ŞAHIS ŞİRKETİ İLE ANONİM ŞİRKET ARASINDAKİ FARKLAR

DIFFERENCES BETWEEN A SOLE COMPANY AND A JOINT STOCK COMPANY

Features and Advantages of a Sole Proprietorship

A sole proprietorship offers entrepreneurs a quick and easy starting point. The features and advantages of this type of company can be listed as follows:

• Minimum Capital Requirement: There is no minimum capital requirement for establishment, making it an ideal option for entrepreneurs with a low budget.
• Flexible Partnership Structure: One or more individuals can be partners. Since it is usually established and managed by a single person, decision-making processes are quite fast and flexible.
• Tax Liabilities: The taxpayers are the partners, not the company. This provides an income tax advantage and can be beneficial for low-income entrepreneurs.
• Personal Liability: Partners are unlimitedly liable, meaning they are responsible for the company's debts with their personal assets. This may increase financial risks but may provide an advantage in obtaining loans.
• Company Name: The commercial name must include the name and surname of at least one partner, which can be useful in creating a personal brand.
• Tax Procedures: A single tax identification number is used for all tax procedures, which simplifies bureaucratic procedures.
• Conversion Opportunity: If needed in the future, it can be converted into a limited or joint-stock company, this flexibility offers the opportunity to make structural changes as the business grows.
• Authority to Open Branches: As the company grows, it has the opportunity to open branches, which increases the expansion potential of the business.
• Easy Closure: The company can be easily closed with a commercial abandonment transaction, which provides flexibility to the entrepreneur and encourages him/her to take risks.
• Simple Accounting: Accounting transactions are other It is simpler and more economical than other types of companies, which provides a cost advantage especially for small businesses.
• Fast Establishment: The establishment process is faster and less costly compared to other types of companies, which allows entrepreneurs to quickly implement their ideas.

Features and Advantages of Joint Stock Companies

According to the Turkish Commercial Code No. 6102, a joint stock company is a company whose capital is fixed and divided into shares, and whose debts are only liable with its assets. This type of company has an important place in the modern business world and offers an attractive option for large-scale enterprises and investors. The basic features and structural elements of joint stock companies can be detailed as follows:

• Partnership Structure and Flexibility: In joint stock companies, there can be a minimum of 1 and a maximum of an unlimited number of shareholders. This broad partnership structure allows the company to grow and the participation of different investors. In large-scale businesses, this flexibility makes it easier to increase capital and include new partners.
• Legal Framework and Agreement: The establishment and operation of joint stock companies are subject to a detailed legal framework. In this context, it is mandatory to have a written articles of association that includes all the basic principles of the company, its management structure and shareholder rights. This agreement is the constitution of the company and is binding for all parties.
• Limited Liability Principle: In joint stock companies, shareholders have limited liability to the amount of capital they commit to the company. This important feature encourages investors to invest without risking their personal assets. The company's debts or liabilities do not affect the personal assets of the shareholders, which provides a great advantage in terms of risk management.
• Minimum Capital Requirement: The minimum capital requirement for the establishment of joint stock companies is 250,000 TL. This amount ensures that the company has a certain financial strength in the initial phase and creates confidence in potential business partners and customers.
• Financial Flexibility and Investment Instruments: Joint stock companies can increase capital using various financial instruments. For example, they can issue debt instruments such as bonds or promissory notes, which support the company's growth and investment plans. This financial flexibility enables the company to quickly adapt to market conditions and implement different investment strategies.
• Sectoral Diversity: Joint stock companies can operate in every sector as long as there are no legal restrictions. This flexibility allows companies to focus on different business areas and evaluate growth opportunities in various sectors.
• Professional Management Structure: Joint-stock companies are managed by a board of directors. This structure allows the company to be managed with a more professional and corporate management approach. Board members are elected by the shareholders and are responsible for the company's strategic decisions. This system increases transparency and accountability, while allowing professionals from different areas of expertise to contribute to the company's management.
• Share Transfer and Liquidity: In joint-stock companies, partners can sell or transfer their shares without consulting other shareholders. This feature provides a significant liquidity advantage for shareholders and allows the value of the company's shares to be determined according to market conditions.
• Public Offering and Stock Exchange Transactions: Joint-stock companies can offer all of their shares to the public and be traded on the stock exchange if they meet certain conditions. This feature allows the company to reach a wider range of investors, increase capital, and determine its market value. It also introduces additional transparency and corporate governance standards for publicly traded companies.
• Audit Requirement and Transparency: There is a requirement for joint stock companies that meet certain criteria to undergo independent auditing. This requirement is even more important for companies operating in sensitive sectors such as banking and insurance. In addition, companies whose annual net revenue and number of employees exceed certain thresholds must also be audited regularly. This audit mechanism ensures the financial health and operational efficiency of the company, while providing transparency for investors and other stakeholders.

Şahıs Şirketi Kurmanın Avantajları

The sole proprietorship, which appeals especially to small and medium-sized businesses, provides entrepreneurs with significant advantages in various areas. These advantages manifest themselves in a wide range from the establishment of the company to its operation in financial, operational and administrative terms. The detailed advantages of establishing a sole proprietorship can be listed as follows:

• Capital Flexibility: The fact that there is no minimum establishment capital limit allows entrepreneurs to start their business with minimum capital. This is a great advantage especially for new entrepreneurs with limited financial resources.
• Fast Establishment and Termination: The opening and closing of a sole proprietorship can be completed in a much shorter time compared to other types of companies. This speed allows rapid adaptation to market conditions and provides flexibility to entrepreneurs.
• Low Cost Advantage: The low establishment and branch opening fees ease the financial burden at the start-up stage. This allows entrepreneurs to direct their resources to the development of the business.
• Simplified Reporting: The year-end declaration and reporting processes of sole proprietorships are simpler and more understandable than other types of companies. This saves time and resources, while allowing legal obligations to be fulfilled more easily.
• Easy Change Procedures: Transactions such as company address changes, title changes and capital increases can be carried out quickly and easily without bureaucratic obstacles. This flexibility allows the business to adapt quickly to changing conditions.
• Simple Termination Process: Trade abandonment procedures, namely closing a sole proprietorship procedures, are simpler and faster than other types of companies. This also provides entrepreneurs with flexibility in exiting business life.
• Individual Control: It can be established and managed individually without the need for any partners. This provides full control over decision-making processes and allows the entrepreneur to directly implement their vision.
• Low Accounting Costs: The small number of books that need to be kept significantly reduces accounting costs compared to other types of companies. This provides a critical cost advantage, especially for businesses in the early stages.
• Fair Taxation: The implementation of a progressive tax system, i.e. taxation based on income, provides financial advantages, especially for entrepreneurs with low profit margins. This system creates a fairer tax burden as the business grows.
• Fast Decision Making and Less Bureaucracy: Fast decision-making processes and less bureaucratic burdens allow the business to have an agile structure. This increases the ability to respond quickly to changes in market conditions.
• Privacy and Personal Branding: Sole proprietorships offer the entrepreneur the opportunity to highlight their personal brand. This is a valuable advantage, especially for professionals operating in the service sector.

Advantages of Establishing a Joint Stock Company

There are many advantages to establishing a joint stock company. These advantages are evident in a wide range from the company's financial structure to its management style, from legal responsibilities to its reputation. Here are the main benefits offered by joint stock companies:

• Limited Liability: One of the most striking features of joint stock companies is that the liability of shareholders is limited to the capital they invest. This structure allows entrepreneurs to minimize financial risks by keeping their personal assets separate from the company's debts. In this way, investors can take bolder steps and innovation is encouraged.
• Capital Increase and Financial Flexibility: Joint stock companies have unique advantages in terms of access to capital markets. They can reach a wide investor base through public offerings, which provides the necessary funds for the company's growth and expansion. In addition, the possibility of being traded on the stock exchange allows the company to capture important opportunities in terms of liquidity and valuation.
• Corporate Continuity: In joint stock companies, the existence of the company is independent of the individual situations of the shareholders. Situations such as the death of a partner, transfer of his shares or departure from the company do not affect the company's activities. This feature allows the company to develop long-term strategies and grow steadily.
• Tax Optimization: Joint-stock companies have a wider maneuverability in tax planning compared to other types of companies. The opportunity to benefit from various tax incentives and advantages helps the company optimize its financial performance and increase its competitiveness.
• Strong Corporate Identity: Joint-stock companies generally have a more professional and corporate image. This perception creates trust in customers, suppliers and potential business partners. A strong corporate identity strengthens the company's position in the market and creates new business opportunities.
• Professional Management: Joint-stock companies are generally managed by professional managers. This structure allows the company to be managed more strategically and effectively. The board of directors and professional managers use their expertise to improve the company’s performance and achieve its goals.
• Stock Options: Corporations can motivate employees and increase their loyalty to the company by offering them stock options. This can be a powerful tool for attracting and retaining talented employees.

Sole Proprietorship Tax Rates: A Detailed Look

Sole proprietorship tax rates are applied in a progressive structure depending on the annual income of the business. This progressive tax system supports small businesses while allowing high-income businesses to pay more tax. The sole proprietorship tax brackets and rates determined for 2024 are explained in detail below:

• The 15% tax rate applied to incomes up to 110,000 TL provides an encouraging starting point for newly established and low-turnover businesses.
• A flat tax of 16,500 TL is applied to the first 110,000 TL of income up to 230,000 TL, while the remaining portion is taxed at 20%. This gradual increase ensures that businesses face a gradual tax burden as they grow.
• A flat tax of 40,500 TL is applied to the first 230,000 TL of income up to 580,000 TL (a different calculation is applied to wage income) and a tax of 27% is applied to the remaining portion. This bracket targets medium-sized businesses and encourages them to contribute more to the economy.
• A flat tax of 135,000 TL (a different calculation is applied to wage income) is applied to the first 580,000 TL of income up to 3,000,000 TL and a tax rate of 35% is applied to the remaining portion. This high-income bracket covers large-scale sole proprietorships and is part of the progressive tax system.
• The highest tax bracket is applied to incomes above 3,000,000 TL. A flat tax of 982,000 TL (a different calculation is applied to wage income) is paid for the first 3,000,000 TL of this income and a tax rate of 44% is paid for the remaining portion. This top bracket aims to ensure fairness in income distribution by increasing the tax burden of high-income businesses.

An important point that sole proprietorship owners should pay attention to is that tax rates gradually increase as their income increases. Therefore, it is critical for business owners to make tax plans and determine their financial strategies by considering their income increases.

Since tax calculations vary according to annual income brackets, the determination of the net tax amount only becomes definite during the collection period. This situation requires sole proprietorship owners to carefully plan their cash flow management.

Let's make the subject concrete with an example calculation: A sole proprietorship with a net income of 420,000 TL in 2024 will be taxed as follows according to tax brackets:

• 15% for the first 110,000 TL: 16,500 TL
• 20% for the next 120,000 TL: 24,000 TL
• 27% for the remaining 190,000 TL: 51,300 TL

In this case, the total income tax to be paid is calculated as 91,800 TL. This example clearly shows how tax brackets are applied in practice and how the tax burden increases with increasing income.

As a result, the sole proprietorship tax rate system aims to provide fair taxation according to the size and income level of the business. This system supports small businesses while expecting large businesses to pay more tax. It is critical for business owners to understand this tax structure well and make their financial plans accordingly for long-term success.

Joint Stock Company Tax Rates

The tax liabilities of joint stock companies are regulated in accordance with the tax legislation in Turkey. The basic types of taxes that these companies are liable to pay are as follows:

• Corporate Tax: It is calculated based on the company's profits. The current rate is 25% and this rate is applied fixed. Some profits specified in the first paragraph of Article 5 of the Corporate Tax Law are exempted from this tax.
• Value Added Tax (VAT): Joint-stock companies are obliged to pay VAT on the income they earn from the sale of goods and services. VAT rates can be applied as 1%, 10% or 20% depending on the nature of the goods or services sold. However, the general VAT rate is determined as 18%.
• Income Tax Withholding: According to the Income Tax Law No. 193, joint-stock companies are obliged to withhold certain rates from the payments they make to their employees and to deposit these deductions to the tax office. Withholding rates vary between 15% and 40%.

In addition, joint stock companies are required to apply stamp duty to documents related to commercial transactions, as per Stamp Duty Law No. 488. They are also required to pay provisional tax on the profit they declare every three months (4 times a year).

Sole Proprietorship or Joint Stock Company?

When evaluating the differences between a sole proprietorship and a joint stock company, it is essential to make a strategic decision in line with the current needs and future goals of the business. The critical factors to consider in this decision process are as follows:

1. Business Scale and Growth Targets: A sole proprietorship may be a suitable option for small-scale businesses that require rapid operations. On the other hand, a joint stock company structure offers a more suitable platform for growth-oriented and investor-oriented initiatives.
2. Capital Structure and Financial Requirements: A sole proprietorship offers an economical solution for initiatives with limited initial capital and minimal investment needs. However, a joint stock company structure that provides ease of capital increase may be more advantageous for large-scale projects or expansion plans.
3. Risk Management and Legal Liability: The risk profile of the sector in which the company will operate is a determining factor in the selection of the company type. In high-risk sectors, the limited liability structure provided by a joint stock company provides significant assurance in terms of protecting personal assets.
4. Tax Optimization: Tax liabilities and rates play a strategic role in the selection of the company type. For businesses with high profit margin expectations, the fixed corporate tax rate (25%) offered by the corporation structure may be more advantageous than the progressive income tax system.
5. Corporate Management and Operational Efficiency: Sole proprietorships stand out with their simple management structure and fast decision-making mechanisms. On the other hand, the corporation model will be a more suitable option for businesses aiming for professional management and corporate structuring.

As a result, the choice of company type should be shaped according to the characteristics and strategic goals of the business. While the sole proprietorship offers an attractive option for small-scale entrepreneurs with its low-cost and fast-establishment advantages, the joint-stock company structure provides a more suitable platform for businesses that are growth-oriented, have high capital requirements, and adopt a corporate governance approach.

Is it Possible to Convert a Sole Proprietorship into a Joint-Stock Company?

It is possible to convert a sole proprietorship into a joint-stock company, but this process should not be considered a simple "conversion". Usually, this process is carried out by dissolving the sole proprietorship and then establishing a new joint-stock company. This complex process requires careful planning and meticulous implementation.

The main steps of the process include:

• Create a new joint stock company record in the trade registry
• Make the necessary notifications to the relevant tax offices
• Ensure the minimum capital requirement for the joint stock company
• Fulfill other legal and financial obligations in accordance with the new corporate structure

In terms of the legal framework, this transformation process is based on two main regulations:

• Article 134, paragraphs 8 and 9 of the Trade Registry Regulation
• Articles 182 to 193 of the Turkish Commercial Code

These legal regulations allow Real Person Commercial Enterprises (Sole Proprietorships) to change their type and become a joint-stock company. However, obtaining legal and financial advice at every stage of this process is of great importance in minimizing possible risks and ensuring that the process progresses smoothly.

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Mesut SENEL | Ifasturk CEO

Certified Public Accountant