How to Establish a Sole Proprietorship? What Are the Required Documents?
Nowadays, people are much more eager to obtain their economic freedom and/or earn additional income. In both cases, trading is the most logical step to take. And the first step to making money by trading is to establish a company. The first step to making money by trading is to establish a company.
While there was no need for taxation in this area, especially before 2011, due to the low internet sales and the newness of the market, now e-commerce has started to overtake standard trade. With the legal changes made, business without a company has become almost impossible. We say almost at this point that there are some limited rights, such as tradesman exemption, which you can examine in our related article.
In our article, we will be looking at the answers to questions such as “What is a sole proprietorship? How to set up a sole proprietorship?”
Which Taxes Do Sole Proprietorships Pay?
Sole proprietorships, unlike equity companies, are inseparable from the business owner in terms of tax liability. This means that the person is personally responsible for the tax payments. All the earnings of the company are counted as the income of the individual and are taxed accordingly.
Since sole proprietorships are income taxpayers, they are taxed progressively. In other words, if the annual profit is up to 24,000 TL, it is taxed at the rate of 15%, if it is between 24,000 – 53,000 TL, at a rate of 20%, if it is between 53,000 – 130,000 TL, at a rate of 27%, if it is between 130,000 – 650,000 TL, at a rate of 35% and if it is more than 650,000 TL, at a rate of 40%.
For other taxes that sole proprietorships are liable to pay,you can take a look at our related article.
Does a Sole Proprietorship Have Legal Entity?
Sole proprietorships can have legal personality. In this case, attention should be paid to the type of sole proprietorship. If the company in question is a limited partnership, one of the partners of the relevant company may have a legal personality. Real persons must establish ordinary companies.
How to Establish a Sole Proprietorship?
The establishment of a sole proprietorship is easier than other types of companies. To establish a sole proprietorship you should make an application for incorporation through the interactive tax office. Then the establishment of the company will be completed with the survey to be made by the tax office.
Although you can do the establishment individually, an agreement should be made with the subject experts to avoid problems in the later stages. 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.
How to Obtain Tax Certificate in Sole Proprietorships?
If you have opened a company in the province of your residence, your tax plate is usually created by the system on the same day. You can access your tax plate by logging in at https://intvrg.gib.gov.tr.
It is legally obligatory to keep the tax certificate within the company.
What are the Documents Required in the Establishment Process?
Although you can do the establishment individually, an agreement should be made with the business experts in order not to have any problems in the later stages. 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.
Another required document is the statement of signature that you will obtain from the notary public. You also must have the rental contract or if you are the owner, the deed of the place that you show as the address of the company.
How Long Does It Take to Establish a Sole Proprietorship?
Since the establishment of a sole proprietorship can be made through the interactive tax office, it can be done in minutes. But technically, the survey officer’s approval depends on how busy is the tax office. Even though the entire process is usually completed within a few days.
Where Should Be the Address of a Sole Proprietorship?
There are three options for the business address. The business owner can use a real office as an address, if he wishes, depending on the type and needs of the business. Nowadays, especially since e-commerce works can be done with the help of a computer, the person can show their house as the business address if they want. Another option in terms of speech is the virtual office application, which is very popular today.
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 virtual offices, this obligation is eliminated.
Can an Individual with Social Insurance Establish a Sole Proprietorship in Their Name?
When you set up a sole proprietorship, you have to have a bond contract, but if you are already an insured employee, you will not need to make a bond in order not to create two different insurance branches at the same time. So yes, you can establish a sole proprietorship while working with the insured, and this will be a more advantageous situation for you since you will not pay bond premium.
Can Public Servants or Their Spouses Establish a Sole Proprietorship?
According to Article 28 of the Public Servants Law No. 657, public servants are prohibited from commercial or self-employment earnings. Therefore, a sole proprietorship or professional office, etc. is not possible to establish for such people.
In addition, there is a provision in the aforementioned article for the spouses of public servants. According to this provision, if the spouses and underage children of public servants want to engage in commercial or professional activities, the relevant public servant must notify the institution they are affiliated with within 15 days. If they do not make the necessary notification on time, a penalty of reprimand is projected for this officer.
On the other hand, there is no obstacle for public servants to engage in agricultural activities. In other words, public servants can grow crops as owners of a field or garden, or they can set up a farm and engage in livestock farming.
Finally, there is no provision in this law for the adult children of public servants. This means that there are no restrictions on commercial or professional activities for the adult children of public servants.
What is the Cost for Establishing a Sole Proprietorship?
The fees to be paid to the notary for the required documents in the establishment are approximately 200 TL for the signature statement and approximately 200 TL for the power of attorney.
Although the fee to be paid to the accountant varies according to the official tariff of your province, the average monthly fee is around 300 TL.
If you want to have your establishment procedures made by the accountant, a fee of around 1000 TL may have to be paid.
You can visit our related blog post for detailed information about the cost of establishing a company.
Can Sole Proprietorships Become Electronic Invoice Taxpayers?
To be an electronic invoice taxpayer, the law determines a limit of 5 million TL. That means that those whose annual turnover exceeds this limit have to use electronic invoices. Apart from this, taxpayers can use electronic invoices if they wish.
What Can You Show As Expense in Sole Proprietorships?
There are many items that can be recorded as expense in sole proprietorships, these are;
Food expenses; If there are personnel working in the enterprise, the law has limited the meal fee to be given to the employee, accordingly, the daily meal fee that can be given to a personnel for 2021 is 25.25 TL including VAT. However, this restriction does not apply if the meal is prepared and served in the workplace or on its premises or if the meal is taken from the outside in bulk and given to the personnel at the workplace.
In addition, if they are related to business, meetings that are held with customers or staff members can become an expense under the name of presentation and hospitality. At this point, you should pay attention that you can not record as an expense the cost of the meal you eat with your family or any food expenses that are not related to work.
Travel expenses; Again, all kinds of travel-related costs such as hotels can be expensed. However, care must be taken to ensure that the relevant expenditures are proportional to the work in question. Again, you can’t show a holiday you go with your family as an expense in this sense.
Clothing expenses;Although most businesses think that they can afford the suits they wear at the workplace or the regular clothes they buy for their employees, unfortunately, there is a restriction in this regard as well. While the clothes given to the employees for work and temporary purposes such as overalls and boots can be deducted as expenses, the clothes they can wear in their private lives, such as suits, cannot be removed. If you want to give clothes to your employee in this sense, you must show the employee’s cost as payment in kind and subject it to withholding.
Passenger car expenses; Expenses of passenger cars can be shown as an expense, provided that they are registered in the company assets or leased on behalf of the company. If you buy a passenger car for the company, you can write off 320,000 TL of the amount you paid for this vehicle, including VAT and SCT; for 2021, the amount exceeding this amount is considered an expense that is not legally accepted.
In 2021, if you rent a passenger car the monthly limit is 6,000 TL, excluding VAT. Again, the rental price exceeding this amount and VAT are recorded as expenses that are not legally accepted.
There is a 70% limitation on all other costs of passenger cars owned or rented by a sole proprietorship. This means; 70% of all items such as gasoline, diesel, highway, parking lot, and maintenance costs of the aforementioned vehicle can be recorded as expense, and the remaining costs cannot be recognized as an expense.
Communication expenses; Communication expenses such as telephone and internet can be shown as expenses, provided they are business-related and registered with the enterprise. However, the point to be noted here is that the Special Communication Tax amount included in the invoices of these expenditures cannot be expensed by Article 39 of the Expense Taxes Law No.
For detailed information, you can watch our video below.