What is a Limited Company?

whatisalimitedcompany

A Limited Company, as defined by the Turkish Commercial Code (TCC), is a type of commercial enterprise where at least one partner is liable for the capital invested. The capital is divided into shares representing specific portions, which are then distributed among the partners, granting them the right to participate in profits and losses.

Characteristics of a Limited Company

  1. Capital and Partners: A Limited Company can be formed with a minimum of one and a maximum of 50 partners. Partners are liable in proportion to their share of capital, and the capital is determined by the total value of the shares.

  2. Management and Representation Authority: The management of a Limited Company is carried out by directors elected from among the partners or by third parties. Directors have the authority to represent and administer the company.

  3. Company Name and Business Scope: The name of a Limited Company must comply with the TCC. The business scope of the company can encompass trade and service sectors.

  4. Limited Liability: One of the major advantages of a Limited Company is that partners have limited liability. Partners are only liable for company debts up to the amount of their capital contribution.

  5. Profit Distribution: Profits of a Limited Company are distributed among the partners according to their shareholdings. The distribution of profits is determined by a general assembly decision.

  6. Establishment and Registration Process: The establishment of a Limited Company involves drafting a contract through a notary public. Subsequently, registration is done in the commercial registry.

Advantages

  1. Limited Liability: Limited liability protects partners' personal assets from being at risk due to company debts.

  2. Flexibility: Limited Companies offer flexibility in management and partnership structures, facilitating decision-making processes.

  3. Ease of Establishment: Establishing a Limited Company requires fewer documents and procedures compared to other types of businesses.

  4. Access to Credit: Limited Companies can obtain loans from banks, with partners' personal assets not being used as collateral for these loans.

Disadvantages

  1. Insufficient Capital: There is a requirement for a certain amount of capital to establish a Limited Company, which can be restrictive initially.

  2. Management Challenges: Differing opinions and conflicts of interest among partners can pose challenges in management.

  3. Profit Sharing: Profit distribution among partners may lead to disagreements, affecting the stability of the company.

How to Establish a Limited Company

  1. Determining Partners: Identify at least one, but no more than 50 partners.

  2. Preparation of Company Agreement: The company agreement is prepared by a notary and signed by the partners.

  3. Capital Investment: Ensure the agreed-upon capital is invested by the partners.

  4. Registration with the Commercial Registry: After approval of the agreement and preparation of other necessary documents, register the company with the commercial registry.

  5. Fulfillment of Tax and Other Obligations: Fulfill the tax and other legal obligations of the established company.

Conclusion

Hiosis, known as a Limited Company, is one of the most commonly preferred types of businesses in Turkey. With advantages such as limited liability, flexibility, and an easy establishment process, it provides numerous opportunities for business owners. However, it also comes with certain disadvantages. Entrepreneurs considering establishing a Limited Company should carefully weigh these pros and cons before making a decision.

01.04.2024

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