Setting up a company in Turkey

Introduction

A business that intends to operate in Turkey needs to know the type of company it should form as well as the requirements needed to establish that company. Under the Turkish Commercial Code Law No. 6102 (TCC), companies can be classified as either a capital or a non-capital company. It is important to consider the particulars of a company type because while some individuals may decide to set up a small or medium-sized company, others may opt for larger corporations.

This article will explain the concept of commercial enterprises and the different types of corporations pursuant to the provisions of the TCC.

1. I) Commercial Enterprise

Article 11 of the TCC a commercial enterprise as an undertaking that engages in activities whose aim is to secure income in a continuous and independent manner and at such a level as to exceed the limits prescribed for tradesmen and artisans. In other words, an enterprise’s main characteristics involve the performance of economic activities (aim of income), continuity and independence (this means the company is able to take independent decisions in the company’s affairs). The TCC also states that a commercial enterprise is a legal unity, which allows it to be recognised as a subject of legal transactions in law. Therefore, commercial enterprises can be transformed into commercial companies like corporations.

1. Branches and Centres

Article 40 of the TCC states that all commercial enterprises must have a main or central office, which should be registered with the Trade Registry. This office is where the legal, administrative and commercial activities of the company are executed. Certainly, this place can differ from the place where other technical activities take place, especially where a company abroad prefers to manage their affairs locally though having a branch set up.

1. II) Corportation Types: Capital Company vs Non – Capital Company

Under the TCC, companies are classified into two main groups:

• Capital companies, including:
  • joint stock companies (JSCs);
  • limited liability companies (LLCs); and
  • commandite partnerships with a share capital divided into shares in which the shareholders have limited liability.
• Non-capital companies (in which shareholders have unlimited liability), including:
  • collective partnerships; and
  • commandite partnerships.

JSCs and LLCs are the most common types of capital companies in Turkey. There are some similarities in terms of their corporate structure, such as:

• Single shareholder: LLCs and JSCs can be established with a single shareholder.
• Liability: The liability of shareholders of JSCs and LLCs is limited to their capital contribution based on the corporate veil principle. There are however, some exceptions to public debts or unpaid taxes that can lead to personal liability of directors or shareholders.

However, the advantages of establishing a JSC and LLC differ. For instance, an LLC can be used to set up holding companies and is also managed by managers who are chosen from among non-shareholders, real persons and/or legal entity shareholders. A JSC however, are more suited for large entities such as financial institutions are managed by the board of directors.

Shareholders of collective partnerships and commandite partnerships (personal companies) have unlimited liability for the company’s debts and undertakings.

Conclusion

Because the corporations described above differ from one another in several key respects, business that wish to do business in Turkey are free to choose from any of the structures provided that their business needs and purposes are met.