The most preferred types of companies are generally divided into two categories: sole companies and limited companies. When choosing the most suitable company model, you should first evaluate your resources and goals.
Sole companies are mostly preferred by individuals who want to complete the company establishment process economically. They are easy and quick to establish—even through the e-Government portal in Turkey.
Limited companies are usually established for the purpose of conducting high-volume transactions. It is one of the most popular types of companies worldwide.
1. The differences between these two types of companies are as follows:
- - In a sole company, partners are personally and fully liable for the company's debts. If the company cannot pay its debts, personal assets may be seized. In a limited company, partners have limited liability and their personal assets are not at risk.
- - There is no minimum capital requirement for sole companies, while limited companies must have a minimum capital of 10,000 TL.
- - A sole company is managed by one person. Although there may be partners, transferring ownership is not a simple process and is rarely preferred. In a limited company, the company is managed by a board of directors.
- - Sole companies pay income tax between 15% and 40%, while limited companies are subject to a 25% corporate tax.
- - The setup cost of a sole company is approximately between 1,000 – 1,500 TL, whereas for a limited company it ranges from 2,500 – 4,000 TL.
- - Sole companies are generally seen as less prestigious. Limited companies are perceived as more corporate and thus more prestigious.
- - A sole company can be closed in one day, while the closure process of a limited company can take up to one year.
2. Key considerations when choosing the type of company:
- - Decide on the level of personal liability you are willing to take.
- - How important is it for your company to appear prestigious?
- - Do you plan to transfer ownership of your company in the future?
- - Which tax regime is more suitable for you?
In Turkey, the most commonly preferred types of companies are sole companies and limited companies. Each model has its own unique advantages and disadvantages. In this analysis, we will objectively review the key differences between sole and limited companies and the factors you should consider when choosing your company type.
3. Features of Sole Companies
- Easy Setup: Sole companies are ideal for small and medium-sized businesses due to their easy and fast setup, no minimum capital requirement, and being managed by a single person. They can even be established via the e-Government system in Turkey. However, personal liability is unlimited—meaning company debts can be covered with personal assets.
4. Features of Limited Companies
- High-Volume Transactions: Limited companies are more suitable for large-scale businesses and companies aiming to become more corporate. Being one of the most preferred types globally, limited companies offer a safer environment for investors since partners' personal assets are not at risk due to company debts.
5. Differences Between Sole and Limited Companies
The fundamental differences between sole and limited companies are listed below:- Personal Liability: Unlimited in sole companies, limited in limited companies.
- Minimum Capital: Not required in sole companies; 10,000 TL required in limited companies.
- Management: Sole companies are managed by one person; limited companies are managed by a board of directors.
- Taxation: Sole companies pay income tax; limited companies pay corporate tax.
- Establishment Cost: Lower for sole companies compared to limited companies.
- Prestige: Limited companies are generally considered more prestigious.
- Setup Duration: Sole companies can be established in one day, limited companies may take up to a year.
- Transferability: Ownership transfer is easier in limited companies than in sole companies.
6. Considerations When Choosing a Company Type
When choosing a company type, you should consider the following:- Personal Liability: How much responsibility are you willing to take for company debts?
- Prestige: How important is the perceived prestige of your company?
- Company Transfer: Do you plan to transfer the company in the future?
- Taxation: Which taxation system suits your business better?
Result
-
Sole companies and limited companies are two widely preferred business structures, each with its own pros and cons. When deciding which type is more suitable for your business, it is essential to evaluate the above factors carefully and consider your company's specific needs.
