Should Entrepreneurs Establish a Limited Liability Company or a Joint Stock Company?
For entrepreneurs, deciding what kind of company they should establish to run their business is as difficult as realizing their dream project. No matter what sector or field your venture is in, taking the right steps in the light of accurate and valid information in the process of establishing a company and getting help at the necessary points will make your work much easier.
In Turkey, there are 5 different types of commercial companies that you can establish according to the Turkish Commercial Code. These types of companies are joint stock company, limited liability company, collective company, limited partnership company and limited partnership company with capital divided into shares. These companies are also divided into two groups as sole proprietorships and capital companies.
Sole Proprietorships
- Collective company
- Limited company
Capital Companies
- Incorporated company
- Limited liability company
- Limited partnership with capital divided into shares
The most common types of companies established in Turkey are limited liability companies and joint stock companies. The type of company you want to establish will be shaped by the purpose of your company, your capital and partnership options.
What is a Limited Liability Company?
A limited liability company is a type of company established by one or more real or legal persons under a trade name. The characteristics of limited liability companies, which are one of the most preferred company types, especially since their establishment costs are lower, are as follows:
- Its capital must be at least 10.000 TL.
- A minimum of 1 and a maximum of 50 people can be partners.
- It can be established for any economic activity and purpose without any legal restriction.
- There is no possibility to go public.
What is a Joint Stock Company?
A joint stock company, like a limited liability company, is a type of company established by one or more natural or legal persons under a trade name. The characteristics of joint stock companies, which come to the forefront as the type of company preferred especially by entrepreneurs who plan to receive investments and enterprises that will generate high income due to the advantage of a fixed tax rate, are as follows:
- The share capital must be at least 50.000 TL.
- A minimum of 1 and a maximum of 500 people can be partners.
- It can be established for any economic activity and purpose without any legal restriction.
- It has the right to issue shares and bonds.
How to Establish a Limited Liability Company? How to Establish a Joint Stock Company?
The procedures for establishing a limited liability company and a joint stock company are almost the same. However, there may be differences in terms of company establishment costs. Limited company establishment costs are at least between 1.750 and 2.500 TL. The establishment costs of joint stock companies are between minimum 2.000 and 5.000 TL.
The items that determine the establishment costs of both limited liability companies and joint stock companies are as follows:
- Financial advisor service and financial advisor representation,
- Signature circular
- Agency of incorporation,
- Signature declaration for the manager,
- A copy of the identity card,
- Approval of the articles of association,
- Trade book approval,
- Rental cost,
- Stamp duty for lease agreement,
- Chamber of Commerce registration and activity certificate,
- Company stamp
- Invoice and delivery note printing.
Whether you are establishing a limited liability company or a joint stock company, a financial advisor should carry out the company establishment on your behalf.
You may also be interested in these:The Biggest Question on Entrepreneurs’ Minds: Personal Liability? Company Formation?
Considerations when Determining the Type of Company
There are some obvious mistakes entrepreneurs make when deciding on the type of company they want to start. In order not to fall into these mistakes and not to make things difficult at the very beginning of the road, there are some situations that need to be considered:
- When determining the company you will establish, take care to choose the type of company that best suits the vision and goals of your startup idea.
- Get accurate information about the sector you want to start your business in and get support from a trusted advisor if you need it at this point.
- Find out whether the type of company you have chosen is accepted by your stakeholders in the sector you will serve. Entering the sector with the wrong type of company can create disruptions, especially in supplier sourcing processes.
- At the point of company management, make sure that you meet your partner or partners on common ground, if any.
- When drafting your company’s articles of association, take care to include articles that will provide tax advantages. At this point, working with a reliable financial advisor will save lives.
Differences between Limited Liability Company and Joint Stock Company
Limited liability companies and joint stock companies have almost identical responsibilities in terms of tax liabilities, tax rates and liquidation processes. However, the most significant differences between limited liability companies and joint stock companies are the establishment costs, the number of partnerships, the responsibilities of the partners and the procedures for the transfer of shares.
- While the establishment cost of a limited liability company is at least between 1,750 and 2,500 TL; this rate is between 2,000 and 5,000 TL for joint stock companies. However, company establishment costs may vary according to the company capital and the purpose, subject, number of letters and words of the articles of association.
- Joint stock companies have a limit of 500 shareholders, while limited liability companies have a limit of 50 shareholders.
- While the responsibilities of partners in joint stock company partnerships cover only capital debts, this situation is different in limited liability companies. In limited liability companies, company partners are responsible for tax debts, Social Security Institution premiums and similar public debts. Company partners are held responsible for public debts in proportion to the capital they committed at the establishment of the company.
- In the share transfer process, it is sufficient to prepare a share transfer agreement for joint stock companies. However, for limited liability companies, this process must be carried out before a notary public.
For more information, please visit our Company Incorporation Consultancy service page.
