Documentation is essential when setting up a company Turkey

Forget the cookie-cutter advice you've heard about setting up a company in Turkey. This isn't your typical "5 easy steps" guide. Instead, we're diving into the hidden currents of Turkish business culture that can make or break your venture. From the surprising definition of who counts as a "foreign investor" to the nuanced differences between company structures, we'll explore the aspects that most websites gloss over. Whether you're a seasoned entrepreneur or a first-time investor, this insider's look will equip you with the knowledge to navigate Turkey's business landscape like a local. Buckle up – your Turkish business adventure starts here.

1. Setting Up a Company in Turkey: Foreign Investment Overview

Turkey offers a welcoming environment for foreign investors, with most business sectors open to international capital. The country's legal framework aims to create a level playing field, where foreign-owned companies operate under largely the same rules as domestic firms.

However, it's important to note that while the general investment climate is open, certain industries may have specific regulations that apply to both foreign and local investors. For example, if you're looking to invest in tourism or mining, you'll need to consider both the foreign investment laws and the sector-specific regulations.

This dual-layer approach ensures that foreign investors can participate in a wide range of economic activities while also adhering to Turkey's strategic interests and industry-specific requirements. As a potential investor, understanding this landscape is crucial for making informed decisions and navigating the legal aspects when setting up a company in Turkey.

2. Legal Framework for Foreign Investment

The cornerstone of Turkey's foreign investment regime is the Direct Foreign Investment Law No. 4875, enacted in 2003. This law marked a significant shift towards a more investor-friendly approach, replacing the previous system of investment permits with a simpler notification process. This change has made setting up a company in Turkey more straightforward for foreign investors.

Key aspects of this law include:

Defining who qualifies as a foreign investor
Outlining the methods for making direct foreign investments
Guaranteeing equal treatment for foreign and domestic investors

To provide more detailed guidance, Turkey also introduced the Implementation Regulation for Direct Foreign Investment Law. This regulation fills in the practical details, covering areas such as:

The procedure for registering foreign investments
Rules on Employing Foreign Personnel
The process for transferring profits and capital abroad

3. Who Can Invest? Defining Foreign Investors

Exchanging business cards: Turkish company management meets investors

Turkey casts a wide net when it comes to welcoming foreign investors. You might be surprised to learn that it's not just citizens of other countries who qualify. The law recognizes four main categories:

Foreign country citizens - This one's pretty straightforward.
Turkish citizens residing abroad - Interesting, right? If you're Turkish but live overseas, you're considered a foreign investor.
Legal entities established under foreign laws - So, the companies incorporated outside Turkey can invest too.
International organizations - Think along the lines of development banks or global institutions.

This broad definition is great news if you're looking to invest in Turkey. It means there's likely a path for you, regardless of your specific situation. For example, if you're a Turkish expat living in Germany and wanting to invest back home, you'd still enjoy the benefits and protections offered to foreign investors.

4. 3 Key Methods for Setting Up a Company in Turkey

When it comes to setting up a company in Turkey, you've got three main options. Each method has its own advantages and considerations, depending on your investment goals and resources:

Establishing a Turkish company: This is like planting your flag on Turkish soil. You create a brand new entity under Turkish law. It's a great choice if you want full control and are in it for the long haul.
Acquiring shares in an existing Turkish company: Think of this as joining forces with an established player. It can be a quicker way to enter the market, especially if you find a company that complements your strengths.
Opening a branch office: This is a middle ground. You're not creating a separate legal entity, but you're establishing a physical presence. It's often used by companies wanting to test the waters before diving in fully.

Each method has its pros and cons, depending on your goals and resources. For instance, if you're a tech startup wanting to tap into Turkey's young, tech-savvy population, establishing your own company might give you the flexibility to build your brand from scratch. On the other hand, if you're in manufacturing, acquiring shares in an existing company could give you instant access to facilities and a workforce.

5. Types of Companies Available for Foreign Investment

When setting up a company in Turkey, foreign investors have several options to choose from. Each type of company has its own characteristics and may be better suited for different investment goals. Let's take a quick look at your options:

Company Type	Key Features	Liability	Suitable For
Ordinary Partnership (Adi Şirket)	Simple structure, easy to set up	Unlimited liability for all partners	Small-scale or temporary projects
Collective Company (Kollektif Şirket)	All partners actively involved in management	Unlimited liability for all partners	Less common for foreign investors due to higher risk
Limited Partnership (Komandit Şirket)	Two types of partners: general and limited	General partners have unlimited liability; limited partners have limited liability	Investors seeking a balance between control and limited liability
Joint Stock Company (Anonim Şirket)	Complex structure, flexible for raising capital	Limited to capital contribution	Larger investments, plans to go public
Limited Liability Company (Limited Şirket)	Balance of protection and simplicity	Limited to capital contribution	Popular choice for foreign investors, small to medium-sized businesses
Cooperative (Kooperatif)	Collaborative structure	Usually limited to capital contribution	Specific collaborative projects, less common for foreign investors

Ordinary partnerships (Adi Şirket)

These are simple partnerships, often used for small-scale or temporary projects. They're easy to set up but lack some of the protections of more formal structures.

Collective companies (Kollektif Şirket)

These are partnerships where all partners have unlimited liability. They're less common for foreign investors due to the higher risk involved. Limited partnerships (Komandit Şirket): These have two types of partners - some with unlimited liability (general partners) and others with limited liability (limited partners). They can be a good middle ground for some investors.

Joint stock companies (Anonim Şirket)

Similar to corporations, these are more complex structures often used for larger investments. They offer more flexibility in terms of raising capital.

Limited liability companies (Limited Şirket)

A popular choice for foreign investors, these offer a good balance of protection and simplicity. They're easier to set up than joint-stock companies but still provide limited liability.

Cooperatives (Kooperatif)

These are less common for foreign investors but can be useful for certain types of collaborative projects.

6. Setting Up a Company in Turkey: Key Features to Consider

Examining capital contribution requirements for Turkey business setup

Minimum capital requirements for

Each company type in Turkey has different minimum capital requirements. By 2024, joint stock companies (Anonim Şirket) need at least 250,000 Turkish Lira, while limited liability companies (Limited Şirket) require a minimum of 50,000 Turkish Lira. This matters because it affects how much you need to invest upfront and can impact your choice of company structure.

Number of partners/shareholders

The number of partners or shareholders you can have varies by company type. For instance, limited liability companies can have up to 50 partners, while joint stock companies have no upper limit. Interestingly, both can now be established with just one shareholder, which is great news if you're planning to go solo.

Management structures

Management structures differ significantly between company types. Joint stock companies have a more complex structure with a board of directors and general assembly, similar to corporations in other countries. Limited liability companies, on the other hand, have a simpler structure with one or more managers. This affects how decisions are made and how much control you have over day-to-day operations.

Liability of partners/shareholders

One of the most critical factors to consider is liability. In joint stock and limited liability companies, shareholders' liability is limited to their capital contribution. This means your personal assets are protected if the business faces financial troubles. However, in collective companies (Kollektif Şirket), partners have unlimited liability, which carries more personal risk.

7. Spotlight on Joint Stock Companies (Anonim Şirket)

Joint stock companies (Anonim Şirket) offer flexibility that's great for larger investments or if you're planning to go public someday. Here are some key points to consider:

Capital structure options: You can choose between fixed or registered capital. Fixed capital is simpler, but registered capital gives you more flexibility to raise funds without going through a full legal process each time. This can be a big advantage if you're planning rapid growth.
Minimum capital: You'll need at least 250,000 Turkish Lira to get started. While this is higher than some other company types, it also signals credibility to potential partners and customers.
Single-shareholder possibility: Interestingly, you can now set up an Anonim Şirket with just one shareholder. This is great if you want the benefits of this structure without bringing in partners right away.

Feature	Joint Stock Company (Anonim Şirket)	Limited Liability Company (Limited Şirket)
Minimum Capital (2024)	250,000 Turkish Lira	50,000 Turkish Lira
Maximum Number of Shareholders	No limit	50 partners
Single Shareholder Option	Yes	Yes
Management Structure	More complex: Board of Directors and General Assembly	Simpler: One or more managers
Liability	Limited to capital contribution	Limited to capital contribution
Suitable for	Larger investments, plans to go public	Small to medium-sized businesses
Capital Structure Options	Fixed or Registered capital	Fixed capital
Complexity	More complex to set up and run	Easier to set up and manage
Cost	Higher setup and ongoing costs	More cost-effective

8. Focus on Limited Liability Companies (Limited Şirket)

If you're looking for a balance of simplicity and protection, a Limited Şirket might be your best bet. Here's why:

Popular choice: Many foreign investors opt for this structure because it's easier to set up and run than an Anonim Şirket, but still offers solid liability protection.
Cost-effective: You'll generally face lower setup and ongoing costs compared to a joint stock company. This can be crucial when you're first entering the Turkish market and want to keep expenses down.
Partner limit: You can have up to 50 partners, which is plenty for most small to medium-sized businesses. Just remember, if you're planning to expand beyond that or go public, you'll need to convert to an Anonim Şirket down the line.

9. Legal Checklist: Setting Up a Company in Turkey

Setting up a company in Turkey involves a few key steps. First, you'll need to draft articles of association - think of this as your company's constitution. It outlines how you'll operate and make decisions. Next, you'll register with the trade registry. This makes your company official in the eyes of the Turkish government.

Don't forget about the capital! Turkey has minimum capital requirements that vary by company type. For a limited liability company, you'll need at least 50,000 Turkish Lira. Joint stock companies require 250,000 Lira. This ensures you're serious about your venture and have some skin in the game.

10. Management and Representation of Companies

How you'll run your company depends on its structure. Joint stock companies have a more formal setup, with a general assembly of shareholders and a board of directors calling the shots. It's like a mini-government for your business.

Limited liability companies keep things simpler. They're managed by one or more managers, giving you more flexibility in day-to-day operations. This can be great if you want a more hands-on approach or have a smaller team.

Choosing the right structure matters because it affects how quickly you can make decisions and adapt to market changes. For example, if you're in a fast-moving tech industry, the agility of a limited liability company might be appealing.

11. Foreign Investor Responsibilities

Navigating foreign investment regulations in Turkey's business landscape

As a foreign investor, you've got two main responsibilities to keep in mind. First, you need to follow through on your capital contribution promises. If you said you'd invest a certain amount, make sure you do it. This isn't just about keeping your word - it's a legal obligation.

Secondly, you'll need to play by the rules. This means complying with both your company's bylaws and Turkish law in general. It might sound obvious, but it's crucial. Falling afoul of regulations can lead to serious consequences, potentially jeopardizing your entire investment.

Consider working with a local legal advisor to ensure you're ticking all the right boxes. They can help you navigate any unfamiliar aspects of Turkish business law, keeping your investment safe and sound.

12. Your Turkish Business Adventure: Ready to Take the Plunge?

Setting up a company in Turkey can be an exciting journey, full of opportunities and challenges. From choosing the right business structure to navigating local regulations, there's a lot to consider. But don't let that scare you off - with the right guidance, you can make your Turkish business dreams a reality.

If you're feeling overwhelmed, remember you're not alone. Atlas Legal Partners in Istanbul specializes in helping foreigners with all sorts of legal matters, including business setup. They can be your local ally, ensuring you don't miss any crucial steps along the way.

So, what's holding you back from starting your Turkish business adventure? Maybe you've got concerns about the process, or perhaps you're wondering how your industry fits into the Turkish market. Why not share your thoughts or questions? Your experience could help others take their first steps too.

Expert Assistance for Setting Up a Company in Turkey

Attorney Name	Education	Membership	Languages
Taha S. Sahin	LLB, MBA	Istanbul Bar No:1 52671	English, Turkish
Saftar Guliyev	LLB, LLM	Istanbul Bar No:1 76338	Turkish, English, Russian
Asiye Bayturk	LLB, BS	Istanbul Bar No:2 1458	Turkish, English
Akif Dogan	LLB	Tekirdag Bar No: 1334	Turkish, English, German

Setting Up a Company in Turkey: What Foreign Investors Must Know