot make the required payments.
The minimum capital amount of joint stock companies is 50,000 TL, and in non-public joint stock companies, the minimum capital amount is 100,000 TL if the registered capital system is accepted.
The minimum capital amount of a limited company is 10,000 TL.
4-) Public Offering
Under Turkish Law, only joint stock companies are entitled to conduct public offerings.
5-) The Income Tax of Share Sales
If a share of a joint stock company is sold after 2 years of its issuance, the income cannot be taxable.
No matter how many years passed after the Company shares have been transferred, it is subject to Income Tax as a gain value increase.
6-) Share Transfer Requirements
The transfer of joint stock companies share is not required to be notarized or announced by Turkish Trade Register Gazette. In limited liability companies, transfer of shares is subject to notarized transfer agreement.
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