What is a Capital Company? How is it Established?

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What is a Capital Company?

One of the most important concepts encountered by entrepreneurs who want to conduct commercial activities is the capital company. In Turkey, capital companies are among the preferred business models for those wishing to establish a company, due to the fact that the partners' liabilities are within certain limits and their corporate structure.

A capital company is a type of company where the capital contributed by the partners is more important than their personal characteristics. In these companies, the partners' liability is generally limited to the amount of capital they have contributed. The personal assets of the partners cannot be directly seized due to the company's debts. This makes capital companies safer than sole proprietorships.

According to the Turkish Commercial Code, capital companies are divided into three groups:

• Joint Stock Company (A.Ş.)

• Limited Liability Company (Ltd. Şti.)

• Limited Partnership with Capital Divided into Shares

In practice in Turkey, the most commonly used capital companies are joint stock companies and limited liability companies.

Key Characteristics of Capital Companies

There are some key characteristics that distinguish capital companies from other types of companies.

Advantage of Limited Liability

In capital companies, the liability of partners is limited to the capital they have invested. Partners' personal assets are generally not at risk due to the company's debts.

Corporate Structure

Capital companies have a specific organizational structure. Management, ownership structure, and decision-making processes are determined by legal regulations.

Continuity

The departure, death, or transfer of shares of one of the partners does not directly terminate the company's operations. The company's legal personality continues.

Investment and Growth Opportunities

Joint-stock companies, in particular, offer significant advantages in attracting investment, transferring shares, and growth processes.

Legal Personality

After their establishment, capital companies acquire an independent legal personality. This allows them to buy and sell goods, enter into contracts, and file lawsuits in their own name.

Types of Capital Companies

What is a Limited Liability Company?

A limited liability company is one of the most preferred types of capital companies in Turkey. It is especially preferred by small and medium-sized enterprises. Limited liability companies can be established with one or more partners. The number of partners can be a maximum of 50.

Advantages of a Limited Liability Company

• The establishment process is quite practical.

• It can be established with a single partner.

• The liability of the partners is limited to their capital shares.

• The management structure is relatively simpler.

• It is suitable for small and medium-sized enterprises.

Disadvantages of a Limited Liability Company

• Share transfer is more cumbersome compared to a joint-stock company.

• It is not as flexible as a joint-stock company in attracting investors.

• It cannot be publicly offered.

What is a Joint Stock Company?

A joint stock company is the preferred type of company for large-scale investments and corporate structures. It can be established by one person or with multiple partners. The company's capital is divided into shares, and shares are more easily transferable.

Advantages of a Joint Stock Company

• Share transfer is easier.

• It is easier to attract investors.

• It can be publicly offered.

• It has a strong structure in terms of corporate reputation.

• It is suitable for large-scale projects.

Disadvantages of a Joint Stock Company

• Establishment and management processes are more complex.

• It has more legal obligations.

• It requires the formation of management bodies.

Advantages of Establishing a Capital Company

Today, many entrepreneurs start their activities by establishing a capital company. The main reasons for this are as follows:

Provides Reliability

Corporate clients and large firms generally prefer to work with capital companies. This increases the prestige of the business.

Facilitates Access to Finance

Banks and investors may have a more positive attitude towards capital companies. It can provide advantages in credit and investment processes.

Increases Brand Value

Gaining the trust of customers becomes easier thanks to the corporate structure.

Strengthens the Partnership Structure

Taking on new partners or changing the partnership structure can be done more systematically.

Ensures the Continuity of the Company

The company can continue its operations independently of its partners.

How to Establish a Capital Company?

The process of establishing a capital company consists of several stages. Today, a significant portion of these processes are carried out electronically.

Determining the Type of Company

As the first step, the type of company suitable for the business's needs should be chosen. If a small or medium-sized enterprise is being established, a limited liability company (LLC) can be preferred. If there are larger investments or the goal of attracting investment, a joint-stock company (JSC) may be more suitable.

Determining the Company Name

The trade name to be used for the company is selected. The name must not have been previously used by another company. When choosing a name, it is important that it reflects the field of activity and is memorable.

Preparing the Articles of Association

One of the most important documents in the establishment of a company is the articles of association. The articles of association include information such as:

• Company name

• Field of activity

• Amount of capital

• Shareholder structure

• Management method

• Company headquarters etc.

Registration with MERSIS

For establishment procedures, an application is made through the Central Registry System (MERSIS). Thanks to this system, company establishment procedures are carried out electronically.

Commitment to Capital

The company partners commit to the determined capital amount. The minimum capital requirements set by law must be met.

Application to the Trade Registry

An application is made to the relevant trade registry office with the prepared documents. After the documents are reviewed, the company is registered.

Tax and Chamber Registrations

Following registration, the tax office procedures are completed and registration with the relevant chamber of commerce is carried out. After this stage, the company can officially begin operations.

Documents Required When Establishing a Capital Company

Generally, the following documents are requested during the establishment process:

• Identity documents

• Residence information

• Company articles of association

• Signature declarations

• Capital declarations

• Documents related to the company address

• Trade registry application documents

The documents required during the application process may vary depending on the type of company.

Taxation in Capital Companies

Capital companies are subject to corporate tax. Corporate tax is calculated on the profits earned by the companies. Additionally, depending on the field of activity, there may be VAT, withholding tax, and other legal obligations. Obtaining professional accounting support is important for the regular fulfillment of tax obligations.

Capital Company or Sole Proprietorship?

This is one of the most frequently asked questions by those wishing to establish a company. Sole proprietorships may be faster and less costly to establish. However, capital companies are more advantageous for businesses aiming for growth.

Sole Proprietorship

• Easy to set up.

• Low cost.

• Limited ownership structure.

• Higher personal liability.

Capital Company

Has a more corporate structure.

• Limited liability of partners.

• Higher potential for investment.

• Suitable for long-term growth.

Capital companies are preferred more, especially in e-commerce, manufacturing, export, and large-scale commercial activities.

Things to Consider When Establishing a Capital Company

Some important points should be considered during the establishment of the company.

Determine the Correct Field of Activity

Correctly defining the field of activity can prevent future legal and financial problems.

Make a Capital Plan

Sufficient capital planning should be done to meet the initial needs of the company.

Seek Professional Support

Obtaining support from financial advisors and legal consultants ensures a smooth establishment process.

Choose the Right Company Address

The address to be used as the company headquarters must meet legal requirements.

Follow Up on Tax Obligations

After establishment, tax returns and other legal obligations must be fulfilled regularly.

Conclusion

Capital companies are important types of companies that offer entrepreneurs limited liability, corporate structure, and growth opportunities. Limited liability companies and joint-stock companies offer significant advantages, especially for businesses with long-term goals. Before establishing a company, the field of activity, capital structure, partnership plan, and growth targets should be evaluated in detail. A capital company established with proper planning and professional consulting support can create a solid foundation for the future success of the business.