Foreign Entrepreneurs, Sole Proprietorships, Branch Offices, Work Permits and Tax Risks in Türkiye

Foreign entrepreneurs considering the Turkish market often begin with a practical question:

Do I really need to establish a Turkish company to start doing business in Türkiye?

The short answer is:

Not necessarily. However, operating without a limited or joint stock company does not mean that a foreign founder may conduct continuous commercial activity in Türkiye without registration, tax compliance or, where applicable, a work permit.

Turkish law provides several possible structures for foreign entrepreneurs. Depending on the business model, a foreign founder may operate through a Turkish company, a sole proprietorship, a branch of a foreign company, or in limited circumstances directly from abroad. A liaison office may also be established, but it cannot carry out commercial activities.

The correct structure depends on where the entrepreneur is physically located, where contracts are concluded, where customers are located, where services are performed, whether employees are hired in Türkiye and whether the foreign founder is personally working in the business.

This article explains the principal alternatives and the legal risks that foreign founders should consider before entering the Turkish market.

1. Does Turkish Law Require Every Foreign Entrepreneur to Establish a Company?

No.

There is no general rule under Turkish law stating that every foreign individual who wishes to generate business income connected with Türkiye must establish a limited liability company or joint stock company.

Türkiye’s foreign investment regime is largely based on the principle of equal treatment between Turkish and foreign investors. Foreign investors may generally establish companies under the Turkish Commercial Code under conditions similar to those applicable to Turkish investors. Except for certain regulated sectors, there is generally no nationality restriction on company shareholders or management rights.

But this does not mean that a foreign entrepreneur can simply move to Türkiye, sell goods or services on a continuous basis, receive payments and operate without any commercial or tax registration.

The real legal question is therefore not:

“Do I need a company?”

It is:

“What legal and tax structure does my particular business activity require?”

2. A Foreign Founder May Establish a Sole Proprietorship in Türkiye

One of the most important alternatives to establishing a Turkish limited liability company is operating as an individual commercial enterprise, commonly referred to in practice as a sole proprietorship or şahıs işletmesi.

Under Article 12 of the Turkish Commercial Code, a person who operates a commercial enterprise, even partially, in their own name is considered a merchant.

A commercial enterprise is broadly characterized by activities conducted independently and continuously with the intention of generating income above the threshold applicable to small-scale tradesmen.

Importantly, being a foreign national does not in itself prevent an individual from registering a commercial enterprise.

The Istanbul Chamber of Commerce expressly provides registration procedures for commercial enterprises owned by foreign nationals. Among other documents, a foreign owner may be required to submit a notarized Turkish translation of the passport, a Turkish tax identification number and, if the person resides in Türkiye, relevant residence documentation.

Therefore:

A foreign founder can potentially conduct business in Türkiye without establishing a separate legal entity such as a limited company by registering and operating a sole proprietorship.

This distinction is important.

A sole proprietorship is a registered business, but it is not a separate legal entity from its owner in the same manner as a limited liability company.

3. What Is the Main Risk of a Sole Proprietorship?

The main disadvantage is personal liability.

When a founder establishes a limited liability company or joint stock company, there is generally a legal separation between the company and the shareholder.

With a sole proprietorship, the entrepreneur personally operates the business.

Consequently, commercial debts and liabilities may directly expose the entrepreneur’s personal assets.

This may become significant where the business:

• signs high-value customer contracts;
• employs personnel;
• leases commercial premises;
• sells potentially defective products;
• handles personal data;
• operates in regulated industries;
• receives substantial advance payments;
• assumes contractual penalties; or
• faces significant consumer claims.

For startups intending to raise investment or take on significant contractual risk, a limited liability company or joint stock company will therefore frequently be more appropriate than a sole proprietorship.

4. A Residence Permit Is Not the Same as a Work Permit

This is one of the most commonly misunderstood points among foreign entrepreneurs.

A foreigner who has a Turkish residence permit does not automatically acquire the right to work in Türkiye.

The Ministry of Labour and Social Security expressly states that, with limited exceptions provided by law, merely holding a residence permit does not grant a foreign national the right to work. Foreign nationals covered by the International Labour Force Law generally need a work permit or a work permit exemption before working in Türkiye.

This issue becomes particularly relevant where a foreign entrepreneur:

• establishes a sole proprietorship;
• manages their business personally from Türkiye;
• provides services personally in Türkiye;
• operates a shop, office, restaurant or other workplace;
• acts as an active company manager; or
• otherwise works for their own account in Türkiye.

Accordingly, business registration and immigration/work authorization must be analysed separately.

5. Can a Foreign Entrepreneur Obtain an Independent Work Permit?

Potentially, yes.

Turkish law recognizes an independent work permit, which allows a foreign national to work in Türkiye on their own account without being attached to a particular employer.

The Ministry of Labour describes an independent work permit as a permit allowing a foreigner to work “in their own name and on their own account.”

When evaluating such applications, the authorities may consider matters including:

• education;
• professional experience;
• contribution to science and technology;
• the effect of the proposed activity or investment on Türkiye’s economy;
• employment creation;
• investment characteristics; and
• where relevant, the foreigner’s ownership interest in a business.

Independent work permits are issued for a limited period and are subject to administrative assessment rather than being granted automatically.

Therefore, a foreign entrepreneur wishing to run a sole proprietorship in Türkiye should not assume that registering the business alone resolves their right-to-work position.

6. What If the Founder Establishes a Turkish Company Instead?

Foreign nationals may generally own 100% of a Turkish company.

There is no general requirement for a Turkish shareholder.

Türkiye’s foreign direct investment framework follows equal-treatment principles, and foreign investors may establish the company types available under the Turkish Commercial Code. Certain sector-specific exceptions nevertheless apply, including restrictions affecting areas such as broadcasting, maritime activities and civil aviation.

The most frequently used structures for foreign investors are:

Limited Liability Company — Limited Şirket

Often suitable for:

• SMEs;
• consulting businesses;
• technology companies;
• e-commerce;
• import/export businesses;
• service businesses; and
• closely held startups.

Joint Stock Company — Anonim Şirket

Frequently preferred where:

• outside investment is expected;
• multiple investment rounds are contemplated;
• different share classes may become necessary;
• corporate governance arrangements are more complex; or
• an exit or institutional investment strategy is anticipated.

A company can usually also provide greater separation between the founder’s personal assets and business liabilities.

7. Does Owning a Turkish Company Automatically Give the Foreign Founder the Right to Work?

No.

Share ownership and work authorization are separate legal concepts.

Under the International Labour Force Law, for example, a foreign national who is both a shareholder and manager of a Turkish limited liability company may work subject to obtaining the required work permit.

Likewise, shareholder members of the board of a joint stock company who actively fall within the relevant statutory categories may require work authorization. Certain non-resident board members and non-managing shareholders may fall within work permit exemptions.

This distinction is especially relevant for overseas founders.

A person may legally own shares in a Turkish company without necessarily residing or working in Türkiye.

The analysis changes when that founder begins personally managing or working in the Turkish operation.

8. Current Work Permit Criteria for Foreign Company Owners

Foreign founders should also be aware that work permit applications can be subject to financial and employment criteria.

Under the Ministry of Labour’s current criteria, where a foreign national establishes a new business or becomes a partner in a business subject to the balance-sheet method, the foreigner’s capital contribution must generally be at least TRY 500,000, the relevant paid-in capital conditions must be satisfied, and the foreigner’s ownership interest must generally be at least 20%.

The workplace must also generally employ at least five Turkish citizens; for a newly permitted foreign owner, this employment condition begins to operate according to the timetable established by the Ministry. Certain exemptions apply, including where the foreign partner’s capital contribution reaches USD 100,000 or where other exemption criteria are satisfied.

These thresholds concern work permit assessment. They should not be confused with company incorporation requirements themselves.

A foreign national may therefore be able to own a company even though obtaining authorization to actively work in that company raises a separate set of requirements.

9. Can an Overseas Founder Simply Sell Services to Turkish Customers Without Establishing Anything in Türkiye?

Sometimes.

Suppose an entrepreneur operates a company in the United Kingdom, Germany, the United States or another jurisdiction and remotely provides software or consulting services to customers located in Türkiye.

Merely having Turkish customers does not necessarily mean that the foreign company must establish a Turkish subsidiary.

However, the analysis changes where the foreign business develops sufficient physical or commercial presence in Türkiye.

Important indicators include:

• having an office in Türkiye;
• maintaining a fixed workplace;
• having employees located in Türkiye;
• having a permanent representative in Türkiye;
• regularly concluding contracts through persons in Türkiye;
• performing substantial services physically in Türkiye; or
• conducting the core business operation from Türkiye.

Under Turkish corporate tax rules, a foreign corporation whose statutory and business headquarters are both outside Türkiye is generally regarded as a limited taxpayer and is taxable in Türkiye on specified Turkish-source income.

Commercial income derived through a workplace or permanent representative in Türkiye can fall within Turkish taxation. The Turkish Revenue Administration explains that the concepts of a “workplace” and “permanent representative” are particularly relevant when determining Turkish taxation of foreign businesses.

Therefore, the fact that invoices are issued by a foreign company does not automatically eliminate Turkish tax exposure.

10. Permanent Establishment Risk

International founders should pay particular attention to permanent establishment, or PE, risk.

A foreign business may begin without a Turkish subsidiary but gradually establish enough presence in Türkiye to create Turkish tax obligations.

For example:

Low-risk scenario:
A UK SaaS company has no office, employee or representative in Türkiye. Turkish customers independently purchase subscriptions online.

Higher-risk scenario:
The founder moves to Istanbul, operates the company every day from an office there, negotiates and signs customer contracts, hires staff and directs the business from Türkiye.

The second scenario raises substantially greater Turkish tax, employment and regulatory concerns.

The relevant Double Taxation Agreement between Türkiye and the foreign company’s jurisdiction must also be reviewed because treaty rules can affect whether a taxable permanent establishment exists.

11. Can a Foreign Company Open a Branch Instead of Establishing a Turkish Subsidiary?

Yes.

A foreign company may establish a branch office in Türkiye.

A Turkish branch is not an independent legal entity separate from its foreign parent. Its existence is connected with the parent company, and the branch may generally operate within the parent company’s business purposes.

The official Invest in Türkiye guidance confirms that a branch:

• has no shareholders;
• is not an independent legal entity;
• generally has no statutory capital requirement; and
• may operate within the purposes of the parent company.

Because the branch is not legally independent from its parent, liabilities generated through the branch may ultimately expose the foreign parent company.

A branch may nevertheless be attractive where a foreign corporation wants a Turkish establishment without creating a separate subsidiary.

12. What About a Liaison Office?

A liaison office is fundamentally different.

A foreign company may obtain authorization from the Ministry of Industry and Technology to establish a liaison office in Türkiye.

However:

A liaison office cannot conduct commercial activities in Türkiye.

It can generally perform functions such as:

• market research;
• representation;
• feasibility studies;
• coordination;
• regional management;
• communication; or
• monitoring investment opportunities,

depending on the scope of the authorization.

The official investment guidance expressly states that foreign companies may establish liaison offices subject to Ministry authorization, provided that the office does not engage in commercial activity in Türkiye.

Therefore, a liaison office cannot ordinarily be used as a disguised sales office.

For example, if a liaison office begins issuing invoices, directly selling services or generating revenue through commercial transactions in Türkiye, significant regulatory and tax problems may arise.

13. Can a Foreign Founder Operate Completely Informally?

This is where the answer becomes much clearer:

Generally, no.

A foreigner should not interpret “you may not need to establish a company” as permission to conduct continuous business without registration.

A person who establishes and continuously operates a commercial enterprise in their own name may acquire merchant status under the Turkish Commercial Code.

Depending on the circumstances, operating informally may lead to issues involving:

• unregistered commercial activity;
• income or corporate taxation;
• VAT;
• tax penalties;
• bookkeeping obligations;
• social security;
• unauthorized employment;
• work permit violations;
• consumer protection law;
• invoicing requirements; and
• sector-specific licensing.

The appropriate legal analysis therefore considers the substance of the business, not merely the label used by the founder.

14. What If the Founder Is Only Testing the Turkish Market?

Foreign startups often want to test demand before creating a Turkish entity.

There can be legitimate ways to structure this phase.

For example, a foreign company may initially:

• sell cross-border from its home jurisdiction;
• appoint an independent Turkish distributor;
• engage a commercial agent;
• work with independent contractors, subject to employment-law classification risks;
• establish a non-commercial liaison office; or
• establish a branch when local commercial presence becomes necessary.

However, simply describing Turkish operations as “market testing” will not protect the founder if the actual activity constitutes regular commercial operations.

Authorities will generally focus on what is happening in practice.

15. Special Rules Apply to Certain Professions and Industries

Foreign investors should also verify whether their proposed activity is subject to nationality, licensing or professional restrictions.

Certain professions are reserved to Turkish citizens or subject to specific legal conditions.

The Ministry of Labour’s current list includes, among others, certain positions or professions involving private security, financial consultancy, dentistry, pharmacy, veterinary medicine, notarial services, legal practice and other regulated professions.

Certain industries may also have restrictions or special licensing requirements, including:

• financial services;
• insurance;
• broadcasting;
• aviation;
• maritime business;
• healthcare;
• education;
• payment services;
• crypto-asset services; and
• telecommunications.

Therefore, establishing the correct business vehicle is only the first step. Sector-specific authorization must also be checked.

16. Company, Sole Proprietorship, Branch or No Turkish Entity?

The appropriate model can broadly be summarized as follows.

Sole Proprietorship

Potentially suitable where:

• the founder operates alone;
• the activity is relatively small;
• investment is not expected immediately; and
• the founder accepts personal liability.

Work permit and tax requirements must still be addressed.

Turkish Limited Liability Company

Potentially suitable where:

• the business will operate continuously in Türkiye;
• local customers and employees are expected;
• commercial contracts will be concluded regularly;
• liability separation is important; and
• a relatively straightforward corporate structure is preferred.

Joint Stock Company

Potentially suitable where:

• investment rounds are expected;
• more sophisticated shareholder structures are needed;
• the business may eventually be sold or institutional investors admitted; or
• corporate governance requirements justify the structure.

Turkish Branch of a Foreign Company

Potentially suitable where:

• the founder already operates through an established overseas company;
• the foreign company wants direct Turkish presence; and
• the parent accepts direct exposure to branch liabilities.

Liaison Office

Potentially suitable where:

• the objective is market research or representation;
• revenue will not be generated through the Turkish office; and
• commercial activity is not yet intended.

Operating Directly From Abroad

Potentially suitable where:

• operations genuinely remain overseas;
• there is no Turkish workplace or permanent representative;
• services are delivered cross-border; and
• the structure does not create a Turkish permanent establishment or other local registration requirement.

17. A Practical Example

Consider a German entrepreneur developing an AI-based SaaS product.

Scenario 1

The founder lives in Berlin. The company is German. Turkish users purchase subscriptions online. There is no office or employee in Türkiye.

A Turkish company may not necessarily be required merely because Turkish customers use the product.

Scenario 2

The founder relocates to Istanbul, rents an office, personally negotiates contracts, hires Turkish sales personnel and operates the Turkish market from that office.

At this stage, relying solely on the German company becomes substantially more complicated. Turkish corporate tax, permanent establishment, employment and work permit issues should be analysed.

Scenario 3

The founder wants to test the market but does not want to sell locally yet.

A properly authorized liaison office may potentially serve certain non-commercial functions.

Scenario 4

The founder wants to personally provide consulting services in Türkiye without incorporating a limited company.

A registered individual commercial enterprise may potentially be considered, together with the appropriate tax registration and work authorization.

The key issue in each scenario is therefore not simply whether a company exists.

It is where and how the business is actually operated.

Frequently Asked Questions

Can a foreigner start a business in Türkiye without a Turkish partner?

Generally, yes. Foreign investors may own 100% of many types of Turkish companies. Sector-specific exceptions should nevertheless be reviewed.

Can a foreigner establish a sole proprietorship in Türkiye?

Yes, a foreign national may in principle register an individual commercial enterprise subject to applicable registration, tax and immigration/work permit requirements.

Does establishing a sole proprietorship automatically give me a residence permit?

No. Commercial registration, residence status and work authorization are separate legal matters.

Can I work in my Turkish company just because I own it?

Not necessarily. Active foreign company managers and certain foreign shareholder-managers may need a work permit.

Can my foreign company invoice Turkish clients without opening a Turkish company?

Potentially yes, particularly in genuine cross-border transactions. However, Turkish tax and permanent-establishment risks must be assessed.

Can I establish a liaison office and sell products through it?

No. Liaison offices are prohibited from conducting commercial activities in Türkiye.

Is a Turkish branch a separate company?

No. A branch is not an independent legal entity separate from the foreign parent company.

Conclusion

A foreign founder does not always have to establish a Turkish limited liability or joint stock company to conduct business connected with Türkiye.

Possible alternatives include a sole proprietorship, a Turkish branch of an existing foreign company, limited cross-border operations from abroad or, for non-commercial functions, a liaison office.

However, “operating without a company” should never be confused with “operating without registration.”

Where the foreign founder regularly carries out business activities from Türkiye, important obligations may arise under Turkish commercial law, tax law, social security law, immigration and work permit legislation.

The most appropriate structure should therefore be determined by examining:

where the founder lives, where the business is managed, where contracts are concluded, where customers and employees are located, how payments are received, whether a Turkish workplace exists and whether the founder personally performs work in Türkiye.

For foreign founders, these questions should ideally be addressed before commercial operations begin, because restructuring an already active and potentially non-compliant business can be significantly more complicated than selecting the correct structure at the outset.