A limited liability company is established in Turkey when the necessary documents are prepared and submitted to the trade registry offices either by the shareholders or their proxy. The primary legal texts to consider for establishing an LLC in Turkey are the Turkish Commercial Code and the Trade Registry Regulation. In this article, we will define what a limited liability company is, explain the requirements for establishing one, and answer frequently asked questions about the process of setting up an LLC in Turkey.
How to define LLC in Turkey
A limited liability company or limited company refers to a company established with one or more shareholders through an application to the trade registry office with the aim of generating economic profit. In LLCs, shareholders are not personally liable for the company's debts. The partners' liabilities are limited to the payment of their committed capital shares and any additional payment and performance obligations stipulated in the company's articles of association. Contributions to the company's capital may consist of cash or movable or immovable assets that can be valued in monetary terms and transferred.
Conditions to Open a Limited Liability Company in Turkey
Certain conditions must be met to establish a limited liability company. These include choosing a trade name, company's purpose being lawful, meeting shareholders' and capital requirements.
The trade name must comply with the law, include at least one of the company's business activities, and not be already in use by another company. It must also not mislead the public, cause confusion with another company, or contradict public order and morality. Therefore, it is essential to check registered companies in Turkey for availability before selecting a trade name.
According to the Turkish Commercial Code, a limited liability company can be established for any lawful economic purpose. Thus, it is not permissible to set up a company for illegal activities or non-economic purposes. Clearly defining the company's purpose can prevent economic and time losses. For example, to operate in the field of medical tourism in Turkey, the company's purpose must explicitly state that it will engage in medical tourism. In some cases, companies are only permitted to operate in a single field.
An LLC in Turkey can have a minimum of one and a maximum of fifty shareholders. Shareholders may be natural persons or legal entities. In cases where a legal entity is a shareholder, it is mandatory to appoint a natural person as its representative. Otherwise, there will be no legal representative for the company, and no one will be available to address legal responsibilities. Shareholders may include minors, in which case the minor's legal guardian must sign the company's incorporation documents on their behalf. If a minor is entering the company as a founding partner along with one of their guardians, the court must appoint a guardian, who will sign the documents on behalf of the minor.
You may be interested in: Appointment and Removal of Limited Liability Company Directors in Turkey
The minimum capital requirement for an LLC in Turkey is 50,000 TRY. The value of each share must be at least 25 TRY, and shares can be freely allocated among the shareholders. The capital specified at the time of incorporation does not need to be paid upfront; but, it must be paid within 24 months. This flexibility is one of the advantages of a limited liability company in Turkey. In contrast, joint-stock companies require at least 25% of the capital to be paid before registration.
Initial Procedures to Open an LLC in Turkey
Foreigners can open a company in Turkey. To do that their passport must be translated into Turkish by a certified translator. Subsequently, a power of attorney must be issued. In Turkey, notaries are the authorized institutions for issuing powers of attorney. Foreign nationals can issue a power of attorney while in Turkey or abroad through Turkish consulates or the relevant authorities of the respective country. If the power of attorney is in a foreign language, it must be translated into Turkish and an apostille annotation must be obtained for it to be processed by Turkish institutions. Additionally, company founders must have a tax identification number in Turkey. Therefore, an application must be made to the tax office on behalf of foreign nationals, and a tax number must be obtained.
How to Open a Limited Liability Company in Turkey?
While the path to open a business in Turkey for foreigners is fundamentally the same as Turkish nationals, foreigners must also complete additional steps, such as having their passports translated and obtaining a tax identification number.
After the power of attorney is issued, the foreign shareholders must be registered with the trade registry office. Since the trade registry office requires this information during the preparation of the articles of association, it is recommended to complete the registration of foreign partners before drafting the articles to ensure a smooth process. The founders' registration can be completed by submitting their translated passports, powers of attorney, and tax identification documents to the trade registry office.
Once the trade registry registrations are complete, the articles of association must be prepared. This step is crucial as the articles of association serve as the company's constitution. The contract specifies the company's activities, purpose, shareholders' rights and obligations, governing rules, capital, address, and other essential matters. Therefore, it is highly recommended to seek legal assistance when drafting the articles of association.
You may be interested in: Liability of Directors in Turkey (Limited Companies)
After this, the next step is to reserve the company name. This can be done through the Central Trade Registry System (MERSIS). If the application to establish the company is not submitted to the trade registry office within the given timeframe, the reserved company name will be released.
After the articles of association are prepared, the final step in establishing the company is to schedule an appointment at the trade registry office. The partners or their representatives must submit the necessary documents and complete the signature process. Once the signature process is complete, taxes and fees must be paid. It is important to note that these payments vary depending on the company's capital, and the costs of establishing a limited liability company are not fixed. Following payment, the trade registry officials will complete the registration process, and the company's incorporation will be announced in the Trade Registry Gazette.
Post-Incorporation Procedures
After the establishment of the LLC in Turkey, the founders must visit a notary to issue signature circulars, which include the authorized representatives' specimen signatures. Without signature circulars, partners cannot represent the company. If a partner of the company is a foreign national, the circular should be issued in the presence of a sworn translator at a notary office in Turkey, or consulates, along with the translated passport. If it is issued in notaries of different countries, it must be translated and apostilled. Once signature circulars are issued, company representatives can represent and bind the company.
Opening a limited liability company in Turkey also involves certain tax office procedures. Tax inspectors visit the company's registered address to verify its operational status. This inspection, called a "verification visit" and it must be completed to avoid the risk of the company being removed from the registry. To avoid wasting time and effort, it is advisable to conduct the incorporation process through a lawyer.
Frequently Asked Questions
Conclusion
In this article, we have answered the question of how to open a limited liability company in Turkey and provided a practical explanation of the process. As highlighted, a limited liability company offers significant advantages, such as no requirement for upfront capital payment, obligation to hire a lawyer in Turkey, and mandatory auditing obligations. It is also easier to manage an LLC in Turkey compared to joint-stock companies. However, since the articles of association serve as the company's constitution and certain issues not included in the contract may limit the company's scope of activity, it is essential to draft the articles of association carefully and manage the process with the help of a law firm in Turkey to prevent potential losses.
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.
