Legal Foundation in Plain Language
Turkish law applies a national-treatment approach to foreign direct investment. In general, foreigners may:
- Incorporate new companies or acquire existing ones.
- Hold 100% ownership in most sectors.
- Appoint foreign managers or board members.
- Repatriate dividends and proceed with lawful capital movements.
This baseline is then refined by special legislation for regulated sectors such as banking, insurance, capital markets, energy, telecoms, private security, aviation, media and broadcasting, and certain professional services. If you are entering a regulated space, harmonize your corporate form and timing with licensing requirements before you sign leases or hire staff.
The Main Vehicles, Explained
1) Limited Liability Company (Ltd. Şti.)
Who picks it: SMEs, local subsidiaries of international groups, trading and services companies, early-stage and mid-stage businesses that want a fast, flexible structure without the heavier governance of a joint stock company.
Core features in practice
- Shareholders: One or more, individuals or companies, domestic or foreign.
- Capital: Statutory minimums apply; plan realistic capitalization to pass banking compliance and support early operations.
- Organs: General assembly of shareholders and at least one manager. A manager can be a shareholder or a third person, and can be foreign.
- Liability: The company is liable with its assets; shareholders are liable up to their capital commitments, with narrow public-law exceptions.
- Transfers: LLC equity is represented by “quotas.” Transfer procedure is more formal than share transfers in a joint stock company and typically involves a notarial deed and trade registry steps. Your articles can add pre-emptive rights, approval conditions, and lock-ups.
- Use cases: Sales and distribution, import/export, e-commerce, consulting and software, service centers, boutique manufacturing.
Why founders like it
- Faster set-up and leaner governance than a joint stock company.
- Works well for wholly-owned subsidiaries and straightforward ownership structures.
- Familiar to counterparties and banks.
Watch-outs
- Equity instruments are less flexible than in a joint stock company. If you plan multiple funding rounds, employee equity pools, or convertible instruments, you may outgrow the LLC format or need a later conversion.
2) Joint Stock Company (Anonim Şirket – A.Ş.)
Who picks it: Growth-oriented businesses that expect external fundraising, complex cap tables, share classes, convertibles, or a future public-markets path; corporate groups that prefer board-driven governance.
Core features in practice
- Shareholders: One or more, individuals or companies, domestic or foreign.
- Capital: Higher statutory minimums than an LLC; non-public companies that adopt a registered capital system must meet an even higher threshold.
- Organs: General assembly and board of directors. Board members may be individuals or legal entities represented by individuals.
- Securities: Shares can be issued in various classes; privileged shares and debt instruments are possible under the rules.
- Transfers: Transfer of registered shares is generally more fluid than LLC quota transfers, subject to statutory or articles-based restrictions.
Why investors like it
- Flexible equity architecture for venture rounds and strategic investment.
- Clear board-level governance.
- Easier to implement share certificates, pledge mechanisms, and a path to public offerings.
Watch-outs
- More formalities and potentially higher running costs than an LLC.
- Not always necessary for lean, single-owner operations.
3) Branch of a Foreign Company
Who picks it: Groups that prefer not to create a separate Turkish legal entity but still wish to carry on commercial activities in Türkiye.
Core features in practice
- Legal personality: A branch is not a separate legal entity. It is the parent company’s extension in Türkiye.
- Liability: The foreign parent remains directly responsible for branch liabilities.
- Commercial capacity: A branch may trade, invoice, employ staff, and register for taxes in Türkiye for its Turkish-source income.
- Governance: A branch representative is appointed with clear signing authorities.
Why some groups choose it
- Keeps the structure simple and fully integrated with the parent.
- May align with group accounting and tax consolidation outside Türkiye.
Watch-outs
- Counterparties sometimes prefer dealing with a separate Turkish entity.
- Parent exposure is direct; if you want a liability shield and corporate separateness, consider an LLC or JSC.
4) Liaison (Representative) Office – Non-Commercial Only
Who picks it: Businesses that want a foot on the ground for market research, sourcing, quality control, partner coordination, or brand representation without trading and invoicing.
Core features in practice
- Nature: A liaison office is not a commercial enterprise and cannot generate revenues, issue invoices, or sign sales contracts in its own name.
- Permit: Operates under a permit issued by the competent authority. Permits are time-limited and extendable if activity remains within the approved non-commercial scope.
- Employment: May hire staff and pay payroll-related taxes and withholdings even though it is not a corporate income tax payer on trading profits.
Why it’s useful
- Low-risk, low-overhead presence to explore the market and coordinate group activities.
- A practical pre-set-up stage before forming a company.
Watch-outs
- Blurring the line into commercial activity risks penalties and cancellation of the permit.
- If you plan to sell or invoice, you need an LLC, JSC, or branch.
Choosing the Right Vehicle: A Decision Framework
- Will you trade and invoice in Türkiye within 0–6 months?
- Yes: Choose LLC, JSC, or Branch.
- No: Consider a Liaison Office for non-commercial presence.
- Do you expect external investors, ESOPs, convertibles, or a potential IPO?
- Yes: Start with a JSC or plan an early LLC → JSC conversion.
- No / single owner: LLC is usually faster and simpler.
- Is parent-level exposure acceptable?
- Yes: A Branch is viable.
- No: Use an LLC or JSC for corporate separateness.
- Are you entering a regulated sector?
- Yes: Map licensing first, then pick the vehicle. Sector rules may dictate or influence corporate form and timing.
- Banking and KYC readiness
- Have apostilled corporate documents, UBO proofs, and a clean ownership chain ready. This often dictates your practical timeline more than pure legal steps.
Step-by-Step: Incorporation and Set-Up in Practice
The following sequence reflects common practice for LLC and JSC incorporations:
- Name Clearance and Articles Drafting
- Prepare your Articles of Association (AoA) through the Central Trade Registry System.
- Ensure your scope of business tracks your NACE activity codes, and sanity-check whether your activities trigger special licenses.
- Shareholder Documentation
- Individuals: passports and address proofs.
- Corporate shareholders: articles, certificates of good standing, signatory lists, board resolutions authorizing incorporation, and apostille/legalization as required.
- Arrange sworn translations in Türkiye.
- Manager or Board Appointments
- Decide on the initial manager(s) for LLC or board composition for JSC.
- Prepare signature declarations and internal authority matrices.
- Registered Office
- Secure a lease or ownership document for the company address prior to registry filing.
- Capital Planning
- Meet statutory minimum capital and finance your real operating needs (rent, payroll, inventory).
- For in-kind contributions, plan professional valuation and court-related formalities in advance.
- Trade Registry and Chamber Enrollment
- File the incorporation dossier.
- Register with the relevant Chamber of Commerce.
- Tax, E-books, E-invoice
- Complete tax office registrations.
- Activate mandatory e-book and e-invoice modules based on thresholds and sectoral obligations.
- Social Security and Payroll
- Register as an employer if hiring staff.
- Align employment contracts with Turkish labor law and payroll practices.
- Banking
- Open a corporate bank account. Provide KYC pack, UBO charts, and board/manager resolutions granting banking authority.
Branch set-up follows a similar path but begins with a board resolution of the foreign parent to establish a branch in Türkiye, accompanying corporate documents, and appointment of a branch representative.
Liaison office applications are dossier-based, focusing on a clear non-commercial activity plan and proof of the parent’s real business operations.
Governance: Practical Drafting Tips (LLC and JSC)
- Tailor Your Articles: Include transfer restrictions, pre-emptive rights, approval conditions, deadlock resolution, veto lists, supermajority quorums for strategic matters, and mechanisms for drag-along and tag-along.
- Shareholders’ Agreement (SHA): Reinforce confidentiality, IP assignment, non-compete, non-solicitation, information rights, dispute resolution seat and rules, and exit mechanics.
- Signatory Regime: Adopt a board or manager resolution specifying sole/dual signatures, monetary thresholds, and internal approvals for HR, finance, and procurement.
- ESOP/VSOP Planning: For JSCs, articulate classes, vesting, leaver provisions, and transfer restrictions up front. For LLCs, consider alternatives or plan a conversion timeline.
Banking, Compliance, and Money Flows
Turkish banks apply robust AML and sanctions screening. For a smooth account opening:
- Present a clean UBO chain and apostilled documents.
- Provide board or manager resolutions on banking authority.
- Keep your Turkish address and lease in order.
- Plan early for foreign exchange management, dividend distributions, and cross-border intercompany charges.
- Document transfer pricing for management fees, royalties, and cost-sharing.
Accounting, Tax, and Payroll—High-Level Orientation
- Corporate Income Tax: LLCs and JSCs are corporate taxpayers. Branches are taxed on Turkish-source income. Rates and incentives can change annually; confirm the current rate and any sectoral incentives before you model cash flows.
- VAT (KDV): Most supplies are subject to VAT; exports and some services benefit from exemptions or zero-rating.
- Withholding: Cross-border services, interest, and royalties may attract withholding; check any double taxation treaty positions.
- Statutory Books and E-Compliance: Turkey has strong e-compliance infrastructure. Make sure your accounting provider can manage e-books, e-invoices, e-archives, and e-ledgers in line with thresholds.
- Payroll and Social Security: Employee onboarding requires SGK registration, minimum wage compliance, working-time rules, overtime pay, paid leave, termination procedures, and severance entitlements. Foreign managers physically working in Türkiye typically require work and residence permits.
Immigration and Work Authorization
Foreigners can own a company without holding a residence permit. However, working in Türkiye—managing operations on the ground, signing documents in a day-to-day executive capacity, or drawing salary—generally requires a work permit and, practically, a residence permit. Align your corporate structure with your immigration plan:
- Appoint signatories who can be physically present when needed.
- Use power-of-attorney to handle short-term gaps.
- If the foreign manager will live in Türkiye, start the permit process early to avoid operational disruption.
Special Regimes and Locations
- Free Zones: Useful for export-oriented operations; potential customs and tax benefits depending on activity.
- Technology Development Zones: Attractive for R&D and software. Look at income tax, social security, and VAT benefits subject to eligibility and the project’s nature.
- Industrial Zones and Organized Industrial Zones: Consider land availability, utilities, and local incentives for manufacturing.
These regimes do not change the company type, but they shape licensing, compliance, and tax outcomes. Incorporate first; then obtain zone entry approvals and operate within the regime’s rules.
Common Pitfalls (and How to Avoid Them)
- Using a liaison office to trade.
A liaison office cannot sell, invoice, or negotiate commercial contracts in its own name. If revenue is on the horizon, switch to an LLC, JSC, or branch before you start selling. - Under-capitalizing the company.
Meeting minimum capital is not the same as being adequately funded. Banks and landlords expect proof you can operate. Budget realistically for the first 6–12 months. - Ignoring sector licenses.
Some activities require prior authorization. Confirm regulatory scope before signing leases or hiring. - Unclear signatory authorities.
Ambiguity slows banking, contracting, and compliance. Adopt crisp internal authority matrices. - Forgetting IP assignment and confidentiality.
Include robust IP and confidentiality clauses in employment and contractor agreements, not only in the SHA. - Late conversion to JSC when fundraising accelerates.
If you foresee venture rounds, plan cap table architecture early. Converting mid-deal invites delay and friction.
Worked Scenarios
Scenario A – Cross-border e-commerce brand testing the Turkish market
Start with an LLC for trading and fulfillment. Keep governance lean with a single manager and add a second signatory for thresholds above a set amount. If you add outside investors or a large ESOP, consider conversion to JSC in 12–24 months.
Scenario B – Global industrial group opening a sales outpost
If parent-level exposure is acceptable, a branch can trade directly and align with the parent’s accounting. If you require a liability shield or plan local joint ventures, form an LLC.
Scenario C – Software company exploring partnerships with no immediate sales
A liaison office fits if you only conduct market research, partner liaison, and quality control. Once pilots turn into revenue, incorporate an LLC or JSC.
Scenario D – Venture-backed scale-up
Go directly to a JSC to simplify share classes, convertibles, and investor rights. Adopt a tight SHA, ESOP rules, and board committees.
Frequently Asked Questions
Can foreigners own 100% of a Turkish company?
Yes, in most sectors. Sector-specific rules may impose additional conditions or licensing.
Do I need a Turkish partner or director?
No general requirement exists to appoint a Turkish partner or director. You may appoint foreign managers or board members, but immigration and tax rules apply if they work on the ground.
What’s faster: LLC, JSC, branch, or liaison office?
An LLC is usually the fastest among trading vehicles. A liaison office can also be quick but cannot trade. Lead time depends heavily on document legalization, translations, bank KYC, and your readiness with lease and address.
How do I open a bank account?
Provide corporate documents with apostille/legalization, UBO charts, signatory resolutions, Turkish address documentation, and KYC forms. Banking readiness often dictates the real-world start date.
If we plan to list years from now, should we start as a JSC?
If listing is a serious, near-term goal or you will run multiple investor rounds with structured instruments, start with a JSC. Otherwise, an LLC is fine with a planned conversion.
Is a branch cheaper than an LLC?
It can be administratively straightforward, but remember the parent’s direct liability and counterparties’ preferences. Cost should not be the only criterion.
Can a liaison office hire employees?
Yes, for non-commercial functions within its permit scope. Payroll and withholding obligations still apply.
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