Legal Requirements and Process of Company Establishment in Turkey

Legal Requirements and Process of Company Establishment in Turkey

Legal Requirements and Process of Company Establishment in Turkey

(Published at 14/10/2024)

 

Introduction

Turkey has become a prime destination for foreign investors due to its strategic geographical location, bridging Europe and Asia, its rapidly developing economy, and its pro-business regulatory environment. For companies interested in entering the Turkish market, understanding the legal requirements and establishment process is essential. This article provides an overview of the steps and legal obligations necessary for establishing a company in Turkey.

1. Choosing a Suitable Business Structure

Selecting the right legal entity is the first step, as different structures suit different business goals. Turkey offers several types of business entities, including:

  • Limited Liability Company (LLC): The most popular structure for small to medium-sized businesses, requiring a minimum of one shareholder and a capital of 50,000 TRY.
  • Joint Stock Company (JSC): Typically chosen for larger businesses, requiring a minimum capital of 500,000 TRY.
  • Branch Office: An extension of a foreign company in Turkey, which must operate under the parent company’s structure.
  • Liaison Office: Used for non-commercial activities like market research, with a requirement to receive approval from the Ministry of Industry and Technology.

Choosing the right structure will depend on factors like the business scale, sector, and long-term goals. Professional legal advice can help in deciding the most advantageous option.

2. Reserving a Company Name

Before registration, it is essential to reserve a unique company name through the Central Registry Record System (MERSIS). The name must be original and comply with Turkish regulations, avoiding any potentially misleading or offensive terms. This step ensures the company's distinct identity within the Turkish business landscape.

3. Finding a Workplace and Making a Leasing Contract

A physical address is required for official registration. This step includes:

  • Finding Suitable Office Space: Locate an office or commercial space that meets the company’s needs.
  • Negotiating a Lease: Engage with property owners or real estate agents and finalize a lease agreement. In Turkey, lease contracts typically require notarization.
  • Legal Review of Lease Agreement: Legal professionals review the lease to ensure it complies with regulations and aligns with the company’s interests.

Securing an office space supports the company’s operational needs and strengthens its local presence.

4. Notarization and Translation of Documents

Non-Turkish documents must be translated and notarized by a certified translator. Legal documents such as the AOA and identification records require notarization to comply with Turkish legal standards.

5. Drafting the Articles of Association

The Articles of Association (AOA) is a foundational document that outlines the company’s purpose, structure, management, and operational rules. This document must comply with Turkish Commercial Law and include specific information, such as:

  • Company name and registered address
  • Shareholder names, nationalities, and capital contributions
  • Description of business activities
  • Management structure and authority of directors

Legal assistance is strongly recommended during this phase to ensure that the document meets regulatory requirements and protects shareholders' interests

6. Registering with the Trade Registry Office

Registration with the Turkish Trade Registry Office is mandatory to formalize the establishment of the company. The following steps are involved:

  • Submission of Required Documents: Submit the Articles of Association, notarized identification documents, and the registration form.
  • Payment of Registration Fees: There are fees for registration, including an initial publication fee for the Turkish Trade Gazette.
  • Issuance of Tax Identification Number: Upon registration, the company will receive a tax ID, which is necessary for opening a bank account and conducting official business transactions.

Typically, this process takes a few days, although any discrepancies in the documents may cause delays.

7. Hiring a Turkish Accountant

Hiring a Turkish accountant is essential for maintaining financial compliance, including tax filing, payroll, and regular financial reporting. Turkish accounting standards and tax regulations can be complex, and professional assistance ensures all requirements are met.

  • Our firm works with trusted accountants, allowing us to connect your business with reliable, qualified accounting professionals who understand the intricacies of Turkish regulations. Partnering with an experienced accountant simplifies compliance and supports your financial strategy.

8. Opening a Corporate Bank Account

To comply with Turkish Commercial Law, companies must open a corporate bank account where the initial capital contributions are deposited. This account will be used for operational transactions and is an essential step before starting business activities. The bank may request company documents, a tax ID, and proof of registration during the process.

9. Depositing Minimum Capital Requirement

For Limited Liability Companies, a minimum capital of 50,000 TRY is required, while Joint Stock Companies need a minimum of 500,000 TRY. This capital must be deposited in the company’s bank account and documented as part of the registration process.

10. Obtaining Licenses and Permits

Depending on the industry, companies may require specific licenses or permits to operate legally in Turkey. Examples include:

  • Construction Permit: Necessary for real estate and construction businesses.
  • Energy Licenses: Required for companies in energy production, distribution, or related fields.
  • Health and Safety Certification: Compulsory for industries with high health and safety risks.

Identifying and acquiring these permits early in the establishment process helps avoid operational delays and ensures compliance with Turkish regulations.

11. Employee Registration with Social Security Institution

If the company plans to hire employees, registration with the Social Security Institution (SGK) is required. This registration ensures that employees receive the necessary social benefits, including health insurance and retirement benefits. Additionally, foreign employees may need a work permit, which requires separate approval from the Ministry of Labor and Social Security.

12. Registering for VAT and Other Taxes

Companies operating in Turkey are subject to Value-Added Tax (VAT), corporate income tax, and other applicable taxes. Registering for these taxes with the Turkish Tax Authority ensures that the company meets its tax obligations from the outset. Turkey has a range of tax incentives and exemptions for foreign investors, so consulting a tax advisor can help identify potential benefits.

Conclusion

Establishing a company in Turkey is a straightforward but regulated process that offers foreign investors great opportunities. Understanding the legal requirements and following each step carefully will ensure a smooth transition into the Turkish market. With the assistance of legal experts, businesses can navigate the complexities of Turkish Commercial Law, ensure compliance, and focus on growth.

As legal professionals experienced in Turkish Commercial and Corporate Law, we offer comprehensive services for foreign investors. Whether you need assistance with document preparation, obtaining permits, or meeting ongoing compliance requirements, our team is here to support you at every step.

Contact us for a consultation and explore how we can help make your Turkish investment journey a success.