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WHAT IS A LIMITED LIABILITY COMPANY? HOW IS IT ESTABLISHED?

What is a Limited Liability Company?

A limited company is a capital company based on the principle of limited liability. Both natural persons and legal entities can be partners under the company umbrella. A limited company is established under a trade name; its capital is predetermined, and this capital consists of the total shares of the partners.

In limited companies, the liability of the partners is, as a rule, limited to the capital share they have committed to the company. For this reason, it is generally out of the question to target the personal assets of the partners due to the company's private law debts. However, if there are public debts (e.g., tax and SGK debts) that cannot be collected from the company, partners can be held liable in proportion to their capital shares. In addition, partners are also responsible for additional payments or other obligations specified in the company agreement.

There are two basic bodies in a limited company: the General Assembly and the Manager(s) (also referred to as the "board of managers" in practice).

• General Assembly is convened with the participation of every shareholder in the company and makes critical decisions affecting the future of the company. For example, matters such as amending the company agreement, election/dismissal of managers, dissolution of the company, or election of an independent auditor are discussed in the general assembly.
• Manager(s) manage the daily operations of the company and represent it. It is not mandatory for all partners to be managers; a single manager can be appointed, or multiple managers can be assigned. However, it is mandatory that at least one of the managers is a company partner.

What are the Characteristics of a Limited Company?

I have summarized the main characteristics of a limited company in the items below. These headings provide a quick framework regarding the company's partnership structure, capital arrangement, and liability framework:

• Number of partners: A limited company can be established with a single partner or with multiple partners. However, the number of partners can be at most 50.
• Nature of partners: Partners can be natural persons as well as legal entities. For example, if two companies want to establish a partnership together, a limited company can be a suitable option for this structure.
• Minimum capital and payment period: A minimum capital of 50,000 TL is required to establish a limited company. The portion of the committed capital contributed in cash must be paid within 24 months after the company is registered. It is not mandatory to pay the entire capital at the time of establishment; the payment plan can be regulated in the company agreement or tied to a specific schedule by the managers.
• Liability structure: As a rule, partners are not liable with their personal assets for the company's private law debts; liability is limited to the committed capital share. However, regarding public debts (e.g., tax, SGK) that cannot be collected from the company, partners can be held liable in proportion to their capital shares.
• Requirement of company agreement: There is a company agreement that determines the operation of the limited company. This agreement contains the fundamental elements of the company and plays a central role in the establishment process by being registered in the trade registry.
• Public offering restriction: Limited companies, unlike joint-stock companies, cannot go public and cannot be traded on the stock exchange.
• Share transfer and approval: When a partner wants to transfer their share, as a rule, general assembly approval is required. Unless the general assembly gives approval, the share transfer cannot be made; if approval is given, shares can also be transferred to persons outside the company.
• Nature of shares (registered): Shares in limited companies are registered. This situation helps the partnership structure to be more traceable; the transfer of shares and ownership can be tracked more clearly.

Why is a Limited Company Preferred?

There are many reasons why a limited company is preferred. The fact that the company can be established with a single partner provides a significant convenience, especially for individual entrepreneurs. In addition, the fact that the liability of the partners is limited to the capital share they have committed as a general rule contributes to the protection of personal assets and makes the entrepreneurial risk more predictable.

Compared to joint-stock companies, limited companies often have fewer bureaucratic procedures and a more practical management structure. Upon establishment, the company acquires a trade name that includes its field of activity and conducts its commercial activities under this name.

In addition, limited companies are corporate tax subjects. In this way, the remaining amount after corporate tax is deducted from the profit obtained can be distributed to the partners as dividends. Since the taxation of dividends can be more advantageous in some cases compared to income tax, this situation is also one of the elements that make a limited company attractive.

Important decisions in limited companies are taken by the general assembly, which meets with the participation of the partners, mostly by a majority vote. This structure creates a more participatory and balanced decision-making mechanism in company management.

How is Partnership in Limited Companies?

You can establish a limited company on your own, or you can establish it with a maximum of 50 partners. Partners are not liable for company debts and are only obliged to pay the capital shares they committed during the company establishment. Partners of limited companies are responsible for public debts in proportion to their capital. The company must keep a share ledger containing the capital shares. The content of this ledger consists of the names and addresses of the partners, the number of capital shares owned by each partner, their nominal values in case of transfers and transitions, their groups, and the usufruct and pledge rights on the capital shares, as well as the names and addresses of the owners of these rights.

In limited companies, the capital must be at least 10,000 TL, and the value of each partner's capital share must be 25 TL and its multiples. At least 1/4 of the capital shares committed by the partners must be paid before registration, and the remaining part must be paid within 24 months after the company registration.

The management and representation of the company are regulated by the company agreement. The management and representation of the company can be given to one or more partners holding the title of manager, to all partners, or even to third parties. However, at least one partner must have management rights and representation responsibility. Decisions are taken by majority vote.

What are the Required Documents for Establishing a Limited Company?

Certain documents must be prepared for the establishment of a limited company. The required documents for establishing a limited company are generally as follows:

• An establishment notification form must be prepared, in which the headquarters address, the capital amount of the company, the capital ratios of the partners, the company representative, or the company title are written for the company to be established.
• Different documents are required if the partners of the company are natural persons and if they are legal entities. A chamber registration declaration must be submitted for limited companies established by legal entities.
• Personal information of all partners must be submitted. A residence certificate, passport photo, and photocopy of the identity card belonging to each partner must be provided.
• If there is someone who is not a partner among the members of the board of managers, they must provide a written declaration stating that they accept this duty. Signature declarations of the company managers must be available.
• The agreement created during the establishment of the company must be submitted in a notarized form.
• If the company headquarters is rented, you must provide the lease agreement. If the company owns the headquarters building, a photocopy of the title deed is required.
• Partners must provide a receipt showing that they have deposited their capital. A certain share must also be paid to the Competition Authority. After this share is paid, its receipt must be shown.

How to Establish a Limited Company?

You can easily establish a limited company by following several steps. A limited company is preferred by many people due to its easy establishment process and flexible structure. There are some rules you need to pay attention to when establishing a limited company. If you are wondering how the establishment process works, you can get an idea about the process by reviewing the items below:

• Before establishing a limited company, a trade name must be selected first. The title may vary depending on the company being established. It can be freely chosen provided that all phrases indicating the subject of the business and the type of company are in Turkish and fulfill certain rules.
• If words like "Türk" (Turkish), "Milli" (National), "Türkiye" (Turkey), or "Cumhuriyet" (Republic) are desired to be used in the company title, approval must first be obtained from the Council of Ministers. In addition, a name in Turkish or a foreign language can be placed in front of this title.
• While establishing the company, signature authority can be given to one or more persons. If the partners of the company do not want to be present during the establishment, they can provide a power of attorney to allow others to carry out the establishment process on their behalf.
• In a limited company, every partner must deposit four ten-thousandths of their capital to the Competition Authority. For example, if the capital of a limited company is 100,000 TL, it must deposit 40 TL to the Competition Authority.
• Before establishment, a company articles of association (main agreement) must be made for the limited company. This agreement includes the company's name, headquarters, purpose, field of activity, capital, rights of partners, formation/duties of the board of directors, dissolution/liquidation of the company, and much more information.
• A company establishment petition must be written. After writing the company establishment petition, this document must be forwarded to the nearest trade registry directorate.
• After the limited company is established, it must be registered with the chamber of commerce.

What is the Cost of Establishing a Limited Company?

The cost of establishing a limited company changes in 2026, just like every year. The capital amount is limited by laws to a minimum amount. However, in addition to capital, some costs may also arise during establishment. Furthermore, you may encounter additional payments such as lawyer fees when establishing a limited company. Costs may also vary depending on the province where you plan to establish the limited company. The establishment cost is a one-time fee. After establishing the company and completing the steps, you do not need to incur the same expenses again. The establishment expenses of a limited company are generally as follows:

• When establishing a limited company, you have an establishment power of attorney expense. The establishment power of attorney is an amount you need to pay to the notary when you give someone a power of attorney to establish the company.
• While establishing the company, signature declarations of natural persons must be obtained. You also need to pay a fee to the notary for these declarations, which are prepared separately for each partner.
• You must pay four ten-thousandths of your capital to the Competition Authority.
• You must also pay a certain fee when registering with the chamber of commerce or industry. What these fees are may vary depending on the company you are in.
• When establishing a limited company, assistance is usually sought from a financial advisor. The fee to be paid to the financial advisor may also vary depending on the structure of the company and the process.

How Much Capital is Required to Form a Limited Company?

A limited company has a capital-oriented partnership structure. Each of the partners assumes an obligation toward the company in proportion to the capital share they have committed. However, the minimum amount of company capital is determined by legislation.

While a capital of at least 10,000 TL was sufficient to establish a limited company in previous years, the minimum capital amount has been increased to 50,000 TL as of 2025. Therefore, it is not possible to establish a limited company with a capital below 50,000 TL.

In this respect, a limited company is a more accessible option compared to a joint-stock company: since the minimum capital amount for joint-stock companies is 250,000 TL, a limited company provides an advantage for entrepreneurs who want to incorporate with lower capital.

What are the Tax Rates for a Limited Company?

Limited companies do not pay income tax; instead, they are subject to corporate tax. This situation can make tax planning more predictable compared to the progressive income tax tariff seen especially in individual businesses (e.g., sole proprietorships).

In 2026, the corporate tax rate is applied as 25%. As a rule, this rate does not change as the company's profit increases; therefore, at profitability above a certain level, it may provide an advantage in some scenarios compared to businesses subject to rising income tax due to progressive tax brackets.

Some of the prominent basic rates and obligations in limited companies are as follows:

• Corporate tax: 25% (fixed rate)
• Advance tax (Temporary tax): Calculated over the corporate tax rate in 3-month periods
• VAT: 1%, 10%, or 20% depending on the type of goods and services
• Withholding tax: Although it varies according to the type of payment, it is 20% in most cases, for example, in rent payments

The following table provides a brief summary of common taxes and deductions:

In summary, the flat-rate corporate tax regime of limited liability companies can offer a more predictable structure compared to income tax, which rises with increasing brackets as income grows. However, which company type will be more advantageous varies according to variables such as profitability, expense structure, the partners' profit distribution plan, and the sector.

Which Taxes Does a Limited Company Pay?

The responsibilities of limited company owners are not limited to corporate tax alone. Different taxes and declaration obligations may arise depending on the type of activity, transactions performed, and employee status. The most common taxes/deductions encountered in limited companies are generally as follows:

• Stamp Tax: It can come into question in many legal transactions such as rental agreements, service contracts, powers of attorney, and tender/purchasing processes. In which transaction and at what rate the stamp tax will be applied varies depending on the type of document.
• Value Added Tax (VAT): It is a consumption tax calculated on sales of goods or services. The company collects VAT on behalf of the final consumer, declares it, and pays it to the state. The VAT rate can be 1%, 10%, or 20% depending on the nature of the goods/services.
• Advance Tax (Provisional Tax): It is the periodic (usually quarterly) advance payment of corporate tax during the year. It is deducted from the corporate tax calculated at the end of the period; meaning it does not create a tax "for the second time" on the same earnings, but regulates the cash flow within the year.
• Corporate Tax: Limited companies are subject to corporate tax, not income tax. The annual corporate tax return is submitted within the legal period after the closing of the relevant year (usually in April for companies using the calendar year).
• Withholding / Withholding and Premium Service Declaration: It is the declaration in which the taxes deducted from the payments made by the company (e.g., wage withholding, independent professional services payment withholding, etc.) and Social Security Institution (SGK) notifications regarding employees are declared. Declaration periods can be monthly or quarterly depending on the company's status.
• Withholding Tax (Income Tax Deduction) – especially rent withholding: In payments made by the company for the rented workplace, a withholding tax deduction may arise in cases stipulated by the legislation. The application and rates may vary according to the type of rental and the status of the parties.

In summary; the taxes that limited companies will pay can vary depending on factors such as the company's profitability, sector, types of transactions performed, number of employees, and the nature of rentals/payments.

How Much Tax Does a Limited Company Pay?

The taxes to be paid by limited companies may vary according to the earnings obtained and the transactions carried out. However, companies calculate and declare taxes based on the rates determined in the relevant legislation.

For example, if a business generated 2,000,000 TL of taxable profit throughout the year, the corporate tax it needs to pay would be 500,000 TL based on a 25% corporate tax rate.

Similarly, VAT is calculated according to the type of sale made and the rate applied. For example, if a turnover of 200,000 TL (excluding VAT) was obtained from the sale of a product/service subject to a 20% VAT rate, the calculated VAT amount is 40,000 TL.

The advance tax payments made by corporate tax payers within the year (based on periodic profit) are also calculated by taking the corporate tax rate into account. For example, if the limited company made a profit of 500,000 TL in the first 3 months of 2024, the advance tax for this period is calculated as 125,000 TL.

In addition, businesses with employees declare the taxes deducted from wages and SGK notifications with the Withholding and Premium Service Declaration. For example, a limited company with 5 employees declares the deductions and premiums made from employee wages in each period and pays the relevant amounts. The total amount to be paid may vary depending on the gross wages of the employees, premium bases, incentives, and deduction rates.

What are the Differences Between Limited Liability and Joint Stock Companies?

There are significant differences between limited liability companies and joint stock companies across various aspects such as capital structure, shareholder structure, share transfer, and initial public offering (IPO) opportunities. Below, I have summarized the most fundamental distinctions within a clearer framework:

• Public offering / stock exchange: Limited liability companies cannot go public. Joint stock companies, on the other hand, can go public and their shares can be traded on the stock exchange if they meet the necessary conditions.
• Minimum capital: The minimum capital required to establish a joint stock company is 250,000 TL. For a limited liability company, the minimum capital is 50,000 TL.
• Limit on the number of shareholders: The number of shareholders in limited liability companies can be a maximum of 50. In joint stock companies, there is no upper limit on the number of shareholders.
• Liability of shareholders (especially public debts): In a joint stock company, the primary obligation of shareholders is to pay their committed capital share. In a limited liability company, however, shareholders can be held liable for public debts that cannot be collected from the company, in proportion to their capital shares. For example, if a shareholder's stake is 50%, liability may arise for 50% of the public debts.
• Capital blockage prior to registration: In joint stock companies, it may be required to deposit and block the capital amount in a bank prior to registration under certain conditions. In limited liability companies, there is no such general requirement.
• Obligation to retain an attorney: In joint stock companies, an obligation to retain an attorney may arise (depending on the capital size). In limited liability companies, as a rule, there is no such obligation.
• Share transfer and taxation: There are also differences between the two types regarding share transfer processes and taxation. For example, under certain conditions (such as corporations holding shares for a certain period), tax advantages may arise in the disposal of joint stock company shares, whereas the taxation practice for limited liability company share transfers may proceed differently.
• Type of share certificate: Joint stock companies can issue both bearer and registered share certificates. In limited liability companies, shares are, as a rule, registered.
• General assembly meetings: In certain special cases, a ministry representative may need to attend the general assembly meetings of joint stock companies. In limited liability companies, this requirement only arises in exceptional cases explicitly provided for by the legislation.
• Restrictions on field of activity: It is not possible to operate as a limited liability company in certain sectors such as banking, insurance, and financial leasing; in these fields, a joint stock company structure is generally mandatory.

In summary; criteria such as investment/IPO targets, number of partners, capital plan, and share transfer expectations are the most critical factors in determining which type of company would be more suitable.

Can a Limited Company be Converted into a Joint Stock Company?

It is possible to convert a limited company into a joint stock company. In order to carry out this conversion, the change of company type must first be approved by the general assembly. However, general assembly approval alone is not sufficient; certain preparatory procedures must be completed before proceeding with the change of type.

As the first step, the company's latest balance sheet is prepared. Then, an equity determination report of the company is prepared by a sworn financial advisor (YMM). The sworn financial advisor also identifies and reports the company's assets subject to registration, such as real estate or intellectual property. Finally, a new articles of association suitable for the change of type is drafted, and the necessary registration and announcement procedures are carried out.

There is no specific time restriction specified in the legislation for converting a limited company into a joint stock company. Once the required conditions are met, the process can be initiated at any needed time.

What Can Be Deducted as Expenses in a Limited Company?

In a limited company, you can record certain expenditures that are directly related to your business activities and can be documented as expenses. In general, the main items you can deduct as expenses are as follows:

• Office expenses: Fixtures and consumables necessary for the operation of the office, such as furniture, stationery, computers, and printers.
• Rent expense: If you pay rent for an office/workplace, this amount can be written off as an expense.
• Utility expenses: Subscription/utility expenses such as water, internet, natural gas, and electricity used in the office.
• Vehicle expenses: Gasoline/diesel, maintenance-repair, and similar costs related to the vehicle used for business.
• Shipping and postage expenses: Postage and courier shipments made on behalf of the company.
• Travel and representation expenses: Expenses incurred for customer visits; expenses related to events such as conferences, trade fairs, etc., attended by employees; business-related organization/entertainment expenses.
• Personnel expenses: Employee salaries, social security (SGK) premiums, transportation allowances, meal expenses, social benefits, and overtime payments.

Note: Items that can be deducted as expenses may vary based on criteria such as the expense's relevance to the business, documentation (invoice/receipt, etc.), and regulatory limitations.

Who Cannot Establish a Limited Company?

Certain basic conditions must be met to establish a limited company. A limited company cannot be established in the following cases:

• If the minimum capital requirement is not met: As of 2025, the minimum capital for establishing a limited company is 50,000 TL. If the committed capital is below this amount, a limited company cannot be established. In this case, you can examine alternatives that do not have a capital requirement or can be established at a lower cost (e.g., a sole proprietorship) and different company types.
• If the number of partners exceeds 50: The number of partners in a limited company can be at most 50. For larger partnership structures, alternatives such as a joint-stock company should be considered.
• If trade registry/chamber procedures are not finalized: The registration process must be completed for the establishment to take place. If the application is not accepted by the relevant authorities (trade registry/chamber) or if the registration cannot be made due to deficiencies or non-compliance, the establishment cannot be completed.
• If the field of activity is unlawful: A company cannot be established for an illegal activity. It is mandatory for the field of activity to comply with the legislation.

Note: Establishment conditions, field of activity, and application documents may vary depending on the sector, partnership structure, and your province. In case of hesitation, it would be beneficial to obtain up-to-date information from the trade registry or a financial advisor.

Can Retirees Establish a Limited Company?

Retirees can legally establish a limited company and engage in commercial activities in Turkey. According to the Social Security Institution (SGK) legislation, a retired person can be a company partner or director.

However, in cases such as the retired person actively working within the company or assuming a duty that requires them to be considered insured under 4/a (SSK), different consequences may arise regarding the retirement pension. In this context, the suspension of the retirement pension may be in question, or in some cases, the payment of a Social Security Support Premium (SGDP) may be required.

For this reason, before establishing a company, it is important for retirees to clarify the planned partnership/working model (such as just being a partner, being a director, or actively working) and obtain up-to-date information from SGK or a financial advisor. In addition, receiving proper guidance on tax and insurance obligations helps prevent administrative sanctions and loss of rights that may arise in the future.

How Many Partners Are Required to Form a Limited Liability Company?

There is no minimum number of partners required to establish a limited liability company; the company can be incorporated with a single partner. However, the maximum number of partners in a limited liability company is 50.

If your number of partners is expected to exceed 50, it may be more appropriate to consider a joint-stock company structure, as it allows for a larger number of shareholders. At this point, it is beneficial to also consider criteria such as your capital plan, investment targets, and share transfer expectations.

How to Choose a Limited Liability Company Name?

Limited liability companies must pay attention to certain core criteria when choosing a trade name. First of all, the phrase “Limited Şirketi” (or its abbreviation) must be included in the title. Additionally, the trade name is expected to reflect the company's business subject/field of activity.

Furthermore, before determining a name, you must check the trade registry records to ensure that the name you are considering has not already been taken by another business. This is because registering a name that is identical or indistinguishably similar to an existing one is generally not possible.

For example, if you want to adopt the trade name “X İnşaat Limited Şirketi” but a business is already registered under the name “X İnşaat Anonim Şirketi”, you cannot use this title without adding a distinctive modifier (e.g., a different phrase, a second word, or a brand element). Therefore, it is important to ensure that the name complies with regulations and is clearly distinguishable from similar ones.

To summarize;

• Foundations of an LLC: As a rule, the liability of partners is limited to the capital they have committed to contribute to the company; it can be established with a single partner (up to a maximum of 50 partners). Its governing bodies are the General Assembly and Manager(s).
• Incorporation and requirements: The minimum capital for 2026 is 50,000 TL; documents such as the articles of association, company address, and details of partners/managers are prepared during incorporation and registered through trade registry/chamber of commerce procedures.
• Taxation and comparison: A limited liability company is a corporate tax payer (stated as 25% for 2026 in the text); obligations such as VAT, withholding tax, and social security (SGK) premiums may also apply. An LLC cannot be offered to the public; it requires less capital compared to a joint-stock company, but partners may bear personal liability for public debts in proportion to their shares.

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Mesut SENEL | Ifasturk CEO

Independent Accountant Financial Advisor