Most capital companies incorporated in Turkey are either limited liability companies or joint-stock companies. The choice made at incorporation shows its consequences years later, when a partner leaves, an investor comes in or a public debt arises. The decision should therefore not be based on set-up cost alone.
Key differences
- Minimum capital.: The minimum share capital is TRY 50,000 for a limited liability company and TRY 250,000 for a joint-stock company. Non-public joint-stock companies adopting the registered capital system start at TRY 500,000.
- Liability for public debts.: Shareholders of a limited liability company are directly liable, in proportion to their shares, for taxes and social security premiums that cannot be collected from the company. In a joint-stock company this liability falls on board members, not on shareholders.
- Share transfers.: Transferring a share in a limited liability company requires a notarised agreement, approval of the general assembly and registration with the trade registry. Registered shares of a joint-stock company are, as a rule, transferred by endorsement and delivery, which is far more practical.
- Governance.: A limited liability company is run by one or more managers, a joint-stock company by a board of directors. The joint-stock form offers a more developed structure for independent audit and investor relations.
Which is right for whom?
- For small businesses with few partners and infrequent share transfers, a limited liability company is sufficient and more economical.
- For ventures planning to raise investment, change their shareholder structure often or scale up, a joint-stock company is advantageous.
- In sectors with a high risk of public debts, a joint-stock company better protects the partners' personal assets.
The company type can be changed later, but conversion is a separate procedure with its own cost. Drafting the articles of association with a lawyer at incorporation prevents most of the disputes that may later arise between partners.