Comprehensive Guide to Establishing a Business in Turkey
Overview
Starting a business in Turkey offers foreign investors a strategic advantage due to its dynamic economy and prime geographical location. This guide provides essential steps to help you understand the Turkish legal system, choose the appropriate business entity, and comply with registration formalities, ensuring a smooth setup process.
Understanding the Turkish Legal System
Turkey operates under a civil law system based on the Turkish Constitution. Legislative authority is held by the Grand National Assembly, ensuring that all state power stems from the Constitution. Recent constitutional amendments have impacted government structure and powers, such as increasing parliamentary members and granting the president legislative authority for executive matters.
Types of Business Entities in Turkey
When establishing a business in Turkey, selecting the right type of business entity is crucial. The Turkish Commercial Code classifies companies into two main groups:
- Capital Companies:
- Joint Stock Companies (JSCs): Ideal for large-scale operations, JSCs have a developed legal framework for corporate governance. This structure is mandatory for sectors like finance and telecommunications and is necessary for public offerings.
- Limited Liability Companies (LLCs): Suitable for small to medium-sized enterprises (SMEs), LLCs offer a flexible corporate structure, allowing for specific shareholder agreements.
- Non-Capital Companies:
- Collective Partnerships and Commandite Partnerships: Shareholders have unlimited liability, making these less popular among investors.
Setting Up a Business Presence in Turkey
Foreign investors have several options for establishing a business presence in Turkey, including liaison offices, branch offices, and subsidiaries.
- Liaison Offices in Turkey: These offices are restricted from engaging in commercial activities and are used primarily for market research and promotion. They do not have independent legal personality or the authority to enter into contracts.
- Branch Offices in Turkey: While branch offices can conduct business transactions, they are not independent legal entities. The foreign parent company remains liable for the branch’s obligations.
- Turkish Subsidiaries: Many foreign companies prefer to establish subsidiaries as Joint Stock Companies (JSCs) or Limited Liability Companies (LLCs) due to limited liability protections and ease of incorporation.
Steps to Form a Company in Turkey
- Preparation: Draft the company’s articles of association and gather necessary documentation for shareholders and board members.
- Registration: Submit the required documents to the relevant trade registry office and register in the Mersis System, an electronic platform used by trade registry offices.
- Capital Requirements: Deposit the required share capital into a bank and pay a contribution to the Competition Authority.
- Legal Entity Status: The company gains legal entity status upon registration completion, allowing it to operate legally.
- Additional Steps: Obtain a potential tax number, establish a bank account, and ensure compliance with all regulatory requirements.
Financial Reporting and Transparency in Turkey
Businesses in Turkey must maintain financial records in accordance with Turkish Accounting Standards, aligned with International Financial Reporting Standards (IFRS). Annual financial statements and activity reports must be prepared and approved by shareholders. Companies with foreign shareholders are also required to report their activities and any changes in share capital or registered address to the relevant ministry annually.
Conclusion
Establishing a business in Turkey involves several key steps, from selecting the appropriate business entity to ensuring compliance with registration and reporting requirements. By understanding these processes, foreign investors can successfully set up and operate their businesses in Turkey, taking advantage of the country’s strategic location and growing market.
