What is an incorporated company? How to establish an incorporated company?
According to the Turkish Code of Commerce, an incorporated company is a company that has a designated capital which is divided into shares, and the debts that the company is liable for are limited with its assets.
What Are The Properties Of Incorporated Companies?
Briefly, the properties of incorporated companies are;
- Shareholders are liable only to the company and only with the capital shares they have committed.
- Incorporated companies can be established for any economic purpose and business that is not prohibited by law.
- The company is established when the founding partners declare their will to establish an incorporated company in the articles of association, in which they commit to pay the entire capital with notarized signatures.
- The founders are the real persons or legal entities which have made a capital commitment and signed the articles of association.
- To establish an incorporated company, there must be one or more founders.
How To Establish An Incorporated Company?
It is well-advised to agree with an Independent Accountant and Financial Advisor before establishing an incorporated company. The advisor can follow the establishment process when the power of attorney is provided. You can choose WorqCompany to manage all these processes on your behalf. In this sense, the first of the documents required is the power of attorney to be obtained from the notary public.
The stages of the establishment can be listed as follows;
- Preparation of the articles of association
- Notary approval procedures
- Approval of the articles of association in the trade registry
- Obtaining potential tax number
- Depositing the relevant amount of capital in the bank
- Submitting the required documents for establishment to the trade registry
- Making the opening notification to the tax office
- Registration to the relevant association (such as chamber of industry / trade association)
The first stage of establishment is the preparation of the articles of association of the company. First of all, the title of the company is determined with the chamber of commerce. Then, the general assembly and the board members are determined and stated in the articles of association. The scope of corporate action should be specified in the articles of association as well.
After the definition of the establishment information, the potential tax number and tax office information are obtained from the Mersis (central registration) system. Then, ¼ of the capital is deposited by going to the bank and the relevant documents are submitted to the trade registry.
The chamber of commerce completes the establishment by creating the necessary books. After the procedures in chamber of commerce, the company establishment is announced to the relevant tax office.
How Much Capital Is Required To Establish An Incorporated Company?
The lower limit for the capital in the establishment of an incorporated company is 50,000 TL. For companies using the registered capital system, this amount is 100,000 TL. During the establishment phase, ¼ of this amount has to be blocked.
What Is a Registered Capital System?
Normally, in Incorporated companies, the capital increase depends on the decision of the general assembly. This can cause a loss of time when a capital increase is required. The registered capital system is created to prevent this time loss. With this system, the company can increase its capital up to five times the capital committed in the establishment without seeking the decision of the general assembly.
Who Can Establish An Incorporated Company?
Incorporated companies can have only one or multiple partners. Company founders can be real persons or legal entities. If the number of partners exceeds 500, the company becomes subject to the regulations of the Capital Markets Board.
Obligation For Lawyer In Incorporated Companies
There is no article in the Turkish Code of Commerce for the obligation of a lawyer in Incorporated companies. But if the company’s capital is five times or more than the minimum capital determined in the Turkish Code of Commerce, per Article 35 of the Legal Profession Act, this company is obliged to have a contracted lawyer. In other words, it is obligatory to have a lawyer for companies with a capital of 250,000 TL or more.
According to the relevant law, a penalty equal to twice the monthly gross amount of the minimum wage is imposed for each month for companies that do not comply with the obligation to have a lawyer.
What Is In The Articles Of Association Of An Incorporated Company?
- Company’s full title and head office address
- Founding Partners of the Company
- Sectors in which the company will operate
- Capital amount, shares, method, and conditions of capital payment
- The share certificates that will be registered or bearer; privileges granted to certain shares; transfer restrictions. If any, non-cash assets other than cash capital to be included as capital (Workplace, vehicle, warehouse, etc.)
- Interests to be provided to the founders, board members, and other persons from the profits of the company.
- Board members, those who are authorized to sign on behalf of the company.
- Conditions of convoking the general assembly, voting rights of the partners
- The period of time, if the company is limited to a certain time period.
- The method for making the company announcements.
- Types and amounts of capital shares committed by partners.
- Appointment of the first board members of the company
What Is The Establishment Cost Of Incorporated Companies?
The establishment costs of companies vary according to factors such as the number of founding partners, the amount of capital, the rent price, the city you are in. But if we want to calculate an average cost for a single partner incorporated company establishment;
Notary expenses: Approximately 550 TL in total 150 TL for the authorized signatory list, 200 TL for the power of attorney provided for the establishment, 200 TL for the power of attorney to be provided to the financial advisor. The reason why we say approximately is that there may be minor changes from notary to notary.
Chamber of Commerce expense:Although it varies according to the number of words in the articles of association, we can say that the cost will be 1,500 TL on average.
Establishment fee: If you want to make company establishment transactions through a financial advisor, the incorporated company establishment fee is 974 TL according to the Chamber of Independent Accountants and Financial Advisor’s minimum fee schedule.
Rental stamp duty: This amount changes according to the workplace you will rent, and it varies approximately between 25 TL and 120 TL for a place rented with a monthly rent of 1,000 TL. The reason for this variation is that it is affected by variables such as whether the contract has a guarantor or whether the rented place is a virtual office.
Capital blockage: As we mentioned above, the capital should be at least 50,000 TL, and ¼ of the capital determined in the articles of association must be deposited in the bank at the establishment stage.
When we sum up all the above, the initial cost of establishing an incorporated company with the capital blockage is approximately 15,000 TL. Of course, when we consider that the blocked amount can be withdrawn in a few days, the actual cost is around 2,500 TL.
It should also be noted that items such as the rent to be paid and the assets to be purchased for the company are not included in these costs.
What Are The Responsibilities Of Partners In Incorporated Companies?
In incorporated companies, as also stated in the definition, the partners are only responsible to the company and to pay the registered capital shares they have committed. (Turkish Code of Commerce article 329)
However, if the founders, members of the board, managers, and liquidators violate their contractual obligations that are in the law and the articles of association, they are liable for the deficits they have caused to the company, the shareholders, and the company’s creditors. (Turkish Code of Commerce article 553)
Taxes Paid By Incorporated Companies
Incorporated Companies are corporate taxpayers. That means they are normally obliged to pay 20% tax according to the law. However, with the change made at the time this article was written, this rate is applied as 25% for 2021 and 23% for 2022.
Unlike income tax, corporate tax is a flat rate, not progressive. This means that no matter how much the company earns, the annual tax rate will not change.
In terms of tax declaration, these companies have to provide monthly VAT declaration, monthly or quarterly withholding tax return declaration, quarterly corporate advance tax declaration, and annual corporate tax declaration.
The Advantages Of Establishing An Incorporated Company
The biggest advantage of establishing an incorporated company is the responsibilities of the partners as we have mentioned above.
Another advantage is that real persons do not pay Income Tax on the profits they gain if they sell their incorporated company shares, after holding them for two full years.
Companies that are corporate taxpayers do not pay tax for half of their earnings if they sell real estate registered in their assets for at least two full years.
What Are The Documents Required In The Establishment Process?
- Notarized company articles of association – 3 copies / 4 copies for the establishment of foreign-invested companies
- Signature Declaration of the Company Manager – 2 copies
- Chamber of Commerce registration declaration– with photograph
- Company Registration Application Form – 3 copies
- Founding shareholders information form
- Capital blockage letter received from the bank
- Competition Authority share payment (to be paid from the chamber of commerce cashier)
How Long Does It Take To Establish An Incorporated Company?
The establishment of an incorporated company can be done by making an appointment with the chamber of commerce after completing the documents. If there is no error in the articles of association, the establishment process can be completed within an average of three working days.
What Should Be The Address Of The Incorporated Company?
There are three options for the address of an incorporated company. Depending on the type and requirements of the work to be done, the owner of the company can rent a physical workplace and use this place as an address. Optionally he/she can show the house where he/she resides as the company address. Another option is the virtual office option, which is very popular nowadays.
The biggest advantage of using a virtual office is the absence of rental stoppage. If you show your residence as your company address, you will be obliged to deduct the tax of the rent from the landlord and pay it to the state. But since a company rents the virtual offices, this obligation is eliminated.
For more detailed information, you can watch our video below!