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WHAT ARE THE TYPES AND FEATURES OF COMPANIES?

What are the Types of Companies?

Although there are many types of companies according to the Commercial Code, the most well-known and existing types of companies are joint stock companies (JSC), limited liability companies (LLC), sole proprietorships, and limited partnerships. Limited partnerships are divided into two as general partnerships and limited partnerships. Sole proprietorships are also divided into three as simple procedure, business, and freelance.

Joint Stock Companies (JSC)

A joint stock company is a company with a certain capital divided into shares and liable only with its assets for its debts. Shareholders are only responsible to the company with the capital shares they have committed to.

Joint stock companies must be established with a minimum capital of 50,000 TRY and at least 1 partner. It is mandatory to include the term "Joint Stock Company" in their company name and indicate their area of activity. Joint stock companies can be established for any legal economic purpose and subject. They keep books according to the balance sheet principle.

While company partners are responsible for the amount of capital they provide to the company against third parties, the company is only limitedly responsible against third parties up to the amount of company assets. The company capital is divided into equal shares and the amount of the basic capital is known.

Limited Liability Companies (LLC)

A limited liability company is a type of capital company established by one or more real or legal persons under a trade name. Limited liability companies must be established with a minimum capital of 10,000 TRY and at least 1 partner. The number of partners should not exceed 50. It is mandatory to include the term "Limited Company" in their company name and indicate their area of activity. The capital contributed by the partners must be at least 25 TRY or multiples of it.

The responsibilities of the partners in limited liability companies do not cover the company's debts, and the partners are only responsible for paying the main capital shares they have committed and fulfilling the additional payment and ancillary obligations stipulated in the company agreement. Limited liability companies can be established for any legal economic purpose and subject. They keep books according to the balance sheet principle.

Sole Proprietorships

In a sole proprietorship, which is founded by at least one person, all founders have unlimited liability. It is a legal entity. The company owners are liable for all income, expenses, and debts within the company with all their assets. Sole proprietorships are a type of company that can be established easily and closed easily. Sole proprietorships are divided into three as simple procedure, business, and freelance.

1. Simple Procedure

In the simple procedure, commercial gain is the positive difference between the income earned, expenses, and purchase prices of the sold products within the accounting period that a book is closed. There are some conditions to comply with to benefit from the simple procedure. To be able to benefit from the simple procedure, the following conditions specified in the Income Tax Law must be met:

• To work in one's own business actively or to be present,
• Not to sell on the internet,
• If the workplace property belongs to the workplace owner, the annual rental amount in case of rent or the equivalent rental rate in the relevant region for 2023 should not exceed 35,000 TRY in metropolitan areas and 23,000 TRY in other places,
• For those dealing with buying and selling; the annual purchase amount of the goods they purchase as they are or sell after processing should not exceed 440,000 TRY for 2023 or the annual sales amount should not exceed 700,000 TRY,
• For those dealing with service activities, the gross revenue they obtain within one year should not exceed 220,000 TRY for 2023,
• If both buying and selling and service activities are performed together, the total annual sales and business revenue should not exceed 440,000 TRY for 2023.



Main Advantages of Being Subject to Simple Procedure;

• There is no obligation to make tax withholding.
• No withholding tax return is submitted for wages and rent expenses.
• No provisional tax return is submitted, which is paid every three months based on income.
• The deliveries and services of taxpayers subject to the simple procedure are exempt from VAT.
• No VAT return is submitted.


2. Business

Those who start a business for the first time or those who restart their businesses can keep their books according to the business account up to certain amounts that are updated every year. It is a type of liability that can be easily established and closed by real persons without requiring capital. The value of the inventory at the end of the accounting period is added to the revenue, and the value of the inventory at the beginning of the accounting period is added to the expenses. Revenue includes sales amounts, and expenses include purchase amounts within the accounting period.

3. Freelance

Freelance activities mean carrying out non-commercial work that is based on personal effort, scientific or professional knowledge or expertise, and not based on capital, and working under personal responsibility without being subject to the employer. Examples of freelancers include doctors, lawyers, architects, engineers, and consultants.

Limited Partnerships

Limited partnerships, which are one of the types of companies, are divided into two.

1. General Partnership

It is a type of company that has such characteristics as making a contract for the purpose of operating a commercial enterprise with a joint trade name, having the unrestricted responsibilities of some of the partners in the company's receivables, having the limited responsibilities of the other remaining partners, having legal personality limited to the company's subject of operation. The limited liability partners are called limited partners, and the unlimited liability partners are called general partners. They must be independent businesses that provide income at a level that exceeds the level of tradesmen. This type of company enables those who want to earn income without engaging in direct trade and those who need capital to engage in trade to come together.

2. Limited Partnerships with Divided Capital

The capital is divided into shares, and the limited partners can freely transfer these shares, similar to the shares of joint stock companies. One or more of the shareholders are like collective company partners against the company's creditors. Other partners are responsible like anonymous company shareholders. All those who contribute to the capital other than money during the contract are considered founders, and the number of founders must be at least five. At least one of the founders must be a limited partner.

Which Company Type Should Each Business Sector Choose?

The many types of companies and business sectors determine the type of company that needs to be selected according to the characteristics of the commercial activities to be carried out. The most dominant features of company types can be determined by researching, and the most appropriate company type can be selected. For example, banking, insurance, and financial leasing companies are obliged to establish joint stock companies, while any legal business sector can establish a limited liability company.

Limited liability companies and joint-stock companies are the most preferred types of companies by investors. The biggest reason for this is commercial risk and business volume. However, one of the most advantageous company types for those who are new to business is sole proprietorships. The biggest reason for this is tax advantages. While company debts are held responsible with all their assets of company partners in sole proprietorships, this responsibility belongs to the company itself in limited liability and joint-stock companies. Sole proprietorships are easier to establish than other company types and have lower expenses.

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