How to Set up Business in Turkey - Guide to Opening a Company in Turkey for Foreigners

Investors may want to set up a company overseas for various reasons. Fiscal advantages of the relevant country, ease of access to a specific market, favorable laws, the quality and quantity of the workforce, incentives, and other circumstances may be counted among these reasons. On the other hand, companies should not limit themselves to a single region if they wish to grow their business and scale their investments. Turkey, with its growing economy, geopolitical position, and workforce, is a good alternative for companies looking to expand their business. In this article, we will briefly discuss company law in Turkey, then explain the types of companies, and finally, examine the steps on how to set up business in Turkey.

Company Law in Turkey

Company law in Turkey is regulated by the Turkish Commercial Code. Matters such as the establishment, management, change of type, merger, and demerger fall within the scope of company law. Both foreigners and locals can establish and manage companies in Turkey. Foreigners are treated the same as local individuals. Companies in Turkey have separate legal personalities, so shareholders are generally not personally responsible for company debts. Turkey supports the establishment or acquisition of companies by foreigners to attract foreign investment.

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Company Types in Turkey

The types of companies that can be established in Turkey are limitedly listed in the Turkish Commercial Code. Corporations include joint-stock companies, limited liability companies, and limited partnership divided into shares. In these types of companies, shareholders are only responsible for the capital they commit to the company. Personal companies include ordinary limited partnerships and collective companies. In personal companies, shareholders are personally responsible for company debts, so they are usually not preferred by investors.

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How to Set up Business in Turkey

Opening a company in Turkey for foreigners is subject to the same rules as Turkish citizens. The procedures are completed shortly after the preparation of the necessary documents and their submission to the trade registry offices. However, if there are deficiencies, the company establishment application will be rejected, leading to time and money loss. Therefore, it is recommended that individuals wishing to set up a company in Turkey seek assistance from a lawyer. The general steps on how to set up business in Turkey are outlined below:

1. Decide on the trade name

The first thing to do to set up a business in Turkey is to decide on the trade name and type of the company. Since multiple companies cannot be registered under the same name, it is useful to conduct research before starting the establishment procedures. Although business owners can freely choose the trade name, there are some rules to be observed. These rules are regulated in the Turkish Commercial Code and the Regulation on Trade Names. In short, the trade name should not be used by others, should not mislead third parties about the scope, importance, and financial status of the business, should not be contrary to public order, national interests, and morality, and the business subject and company activity in the trade name should be in Turkish.

2. Decide on the type of company

The next step after deciding on the trade name is to decide on the type of company. This issue is closely related to the trade name, as the selected type of company is added to the end of the trade name. Foreigners wishing to set up a business in Turkey generally prefer to establish a limited liability company or a joint-stock company. A single-shareholder joint-stock or limited liability company can be established. Since both limited liability and joint-stock companies are capital companies, the company is primarily responsible for company debts. However, steps should be taken in accordance with the law, as there may be responsibilities in certain matters related to tax and insurance law. It is also recommended to consult a lawyer both during and after the establishment of the company.

Limited liability companies are equivalent to companies in other countries such as Limited Liability Company (LLC), Societas Privata Europaea (SPE), Gesellschaft mit beschränkter Haftung (GmbH), Private Limited Company (Ltd, Limited), Societé à Responsabilité Limiteé (SARL, SàRL), Società a Responsabilità Limitata (Srl), Sociedad Limitada (S.L.), Sociedad de Responsabilidad Limitada (S.R.L., S. de R.L.). Natural or legal persons can be shareholders of limited liability companies. In 2023, the company capital must be at least 10,000 TRY and must be paid within 24 months from the registration of the company. The minimum capital amount is 50.000-TRY by 2024. General assembly approval is required for the transfer of shares in limited liability companies.

Joint-stock companies are equivalent to companies in different countries such as Corporation (Inc., Corp.), Societas Europaea (SE), Aktiengesellschaft (AG), Societé Anonyme (SA), Public Limited Company (plc), Società per Azioni (SpA), Sociedad Anónima (S.A.). Natural or legal persons can be shareholders of joint-stock companies. In 2023, the capital must be at least 50,000 TRY, and 25% must be paid before the registration of the company, and the remaining amount must be paid within 24 months from the registration. The minimum capital amount is 250.000-TRY by 2024. General assembly approval is not required for the transfer of shares in joint-stock companies, and shares can be freely transferred.

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3. Lease or purchase the location where the company will be established

To establish a company in Turkey, an address where the company's headquarters will be located is required. This address can be provided by renting or by acquiring ownership of the immovable property. The prepared commercial lease agreement is submitted to the relevant tax office, and the consistency of the declared address with the address in the lease agreement is checked. Also, taxes to be applied to the lease are determined according to the contract submitted.

4. Obtain a tax number

The tax number is like the identification number for companies or foreigners in Turkey. Therefore, the tax number is used to distinguish between foreign investors or companies. For this reason, one of the requirements for foreigners to establish a company in Turkey is obtaining a potential tax number. To obtain the potential tax number, shareholders must apply to the tax office before starting the procedures and obtain the tax number.

5. Prepare the company documents and contracts

Articles of association are the constitution of the company. These contracts include information such as the company's name, purpose, subject, field of activity, shares of partners, management of the company, representation, and distribution of duties. If there are multiple partners, it is suggested to regulate the relationships between partners. Therefore, the shareholders' agreement should be prepared, taking into account the requests and expectations of the parties, and the will of the parties should be accurately reflected in the agreement.

Turkish institutions ask for Turkish documents. Therefore, foreigners who want to set up a company in Turkey must translate documents such as contracts, passports, signature circulars, and residence permits into Turkish, obtain the apostille if necessary, and notarize them. If the partner is a legal person, documents such as the operating certificate, board resolution approving the establishment, and documents indicating who will represent the company should be prepared, translated, and submitted to the file.

6. Obtain official permits

Some activities, such as operating an exchange bureau, require ministry approval to establish a company. If the establishment of the desired company is subject to the approval of the ministry or other institutions, these permits must be obtained before completing the establishment process.

7. Visit the competent trade registry office for establishment

After applying online, depending on the type of company, the required documents are taken to the competent trade registry office. In the office, the company's records are approved, documents are reviewed, and if everything is in order, the company establishment process is completed. Subsequently, the registry office informs the tax office and the Social Security Institution about the company's establishment.

8. Open a bank account

Foreigners wishing to establish a company in Turkey must open a bank account in the name of the company to make necessary payments and deposit the capital. Having a bank account is crucial for tracking all financial transactions and ensuring transparency.

9. Hire Employees

Some companies are legally required to employ certain staff. This obligation may arise when the company reaches a certain size, requiring positions such as disabled employees, occupational safety specialists, or workplace physicians. It can also be mandated by the specific license the company seeks, regardless of size. Some companies have special employment obligations based on the field in which they operate. For example, to obtain a travel agency license, the company must employ at least one person with an education in hospitality and tourism, a guiding license, or a foreign language proficiency certificate for an information officer. Therefore, setting up a business in Turkey as a foreigner requires considering these factors and making an accurate cost assessment.

10. Obtain Work Permits for Foreign Employees or Shareholders

Some partners may want to work in Turkey. Foreigners who wish to work in Turkey must obtain a work permit before starting work. The employment of foreign workers is subject to certain conditions, the most important being the requirement to employ five Turkish citizens for each foreign worker. According to the relevant law, five Turkish citizens must be employed before hiring a foreign worker, and a separate work permit application must be made for each foreign worker. However, there are some exceptions for company partners, allowing them to work in Turkey for a certain period without a work permit.

11. Apply for Licenses

Opening a company in Turkey is the first step to doing business. After opening the company, foreigners must obtain the relevant licenses based on their activity area. For example, a company looking to establish a travel agency must first apply for a business title, register with TÜRSAB, and finally obtain a license from the Ministry of Culture and Tourism. Companies that operate without obtaining the necessary licenses may face administrative and legal penalties and may not achieve the expected benefits from their investments in Turkey.  

12. Get Legal Advice

Choosing the type of company, drafting contracts, preparing documents, determining the partnership structure, applying for licenses, employing workers, and much more... All of these areas are complex and require legal knowledge. In this challenging process, your most important guide will be your lawyer. By working with a lawyer, you will be protected from unforeseen costs, and your business setup process will be completed quickly and efficiently. Moreover, taking the right steps at the right time will make it easier to achieve your desired outcome. While working with a lawyer is not always mandatory, some companies are required to have a contracted lawyer as long as they meet certain criteria.

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Conclusion

There are certain rules to follow when establishing a company in Turkey, and these rules vary depending on the type of company. Making mistakes during the establishment process can lead to significant losses in the future. So, having legal support is essential during the initial stages. On the other hand, receiving legal consultancy after the company is established will help you make the right decisions to grow your investment and be prepared for any obstacles that may arise along the way.

For any questions or legal assistance regarding this matter, you may contact us at info@paldimoglu.av.tr.