What Are the Different Legal Entities in Turkey?

Embarking on a business venture in Turkey presents enticing opportunities for both local and international entrepreneurs. Turkey's geographical positioning at the crossroads of Europe and Asia, combined with a vibrant economic landscape and robust growth potential, makes it an ideal location for establishing a company. This guide will delve into the essentials of setting up a business in Turkey, focusing on the legal structures available, the process of registration, and the incentives provided by the Turkish government to foster foreign investment.

Legal Structures for Establishing a Business in Turkey

Types of Corporate Entities

Under the principles of non-discrimination and equal treatment enshrined in Turkish foreign investment law, international investors enjoy the same status as domestic investors. A company can be established with 100% foreign capital, without any requirement for Turkish capital or management participation. Corporate structures are regulated by the Turkish Commercial Code No. 6102, enacted in 2011.

All corporate forms are open to foreign investment; however, joint-stock companies (Anonim Şirket) and limited liability companies (Limited Şirket) are the preferred choices for many international entrepreneurs.

Joint-Stock Company (Anonim Şirket)

A joint-stock company can be founded for any legal economic purpose. The minimum required capital is 50,000 TRY, with shares having a nominal value of at least 0.01 TRY each. At least 25% of the capital committed in cash must be paid before registration in the Trade Registry. The company's bylaws must outline the trade name, list of shareholders, address, business objective, total capital, and the amount committed by each shareholder, among other details.

Limited Liability Company (Limited Şirket)

This type of company can be started with at least one partner (either real or legal persons) and can also be established for any legal economic purpose. The minimum capital requirement is 10,000 TRY, with a minimum share value of 25 TRY. The entire capital must be committed unconditionally by the shareholders.

Branches and Representative Offices

Foreign companies looking to open branches in Turkey must obtain permission from the Ministry of Trade and Industry. Branches are not separate legal entities and must operate under the same articles of association as the parent company. There is no minimum capital requirement for branches, allowing them some autonomy in external operations while being financed by the headquarters.

Representative offices are allowed to conduct non-commercial activities such as gathering information about investment opportunities in Turkey and conducting market feasibility studies. These offices must obtain permission from the Directorate of Foreign Investments, and while they are exempt from income tax, all expenses must be paid in foreign currency from abroad.

Incentives for Foreign Investors

The Turkish government offers various incentives for foreign investors, including tax benefits and comprehensive support in navigating through the legal framework. These incentives make Turkey an attractive destination for tapping into the local market or using the country as a gateway for regional and international trade.

By understanding these foundational aspects, entrepreneurs can better prepare to enter the Turkish market, ensuring compliance with legal requirements and taking full advantage of the benefits available to foreign investors. Establishing a business in Turkey not only promises substantial economic returns but also positions investors strategically on the global map.

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