DIFFERENCES BETWEEN SOLE PARTY AND CAPITAL COMPANY IN TURKEY

 

For entrepreneurs wishing to start their own business in Turkey, determining the appropriate type of company for their commercial activities is one of the most important initial criteria.

 

Differences Between Sole Proprietorships and Capital Companies

 

       For entrepreneurs wishing to start their own business, choosing the appropriate type of company is one of the essential criteria for success. According to fiscal legislation, company types are fundamentally divided into two main categories: sole proprietorships and capital companies.

 

Before discussing the differences between sole proprietorships and capital companies, let's briefly introduce these types of companies.

 

What is a Sole Proprietorship?

     A sole proprietorship is, in short, a type of company established by an individual and preferred for small-scale operations. In a sole proprietorship, the founder is taxpayer as a merchant. In other words, the founder conducts his or her commercial activities like a company. There is no separate legal entity for the company.

In sole proprietorships, the founders are unlimitedly liable for all commercial debts, including their personal assets. Sole proprietorships are often preferred for small-scale operations. This is primarily due to the rapid, simple, and low-cost nature of the incorporation process.

 

Which sole proprietorships can be established individually?

 

According to Turkish law, sole proprietorships are divided into two categories:
1. Sole Proprietorship: This is the smallest type of company established by a single person. Establishment is simple and cost-effective.

2. Ordinary Partnership (Sole Proprietorship with Partnerships): This is a type of company established by multiple individuals to jointly conduct business for a specific purpose. In ordinary partnerships, each partner is registered as a merchant. The company does not have a separate legal entity. Company activities are conducted as individual partnerships.

 

What is a Capital Company?

 

      A capital company is, in short, a type of company that has a legal entity separate from its founding partners. The partners are commercial entities with legal personality whose liability is limited to the amount of capital contributed.

In a capital company, the shareholders are liable for the company's debts and obligations only to the extent of their own capital.

Sole Proprietorships are generally preferred for medium and large-scale operations. Because the corporate tax rate is fixed for capital companies, the tax rate does not increase as the company's income increases. It is fixed. However, in sole proprietorships, the income tax rate gradually increases as income increases. Therefore, capital companies are frequently preferred for medium and large-scale operations.

 

What are Capital Companies?

    The most preferred capital companies are limited companies and joint-stock companies. In addition to these, there are many other types of capital companies.

1. Limited Company (LLC): Limited companies are one of the most preferred types of companies. According to 2025 data, they are established with a minimum capital of 50,000 TL. Establishment is simpler and easier compared to joint-stock companies. Limited companies, which can be established with a single partner, can have a maximum of 50 partners.

2. Joint-Stock Company (JSC): This is another of the most preferred capital companies. According to 2025 data, joint-stock companies can be established with a minimum capital of 250,000 TL. There is no restriction on the number of partners for joint-stock companies established with a single partner.

 

Comparison of Sole Proprietorships and Capital Companies in Türkiye

      Sole proprietorships and capital companies differ in many ways in terms of their responsibilities and structures. For these reasons, choosing the right company for the conduct and development of commercial activities is crucial. A thorough understanding of the different types of companies is crucial for making the right choice.

 

Differences in Liability

      In a sole proprietorship, the partners are the company itself. They are personally and unlimitedly liable for all debts and obligations. In other words, they are liable with all their assets for any unpaid debts resulting from commercial activities.

         In a capital company, the company has a separate legal entity from the partners. In other words, the company itself is a separate legal entity. The partners' liability for debts is limited to their shareholding in the company.

Differences in Establishment Processes

          Sole proprietorships are more practical and faster to establish than capital companies. In a sole proprietorship, the incorporation process and the establishment of the company are completed within one to two days. This short establishment time is one of the most important criteria when choosing a sole proprietorship.

The establishment process for a capital company is planned in advance and takes longer. Because a capital company requires more documents, gathering these documents can take longer. Establishing a sole proprietorship can take 3 to 4 days.

You can contact us anytime for detailed information and support regarding company establishment. Once the appropriate company type is determined for your business, our expert team establishes your company on a turnkey basis.

 

Capital Requirements

      There is no capital requirement for sole proprietorships. A sole proprietorship can be established without capital.

 

      For capital companies, however, a certain amount of capital is required for incorporation. A limited liability company can be established with a minimum capital of 50,000 TL, while a joint stock company can be established with a minimum capital of 250,000 TL.

 

Note: There is no capital deposit requirement for the establishment of a limited liability company. This means that the capital is added to the articles of association. After the company is established, the capital can be deposited into the company's bank account within two years, according to the law.

 

In joint-stock companies, at least one-quarter of the company's capital must be readily available and deposited into a bank account during the incorporation process.

 

Differences in Company Management

 

        In sole proprietorships, the partner is the company itself. All administrative and management activities are carried out by the partner.
Capital companies have a separate legal entity. Bodies such as a board of directors and a general assembly are established to manage this legal entity.

 

What are the Advantages and Disadvantages of a Sole Proprietorship?

 

The advantages and disadvantages of establishing a sole proprietorship can be briefly listed as follows.
Advantages of a Sole Proprietorship

1. Quick and easy to open
2. Low establishment and subsequent monthly accounting fees.
3. No capital requirement.
4. Simple administration and management.
5. Suitable for small-scale operations.
6. According to 2025 data, it offers tax advantages for operations with annual net profits of less than 150,000 TL.

 

Disadvantages of a Sole Proprietorship
1. Partners are unlimitedly liable for all debts.
2. Lower commercial image compared to a capital company
3. Income tax rates can increase up to 40% if revenues increase.

 

What are the Advantages and Disadvantages of Capital Stock Companies?

Some advantages and disadvantages of capital stock companies, in terms of their establishment, operations, and management structure, can be listed below.

Advantages of Capital Companies

1. More prestigious and reputable.
2. Partners are liable for debts to the extent of their capital share.
3. Higher commercial image and respectability.
4. For medium- and large-scale operations, a fixed corporate tax rate is more advantageous from a tax perspective.

Disadvantages of Capital Companies
1. Relatively high establishment costs
2. Complicated establishment procedures
3. Minimum capital requirement
4. Relatively high bureaucratic processes

 

HOW SHOULD I CHOOSE THE COMPANY TYPE

      When choosing a company type, the most important criterion to consider is the amount of revenue to be generated in one year.

      As a recommendation, if your annual net profit is expected to be below 150,000 TL, based on 2025 data, choosing a sole proprietorship is recommended due to its lower costs.

      However, if your annual net profit is expected to exceed 150,000 TL, opting for a capital company may be recommended due to its flat tax rate and tax advantages. Furthermore, many entrepreneurs prefer capital companies due to their greater prestige.

 

     If you are in the process of establishing a company in Türkiye, you can always contact us for questions and support.