CORPORATION VS LLC IN TURKEY (WHICH YOU SHOULD CHOOSE)

INTRODUCTION

Corporation (Anonym Company in Turkish) is defined in Turkish Commercial Law as “…a type of commercial company that has divided capital into pre-determined number of shares…”. The shareholders’ liability is limited to their capital commitment to the corporation.

LLC (Limited Liability Company) is defined in Turkish Commercial Law as “…a type of commercial company that is formed by individuals or legal entities, has a determined capital, has shareholders less then 50.”

In this article, we will explain the differences between these two types of company and their advantages over each other, to our clients.

DIFFERENCES:

1. DECLARED CAPITAL

A corporation in Turkey has to have at least 50.000 Lira declared capital. A LLC in Turkey has to have at least 10.000 Lira declared capital.

2. GOING PUBLIC

Turkish Commercial Law states that only corporations can go public. An LLC is not able to go public.

3. SHAREHOLDERS

An LLC, can have 50 shareholders at most. For a corporation, Turkish Commercial Law did not accept an upper limit for corporations. There is no lower limit for number of shareholders regarding both types of companies.

4. LIABILITY OF SHAREHOLDERS

For corporate shareholders, full non-liability is provided by the company. It means that the shareholders will not be subjected to debts enforcement for the debts incurred by the company. For LLCs however, the shareholders will be held liable for the public debts (Taxes, government fees etc.) incurred by the company.

5. OBLIGATION OF SHAREHOLDERS TO BE EXECUTIVES

In corporations, there is no obligation for shareholders to hold any executive position in the company. For LLCs, at least one shareholder must hold an executive position in the company.

6. SQUEEZE-OUT

In Turkish Commercial Law, it is stated that for corporations there is no squeezing out a shareholder. But for LLCs, the shareholders can accept squeeze out for determined conditions. Even if there is no agreement on squeeze-out, shareholders can apply to the court for squeezing out another shareholder if there is a viable reason.

7. TRANSFER OF SHARES

Share transferring is really simple and easy for corporations. If the share is registered, the transfer will be done by endorsing. If the share is a bearer’s share, the transfer will simply done by giving the share to another person.

But for LLCs, the transfer will have to be completed in a notary with a formal agreement. Also, at least ¾ of the owners of the total capital will have to approve of the transferring.

8. OBLIGATION TO HAVE A LAWYER

According to the Turkish Commercial Law, it is stated that corporations must hire a lawyer, while the LLCs don’t have to.

WHICH TO CHOOSE

As you can see, the corporations are much bigger companies compared to LLCs. The initial capital of the corporations is 50.000 TL, while the initial capital of the LLCs is 10.000 TL. The corporations can easily open their shares for public while the LLCs cannot. The shareholders of the corporations don’t have to be executives in the company while the shareholders in LLCs have to.

Therefore, it can be said that LLCS are much smaller and local type of companies. The corporates are big and much more professionally organized. Also, the shareholder’s liability is much more advantageous for corporations then LLCs.

OUR SERVICES

As Alfa Law Firm, we can provide our clients with legal consultancy on which company they should choose to form. Also, with the Power of Attorney document, we will be able to form any company in Turkey for our clients.