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What is a Limited Company? How to establish an incorporated company?

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What is a Limited Company?

In this article, we will explain the characteristics, tax status, number of partners, and other frequently asked questions about limited companies.

What Are The Company Types?

Companies are defined in two separate laws in Turkish Legislation.

In the Turkish Code of Commerce, the company types are listed as limited company, incorporated company, commandite company with its capital divided into shares as stock corporation types; unlimited liability company and limited partnership as sole proprietorship types. Stock corporations are taxpayers of corporate tax, while sole proprietorships are taxpayers of income tax.

Ordinary companies are defined in the Turkish Code of Obligations and ordinary companies are also income taxpayers.

Tax Status of Limited Companies

Limited companies are corporate taxpayers, which means that they are normally required 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 the declaration, these companies have to submit; monthly VAT declaration, monthly or quarterly withholding tax return declaration, quarterly corporate advance tax declaration, and annual corporate tax declaration.

How Many Partners Should Limited Companies Have?

Limited companies can be established with one partner, and the upper limit for the number of partners is fifty. So what should be done if after a while the number of partners exceeds fifty? If the number of partners exceeds fifty, the sanction to be applied doesn’t exist in the law. What needs to be done is to transform the Limited Company into an Incorporated company. Because there is no upper limit for the number of partners in the Incorporated companies.

Can Retired People Establish a Limited Company?

There is no prevention for retirees to establish any type of company in our country. In addition, retirees do not pay BAĞKUR (social security organization for artisans and the self-employed) premiums if they establish a limited company. Instead, they have to pay the Social Security Support Contribution. Due to the radical changes made in the law, the status of this premium varies according to the period when the person’s insurance started. In the current period, the Social Security Support Contribution deduction rate to be made is 10% of the salary.

How to Establish a Limited 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 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.

With the last amendment, the obligation to block ¼ of the capital in the establishment of a limited company has been abolished. Therefore, it is sufficient to transfer the minimum capital amount of 10.000 TL, which is a legal requirement for the establishment of a limited company, to the company account within 2 years.

After all these steps are completed, the company’s trade register entry should be made by going to the relevant Chamber of Commerce.

How to Determine the Title of a Limited Company?

The first point to be considered while determining the title for Limited Companies is the indication of the field of activity. In addition, when selecting the title of the company, the status of similar titles should be asked to the trade registry directorate. This is because the same title cannot be used by more than one company. The two words that will come after the first word can not be the same.

For example; Kurtulus Textile Hotel Management Limited Company if there is a title such as, Kurtuluş Construction Textile Limited Company cannot be chosen. Therefore, it would be best to carry out the title determination phase with an expert.

What Documents Are Required in the Establishment Process?

  • 1 photograph
  • Chamber registration statement (fill in the form with the request number and potential tax number and print it out.)
  • Power of Attorney
  • Notice of business start date
  • E-notice form
  • Online tax office password request form
  • Lease contract (or copy of title deed)
  • Authorized signatory list of the company manager
  • Accountant’s power of attorney
  • Accounting service contract

How Long Does It Take to Establish a Limited Company?

Limited company establishment can be done by making an appointment with the chamber of commerce after the documents are completed. In general, this process can be completed in an average of three working days.

What Should Be the Address of the Limited Company?

There are three options for the company address. Depending on the type and needs of the business, the owner of the company can rent a real workplace and use this place as an address of the company. Nowadays, especially since e-commerce can be operated with the help of a computer, the person can show his/her house as the company address if he/she wants. Another option that is very popular nowadays, is the virtual office option.

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.

What is the Establishment Cost of Limited Companies?

If we say that the limited company will be established with one partner, the chamber of commerce will charge according to the number of words in the articles of association. his will cost around 1200 TL for up to a thousand words on average. n addition, there is an average of 600 TL in total for the power of attorney and signature statements to be obtained from the notary public.

Since limited companies have to keep books on the basis of balance, minor costs might occur after the establishment. These costs will vary depending on whether the company is an e-ledger taxpayer or not.

With WorqCompany, you can easily establish a limited company and without paying registration and announcement fees. If you want to establish a company easily visit our website.

How Does Share Transfer happen in Limited Companies?

In a limited company, the transfer of the shares of one or more of the partners to another partner or someone from outside the company is called a share transfer.

For the share transfer process, the first thing required is the approval of the general assembly of the company. Of course, if it is stated in the articles of association that there is no need for the approval of the general assembly in the transfer of shares, this may not be necessary. In addition, this transaction is made with a notarized limited company share transfer agreement.

How to Convert from a Limited Company to an Incorporated Company?

The procedure for the process of changing the type of limited company is as follows:

  1. The director/board of directors takes the decision of changing the type.
  2. A type change report is prepared by the director/board of directors.
  3. The interim balance sheet is issued.
  4. Type change operations are open to the review of the partners.
  5. An equity evaluation report – a valuation report for assets subject to registration is prepared by a relevant professional (by a certified public accountant or independent accountant and financial advisor).
  6. The type change plan is submitted to the approval of the general assembly.
  7. The articles of association of the new company to be established are drawn up.
  8. A type change plan is prepared by the director/board of directors.
  9. The general assembly resolution is registered in the trade registry and announced in the Turkish trade registry gazette.

Do Limited Companies Have to Be an Electronic Invoice Payer?

For limited companies, as in other types of companies, a limit of 5 million TL has been determined in the law to be an electronic invoice taxpayer. That means those whose annual turnover exceeds this limit must use e-invoice. Apart from this, taxpayers can use e-invoice if they wish.

You can watch our video for more detailed information: