Sole Proprietorship or LLC in Türkiye? Which Fits You

Starting out as an individual is easy. When the business grows, the questions of liability and tax come up.

Comparison

	Sole proprietorship	Limited company (LLC)
Legal structure	No separate legal entity, the owner is the merchant	Separate legal entity
Liability	The owner is liable with all personal assets, without limit	Shareholders are in principle limited to their capital share
Capital	No minimum capital	Statutory minimum capital required
Tax	Income tax, progressive rates	Corporate tax, plus tax on profit distribution
Setup and operation	Simple, low cost	Articles of association, trade registry, general assembly, books and minutes
Adding partners	Not possible	Possible, share transfer is subject to formalities
Credit and investors	Limited	More institutional image

Which one in which situation?

A sole proprietorship may fit:

• Small, low-risk, one-person businesses,
• If you want to keep incorporation cost and administrative burden low.

An LLC may fit:

• If you want to protect personal assets in a risky activity,
• If you plan to bring in partners, investment or credit,
• If you want to balance the tax burden as income grows.

Note

Limited liability is not absolute protection. Banks ask shareholders for guarantees, and managers can be liable under the law in cases of loss of capital and over-indebtedness. See loss of capital and over-indebtedness.

How Denova can help

Within our Legal and Financial Advisory, we assess the choice of structure together with its tax and liability effects. For the difference between limited and joint stock companies see LLC or joint stock company.