What Is a Company?
Companies are organizations that are established by combining the money and labor of a minimum of two people to serve a common purpose. According to TDK, it simply means partnership. In today’s conditions, a single individual’s capital and workforce may not be sufficient to establish a company. For this reason, it makes things easier for like-minded people to combine their money and labor to achieve such a goal. Companies are established in line with such needs as socialization, capital, and labor. These companies are established according to certain laws. The main goal is to make a profit and earn money.
Organizations that do not pursue commercial purposes are called associations. Companies are separated from associations in this aspect. The laws we mention below determine the capital of the company’s partners, the sharing of income, the way people work, and the circumstances under which the company will wind up.
The companies themselves are divided into many units and each unit has to fulfill its duties and responsibilities. Every company is obliged to pay its annual tax and employ insured workers. Some companies may apply to sell stocks so that they could rise in value. In this way, they can increase their income. The main purpose of companies is to increase their revenues because they have certain payments to make. Every step companies take must be determined and documented carefully.
Company Types and Their Characteristics
One of the most difficult things those wanting to be entrepreneurs face when starting a company is to decide the type of the company. The first thing we can recommend to those candidates is to examine all the stages and procedures they may encounter during the establishment of a company, to contact experienced entrepreneurs as much as possible, and to learn all the information about this subject in detail. By following these steps, they will get one step closer to their goals.
Companies are classified according to the law. In fact, they are divided into two main groups as sole proprietorships and capital companies. These two main groups are divided into groups within themselves as well. One of the most important things you should know before establishing a company is the structural and functional differences between these two groups.
What Is a Capital Company?
Capital companies are companies in which real or legal persons are partners through their capital and are known for their capital and management. In these companies, partners are obliged to reveal the limited capital. It is the partners’ responsibility to put in the money promised and committed by all. It is business and capital that are in the first place, not partners. Likewise, the foundation of the company is its assets. For this reason, one of the partners’ quitting does not cause the termination of capital companies. Common shares in capital companies are changeable and individual. If the partners wish, they can sell this share or transfer it to another person.
Other important articles for capital companies are as follows;
Capital companies are divided into 3 separate groups: Joint-Stock Companies, Limited Liability Companies, Limited Partnerships Divided Into Shares. To put it briefly, joint-stock companies are established by at least one person. This person can either be a natural or a legal person. Joint-stock companies have a board of directors, a general assembly, and a supervisory board. Limited companies are established by at least one natural or legal person like joint-stock companies. However, as you can understand from its name, it is limited to a maximum of 50 partners. This upper limit is one of the most important features that distinguish limited companies from joint-stock ones. Likewise, the amount of capital put is under the responsibility of the partners. The responsibility of the partners may increase or decrease depending on the capital they put in. However, if the number of partners exceeds 20, there must be a general assembly and a supervisory board.
Limited partnerships divided into shares consists of at least 2 partners. At least one active partner must exist. The responsibilities of the active partner are unlimited, and the responsibility of the unlimited partner is determined by the capital s/he puts forth.
What Is a Joint-Stock Company?
Joint-stock companies cover all the features of capital companies. They aim at bigger goals than other companies. It has the right to benefit from all economic activities. However, it also has the right to issue securities like stocks. Briefly, according to the definition of the Turkish Commercial Code, a joint-stock company is a company whose capital is definite and divided into shares, and which is liable only for its assets due to its debts. According to the 329th article of the Turkish Commercial Code, the liabilities of the shareholders to the company are only the capital shares they have committed. Joint Stock Company Principles are as follows;
Characteristics of Joint-Stock Companies
Joint-stock companies have several features determined by law. First of all, when establishing a company, the subject, and purpose of the company should be determined in the first step and it needs to be clearly stated in the main contract. The founders of joint-stock companies are considered as tradesmen and therefore these companies are established under the business name. In addition, they must register these titles in the trade registry. According to the Turkish Commercial Code, joint-stock companies can be established by one or more persons. In other words, a single person can establish a joint-stock company. A capital of at least 50,000 TL is required but this lower limit is 100,000 TL for non-public joint-stock companies. It is possible to be a foreigner in joint-stock company partnerships. Unlike other companies, they have the right to issue stocks and bonds. Joint-stock companies can represent themselves with shares, but the company capital must be paid in full. Otherwise, the person cannot register the shares to the bearer. If it is decided to divide the capital, each capital is divided into shares.
What Is a Limited Liability Company?
Limited companies are companies with limited capital established by at least one natural or legal person under a commercial name like a joint-stock company. The partners have to put in the capital they have committed. Unlike joint-stock companies, the capital provided by the partners is limited. In limited companies, the principal capital is determined. The main capital is the sum of the capital that all partners have put. Except for banking and insurance, there is no limit of subject and purpose. They are free to perform all activities deemed appropriate by law.
Limited companies, like other companies, also pursue commercial purposes. Its main bodies are the general assembly, directors, and auditors. However, in limited companies, the number of partners does not exceed 50. In the case of a partnership, there is no lower limit. It is also possible to establish a limited company with a single partner. The only responsibility of these partners is to reveal the capital they have committed. They are not responsible for the debts of the company. However, additional payments and side performance obligations are paid by the partners. In addition to these, important books that limited companies should have are as follows; general journal, ledger, inventory, balance sheet, and share ledger.
The capital required to establish a limited company is at least 10,000 TL. Basic capital is divided into certain shares. The values of these shares must be at least 25 TL and its multiples for each partner. At least 1/4 of the nominal value of the committed shares must be paid before registration. The remaining payment must be made within 24 months.
Limited Partnerships Divided Into Shares
Although limited partnerships divided into shares are very rare compared to other company types, they are included in the Turkish Commercial Code. First of all, limited partnership companies consist at least of 2 people and they are established under the same commercial title. Commandite companies are established with a contract. Therefore, it has a few conditions: The partners of the company are limited to creditors from the company. The responsibilities of these partners are also limited to the creditors of the company. There are also limitations in terms of the capacity to have rights. Limited partnership divided into shares is a subgroup of the limited partnership. As you can see from the name, the capital of the partners is divided into shares in these companies. Some of these partners are people with unlimited liability to the creditors of the company. Other partners are joint-stock company shareholders.
What Is a Sole Proprietorship Company?
Sole proprietorships are companies that individuals can establish on their own or as partners. In these companies, the responsibilities of each partner are unlimited, and it is much easier to establish when compared to joint-stock and limited companies. However, the approval of all partners is required for the sale and transfer of partnership shares. When the required documents are collected, the process of starting the company can be completed in as little as 2 days.
When establishing a sole proprietorship, you need much fewer documents and only a very short time. Responsibilities and authority belong to the company owner or partners. Wages and establishment costs within the company are much lower than other companies. The easier it is to establish those companies, the easier it is to close them. It may take up to 1 year to wind up capital companies, but 1 day is enough for sole proprietorships. The tax you have to pay is determined in line with the company income. This may be an advantage for the first years your company is founded, but as your income increases, the tax you have to pay naturally increases as well. Therefore, this advantage may turn into a disadvantage once you have grown your company. Nevertheless, taking everything into account, establishing a sole proprietorship has many advantages. While the capital required to establish a capital company is 50,000 TL, it is possible to establish your own company with only 500-700 TL.
What Are The Purposes of Companies?
Although companies vary according to the sectors they are in, they usually have some common goals. These can be divided into two categories as general and special purposes. General purposes such as making a profit, providing a certain service for customers, maintaining the company’s existence for a long time, and growing are valid for almost all types of companies. Although the order of importance of some of these varies for certain companies, every company that carries out its activities for a commercial purpose has these general objectives.
The mission of companies is a value that guides the company and distinguishes it apart from its competitors. It expresses their long-term goals and does not change too much. For these reasons, the mission concept may be very helpful in determining the general objectives of the companies. As the mission also concerns employees, it helps people know what they are working for and thus creates a more effective work environment.
General Purposes
Special Purposes
Companies have specific goals as well as general goals that support them in achieving their main goals:
What Are The Conditions For Establishing A Company In Turkey?
In the beginning of the basic thing, you need to do before starting a company is to do good market research. You must learn about yesterday, today, and tomorrow. So you can learn from both successful and unsuccessful names in the industry. A good feasibility study can be an important step before starting a company. In addition, you also need to decide what type of company you will set up before you start a company.
Companies are generally divided into three main categories according to their type: sole proprietorship, limited liability company, and joint-stock company. The amount of capital you need also varies according to the type of company you choose.
How To Establish A Sole Proprietorship Company?
A sole proprietorship company is one of the most preferred companies because it is the easiest type of company to establish and close. A sole proprietorship company is preferred for activities with less turnover and does not have a certain minimum amount of capital. The company must have as much cash capital as it can carry out its operations. In general, the name and surname of the founder are written in the title. If you want, you can easily create your personal company by authorizing an accountant or by making an application on your own.
Documents Required To Establish A Sole Proprietorship Company
Advantages Of A Sole Proprietorship Company:
Disadvantages Of A Sole Proprietorship Company:
How To Establish A Joint Stock Company?
Joint Stock Companies can be a very convenient option, especially for high-income companies, because they have a flat tax rate. Being responsible for borrowers at the rate of all capital in a joint-stock company may also be another reason for choosing to establish a joint-stock company. The costs of a joint-stock company, which is also a very convenient option for entrepreneurs who want to get investment, are higher compared to other options. These companies can be established by at least 5 legal entities or individuals, and the main capital amount is at least 50,000 TL.
Documents Required To Establish A Joint Stock Company
How To Establish A Limited Liability Company?
With the new regulation, limited liability companies can now have a single partner. To establish a Limited liability company, the main amount of capital must be at least 10,000 TL and the number of partners must not exceed 50. In addition, shareholders must have invested more than 25 TL.
Documents Required To Establish A Limited Liability Company
Tax On Limited Liability Companies
Limited liability companies are also taxpayers with corporate tax. These companies provide withholding tax returns for the jobs they rent and the services they receive and pay income tax withholding. If the number of employees of the company is below 10 people, a withholding tax return can be issued every 3 months. Otherwise, it is issued monthly. They must pay a Value Added Tax Return every month. Corporate temporary tax is given 1 time in 3 months.
Stages Of Establishing A Company In Turkey
After deciding on the type of company, there are two registration procedures that you must perform at the installation stage: register with the relevant Chamber of Commerce and demand a taxpayer from the relevant Tax Office.
First, you need to determine your address, which you will show as the company’s headquarters. After the lease is made, you must prepare your main contract. At this stage, the company name and NACE Code must be determined. After the main contract is prepared, it is useful to check it with your financial advisor. The main contract will be prepared through the Mersis system, and the potential tax number will be given through the system.
And then you have notary work to take care of. You must sign under the main contract that will be printed at the notary and give the financial adviser the authority to create a company. With a notarized main contract and a potential tax number received through the system, you must open an account in the bank on behalf of the company and deposit ¼ of the capital into this account. This money will be blocked by your bank until the setup phase of your company is complete. Once your company is established, the blockade will be lifted and you will be able to use your money. If the company you are going to create is a limited company, this process is not necessary. After this stage, you can apply for company registration along with a file containing the necessary documents to the relevant chamber of Commerce. If there are no deficiencies in your documents, the Chamber of Commerce will complete your transactions in a short time.
After the registration of your company is completed, you will go to the notary for the second time and sign to prepare the signature circulars of the established company. As an official of the company, you will give your financial adviser power of attorney from a notary. In addition, to apply for the tax office, managers must approve their identity or identity cards at the notary public and hand over notarized copies to the financial advisor.
Your financial advisor will apply for registration with the tax office and issue your company’s tax plate at the end of the day. The Tax Office will send a survey officer to the address where your company is located, the survey officer will visit the company address and ask you to be present at the survey and sign the survey report. With the regulation of the survey report, your company establishment transactions are also terminated.
Types Of Taxes That Companies In Turkey Are Responsible For
Stamp Duty
Concise Declaration
Value Added Tax (VAT) declaration
Temporary Tax Return
Annual Income Tax Return In Simple Procedure
Annual Income Tax Return
Annual Corporate Tax Return
BA and BS forms
How Can Foreign Citizens Establish A Company In Turkey?
International investors have the right to establish any company in Turkey that Turkish citizens can establish. Foreign investors can open a company in Turkey after completing residence documents, notarized and translated passports, documents on the partnership of the company, and other documents that must be obtained from abroad. These people should apply the same steps as local citizens when creating a company in Turkey. At the first stage, the company contract is prepared. In this agreement, the company’s title, purpose, director and representative, capital, and shareholders must be clearly stated. The Founders then certify their signatures. The Competition Authority’s share is credited to the company’s bank account.
This rate is 0.04% of capital. The founders of the company must then register the necessary documents with the registry of commerce. But sole proprietorship companies have different conditions than other companies. First and foremost, a foreign natural person must have a work permit. Otherwise, it is not possible to establish a private company. In addition, a 5-year residence permit is required along with a residence certificate.
Advantages of Establishing a Company in Turkey
Located between Europe, the Middle East and Central Asia, Turkey is a country that is highly preferred by foreign investors as it acts as a bridge between these 3 regions. Turkey’s strong infrastructure and workforce attract entrepreneurs from all over the world. Furthermore, the support of the state given to entrepreneurs and the tax system make it simpler to establish a company in Turkey. The advantages offered for Turkish citizens are valid for foreign investors as well and thus it makes it easier to attract more investors to the country. With the Customs Union Agreement, companies in Turkey can easily trade with EU countries.
How Can Foreign People Establish A Company In The TRNC?
It is also possible for foreign people to establish their companies in Northern Cyprus. TRNC is still a popular holiday destination today and is also one of the most suitable places for both local and foreign people to establish a company. With the support of foreign companies, Northern Cyprus is an economically powerful state. Foreign investors have been active in many sectors of the economy in Northern Cyprus and have thus played a major role in the development of this state. For this reason, the TRNC government provided many opportunities for foreign investors and considered them equal to the locals. Both small and large companies have been established in Northern Cyprus so far. Businesses such as hotels, spas and restaurants continue to exist successfully. Establishing a company in Northern Cyprus has many advantages, such as useful tax laws, privacy policies, and simple ways to establish and run a company.
At least 2 people are needed to establish a company in TRNC. There is no objection to these people being foreign or local. However, in the case of the company’s real estate and construction-related activities, 51% of the shares should be owned by the local representative/s.
Turkish Republic of Northern Cyprus (TRNC)
The Turkish Republic of Northern Cyprus is a country located in the north of the island of Cyprus. Most of its economy is based on the service sector. Tourism, which is a part of the service sector, is of great importance to the country. Because the country is located on an island, trade mostly occurs through imported products. For this reason, the Turkish Republic of Northern Cyprus is very suitable for foreign investors.
Types Of Companies In The Turkish Republic Of Northern Cyprus
There are several different types of companies that can be established in the Turkish Republic of Northern Cyprus, and these types can give you advantages according to the work that the company you will establish will do. If you plan to start a company in TRNC, you should choose the type of company that best suits your business and capital.
TRNC Limited Liability Companies (LTD.)
The most common type of company in the Turkish Republic of Northern Cyprus is limited liability companies. It can be established with a maximum of 50 shareholders. Limited liability companies do not require minimum capital. Limited liability companies are divided into Private and Public. There should be at least 2 shareholders in Private LTD companies and at least 7 shareholders in Public LTD companies. In addition, when shareholders in Private LTD companies want to sell their shares, they must first offer them to other shareholders. In Public LTD companies, there is no obligation for that.
Collective and Commandite Companies
Partnerships established by two or more people for profit are called Collective Partnerships. When a Collective Partnership – or a collective company- is founded, the partners can make an agreement for partnership, but that is not a legal obligation. An experienced lawyer’s help can be useful in this process. Partners are individually responsible for situations that arise as a result of the activities of collective companies. Responsibilities related to the company are distributed equally to each partner. The tax liability is on the partners, not the company.
In commandite companies, there may be one or more persons among the partners who take responsibility for the company, and one or more persons who do not take responsibility for the company. Unlike collective companies, partners who do not take responsibility in commandite companies cannot have a say in the management of the company and cannot decide on behalf of the company. Partners who are not responsible only share the profit of the partnership. The tax liability is on the partners, as in collective companies.
TRNC Branches of Foreign Companies
A branch of a company not established in the Turkish Republic of Northern Cyprus, whose address and administrative centre are located in a different country, can receive approval in the TRNC. In such a case, although the approved branch in the TRNC is considered a foreign company, it is considered the same as local companies.
A branch of a foreign company to be opened in the Turkish Republic of Northern Cyprus requires the permission of the Council of Ministers of the TRNC. However, the capital of the main company must be at least $ 100,000 USD or equivalent.
Free Port Area Companies
Companies operating under the Port Zone law of the Turkish Republic of Northern Cyprus must register as a company to the Free Zone administration. Companies registered in the Free Port region are established and operate in accordance with the articles of Chapter 113, TRNC Companies Law. The difference between free port companies and local companies is that the activities of these companies abroad and within the region are exempt from Corporate Tax, Income Tax and Value Added Tax. Free Port Area companies are only responsible for the tax and social security payments of their staff. All these tax advantages provided by the state attract the interest of investors to companies in the Free Port Area.
International Business Companies (Offshore)
International Business Companies established and registered in accordance with the law on International Business Companies in the Turkish Republic of Northern Cyprus and operating in accordance with this law carry out their activities with a foreign focus. These companies pay 1% of their annual net profits to the TRNC as Corporate Tax. Other than that, International Business Companies are not subject to any taxes. International Business Companies are also responsible for the tax and social security payments of their staff. International Business Companies can open accounts at any of the banks registered in the Turkish Republic of Northern Cyprus. These companies can operate in any field other than gambling.
Establishing A Company In The Turkish Republic Of Northern Cyprus
If you are considering establishing a company in the Turkish Republic of Northern Cyprus, you must first determine whether the company will take ownership of any real estate. To establish a company that will take ownership of real estate (workplace, apartment, field, etc.) there is a necessity that the majority of the shareholders should not be foreigners. If most or all of the shareholders are foreign investors, real estate can be purchased under certain restrictions with permission from the Council of Ministers. In order to overcome these restrictions, 51% of the company’s shareholders must be TRNC citizens and the board of directors must consist mostly of TRNC citizens. In companies that will not take real estate ownership, there is no problem that all shareholders and the board of Directors of the company are foreigners.
After determining whether to buy real estate, what you need to decide is the name of the company. The establishment process begins when you submit the company name and several alternatives that you have specified to the Registrar of Companies. If the company name you specify does not coincide with one of the existing company names, or is not considered objectionable, it will receive approval. After your company name is approved, the Master Contract and Regulations are prepared. In the Master Contract and Regulations, there will be the aims and rules of the company you will establish. Sensitivity is very important at this stage. Any mistakes can lead to problems in the future. So you can get help from someone who is an expert in the field of law.
Documents Required To Establish A Company In TRNC
Registration must be made when establishing a foreign company. A number of documents must be provided to the Official Receiver and Registrar, when registering the company.
These are:
If the share of foreign partners is more than 49%, they must obtain approval from the Ministry in Charge of the Economy. Those who want to establish a company in foreign countries must obtain the approval of the Ministry in Charge of the Economy and the Council of Ministers. Otherwise, they do not have the right to establish a company or branch in the TRNC. These companies are then certified as Foreign or Overseas Companies. In addition to these, other documents that should be available include:
When these documents are completed, the company is registered by the Official Receiver and Registrar. In this way, the investor or partners can work on the investment as a legal entity. A company that intends to invest in the TRNC must apply with a Special Project Feasibility Form. This form contains information about the nature of the project and investment. The Form must be submitted to the State Planning Organisation. Your application is evaluated within 3 months after the opinion of the relevant ministry and concluded by the State Planning Organization.
Company Taxes In TRNC
Investors who want to establish a company in Northern Cyprus or want to become a partner in a company should conduct detailed research on this issue in advance. No investor wants their capital wasted, but they want to witness the successful operation of the company they founded.
The tax system is an important detail for countries and investors all over the world. It can scare investor at first, but with good research, you can secure your business. The most important taxes that investors who want to establish a company in TRNC should know are:
Corporate Tax
The earnings of many companies and organizations specified by the Capital Companies and Corporate Tax Act are dependent on Corporate Tax. Companies and other institutions located within the borders of the TRNC are subject to Corporate Tax. These institutions must pay corporate tax with 15% of their earnings, regardless of whether they earn within the borders of the TRNC or from a foreign place. But foreign institutions whose legal centres or business centres are not within the borders of TRNC only pay 15% of their earnings that they obtain from TRNC. Individuals who invest in educational and medical institutions such as higher education institutions, student dormitories, nursing homes and health facilities are obliged to pay 10% corporate tax for a period of 5 years. While calculating the gross earning subject to taxation, investment tax credits and depreciation expenses should be taken into consideration. Corporate Tax is paid twice a year, in equal payments in May and October.
The Income Tax
Institutions and companies subject to income tax are clearly specified in the Corporate Tax Law. These institutions are obliged to pay Income Tax with 15% of the orporate income apart from the Corporate Tax they must pay. According to the Corporate Tax Law, the discounted Corporate Tax rate is 10%. In the case of Income Tax deductions in institutions entitled to benefit from this discount, they are not subject to the established Income Tax rate. Instead, the ratio of non-distributed corporate earnings to the amount of paid-in capital is calculated. However, this is accepted provided that the non-distributed corporate earnings do not exceed the applicable deduction rate.
Value Added Tax
Value Added Tax has been in effect as Excise Tax since 1996. According to the Value Added Tax Rates Regulation, 6 Value Added Taxes are paid. The Current Value Added Tax rates are: 0%, 3%, 5%, 10%, 15%, 20%
Advantages Of Establishing A Company In The Turkish Republic Of Northern Cyprus
Although you have a good idea to start a company and get into the business world, one of the most important things you need to consider to get into this business is taxes. At this point, the TRNC attracts the attention of investors with the facilities it provides to companies about taxes. When it comes to taxes, two types of companies stand out with their advantages: Free Port Area Companies and International Business Companies (Offshore companies). These two types of companies, which are quite different from each other, have advantages over themselves.
One of the advantages of establishing a company in TRNC is that the establishment costs are lower compared to other Offshore centres. While other centres may require up to $500,000 to be kept in a bank account, a one-time fee can be used by the company at a later time.
Another advantage of establishing a company in the TRNC is that the currency used in the country is the Turkish Lira. Since it is traded in the same currency as Turkey, there is no currency difference problem. Since Turkish-based banks also have branches in the TRNC, money transfer operations are also easier. In addition, having the country in the same time period as Turkey makes things easier.
Finally, possible disputes and confusion can be more easily resolved, as the native languages of Turkey and the Turkish Republic of Northern Cyprus are the same.