⚖️ Introduction
The Limited Liability Company (LLC), known as “Limited Şirket (Ltd. Şti.)” under Turkish law, is one of the most widely used corporate structures for small and medium-sized enterprises. Its popularity stems from its simplified formation process, low capital requirements, and flexible management structure.
In this article, we explore the essential legal features of an LLC in Turkey, particularly within the context of establishing a business in regulated sectors like energy, and compare it with the Joint Stock Company (A.Ş.), which is often mandated for large-scale operations.
1️⃣ Legal Basis and Recognition
The LLC structure is governed by the Turkish Commercial Code (TCC) No. 6102, which provides a clear legal framework for establishment, governance, profit distribution, and liability.
According to the TCC:
- An LLC has legal personality independent of its partners.
- It can be founded by one or more individuals or legal entities (maximum: 50 shareholders).
- Partners’ liability is limited to their capital contribution.
2️⃣ Capital Requirements and Formation
A Limited Liability Company in Turkey requires:
- Minimum capital: TRY 10,000
- No obligation to deposit 25% before registration, unlike Joint Stock Companies
- One or more managers (can be partners or external persons)
🔹 Steps to Establish an LLC:
- Choose a company name and business scope
- Draft the Articles of Association
- Register via MERSIS system
- Submit documents to Trade Registry
- Obtain Tax ID, SGK registration, and open bank account
The process typically takes 5–7 business days when documents are complete.
3️⃣ Governance Structure
LLCs are governed by managers rather than a board of directors.
- One or more managers may be appointed
- A general assembly of shareholders makes key decisions (e.g., profit distribution, amendment of articles)
- Unlike A.Ş., there is no requirement for an independent auditor unless financial thresholds are exceeded
📌 Thresholds for Mandatory Audit (as of latest regulations):
- Total assets ≥ TRY 75 million
- Annual net sales ≥ TRY 150 million
- Employees ≥ 150
If two of the above are met for two consecutive years, independent auditing becomes mandatory.
4️⃣ Taxation
LLCs are subject to the same tax regime as other corporate entities in Turkey:
| Tax Type | Rate |
|---|---|
| Corporate Income Tax | 25% |
| VAT (varies) | 1%–20% |
| Withholding on dividends | 10% |
| Stamp tax | Applicable on contracts |
LLCs must also keep double-entry accounting records and submit periodic tax declarations.
5️⃣ Restrictions and Drawbacks
Despite its flexibility and lower cost, LLCs face some structural limitations, particularly for fast-growing and capital-intensive sectors like energy.
❌ Key Restrictions:
- Cannot offer shares to the public
- Share transfer is more complicated: Notarized share transfer agreement is required, and existing shareholders have preemptive rights
- Access to external funding is limited, especially from institutional investors
- Ineligible for certain energy licenses (e.g., electricity generation or distribution) under EMRA
6️⃣ Use in the Energy Sector
While LLCs are not suitable for licensed energy operations, they can still be used in:
- Unlicensed rooftop solar installations (<1 MW)
- Engineering, Procurement & Construction (EPC) companies
- Energy consultancy firms
- Operation and maintenance (O&M) services
- Local energy cooperatives or service providers
For these cases, LLCs offer an efficient, low-risk entry model.
7️⃣ Share Transfers and Exit Strategy
Transferring shares in an LLC is more formal and restrictive than in a JSC:
- Requires notarized agreement
- Must be registered in the share ledger
- Shareholders may block transfers unless consent is given
This could be a concern for venture capital, M&A, or foreign exit strategies.
8️⃣ Foreign Investor Considerations
Turkey allows 100% foreign ownership in LLCs. However, foreign investors must:
- Obtain a potential tax number before incorporation
- Appoint a local legal representative
- Notify the Ministry of Industry and Technology after incorporation under FDI Law No. 4875
9️⃣ Pros and Cons Summary
| Feature | LLC (Ltd. Şti.) |
|---|---|
| Minimum Capital | TRY 10,000 |
| Public Offering | ❌ Not allowed |
| Share Transfer | ❌ Restricted |
| Suitable for EMRA License | ❌ Generally not eligible |
| Management Structure | Flexible (managers) |
| Audit Obligation | Optional (unless thresholds are met) |
| Foreign Ownership | ✅ Allowed |
| Setup Time | ✅ Fast (5–7 days) |
🔟 Conclusion
Limited Liability Companies in Turkey offer an efficient and legally sound structure for small-to-medium enterprises, consultancy firms, and service providers in the energy ecosystem. However, for entities aiming to participate in regulated and licensed energy markets, the structure falls short due to legal limitations on licensing and capital mobility.
Entrepreneurs and investors must balance simplicity against strategic scalability. When the goal is a low-risk entry into the market or a specialized service firm, LLCs are a smart choice. For energy generation or trading, a Joint Stock Company remains the more suitable vehicle.
INTERN LAW FACULTY STUDENT
YAĞMUR YORULMAZ
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