Sole Proprietorship vs Limited Liability Company in Turkey: Which Should a Foreigner Choose?

Most foreign founders in Turkey choose the limited liability company (Ltd. Şti.) for one reason: it shields your personal assets from business debts. A sole proprietorship (individual company) is cheaper and faster to start, but you are personally liable for everything the business owes. This guide compares the two on liability, capital, tax, social security and setup, so you can pick the vehicle that fits your plans and your risk appetite.

The Two Structures Foreigners Compare Most

When you decide to do business in Turkey, the practical choice usually comes down to two vehicles: the sole proprietorship (a one-person individual business, in Turkish şahıs işletmesi or ferdi işletme) and the limited liability company (limited şirket, abbreviated Ltd. Şti.). They sit in different parts of Turkish law and behave very differently when it comes to personal risk, tax and credibility with banks and counterparties.

The limited liability company is a capital company governed by the Turkish Commercial Code (Türk Ticaret Kanunu, Law No. 6102, "TTK"). It has its own legal personality, separate from its owners. A sole proprietorship, by contrast, is essentially a registered natural person carrying on a trade: there is no separate legal entity standing between you and the business.

Below we break down each factor that matters to a foreign founder. For a full walkthrough of incorporation, see our company incorporation in Turkey service.

Sole Proprietorship vs LLC: Side-by-Side Comparison

Here is the short version before we go deeper. Use this table to see, at a glance, where the two structures genuinely differ.

Each row is unpacked in the sections that follow.

Liability: Where Your Personal Risk Really Differs

This is the single most important distinction, and the reason most foreign investors choose an LLC.

Sole proprietorship - unlimited personal liability

A sole proprietorship has no separate legal personality. You and the business are the same legal person, so you are personally and unlimitedly liable for all business debts, taxes and obligations - with your personal assets, including savings, a home or a car. If the business cannot pay, creditors can pursue you directly under the general rules of the Turkish Code of Obligations (Law No. 6098) and enforce against your personal property through the Enforcement and Bankruptcy Law (İİK, Law No. 2004). If a Turkish counterparty starts proceedings against you, that is exactly where our enforcement under the İİK (Law No. 2004) work comes in, on either side of a dispute.

Limited liability company - your personal assets are shielded

An LLC has its own legal personality under the TTK. As a rule, shareholders are not personally liable for company debts. Once you have paid in your subscribed capital, you have no further private-law liability for ordinary company debts - creditors look to the company, not to you. The company can fail without taking your house with it.

There is one important carve-out in Turkish practice: public debts. Where the company cannot pay its taxes or social-security (SGK) premiums, shareholders can be held responsible for those public receivables in proportion to their shareholding under the Law on the Procedure for Collection of Public Receivables (Law No. 6183) and the Tax Procedure Law (Law No. 213). Managing directors and legal representatives face broader exposure - they can be pursued for the whole unpaid public debt. Sound bookkeeping and timely filings keep this risk low.

Capital, Partners and Foreign Ownership

Minimum capital

A sole proprietorship has no statutory minimum capital - you register and begin trading. A limited liability company needs a minimum share capital of 50,000 TL under the TTK (Art. 580), raised from the previous 10,000 TL. This floor is updated by decree from time to time, so confirm the current figure at the time of incorporation. Capital is divided into shares and recorded in the articles of association.

Number of owners

• Sole proprietorship: a single natural person. It is inherently a one-person business.
• LLC: from one to fifty shareholders (TTK Art. 574). Shareholders may be Turkish or foreign individuals or companies - Turkey permits 100% foreign ownership in most sectors.

Where foreign ownership is restricted

"Most sectors" is not "all sectors." Certain regulated industries cap or condition foreign shareholding - for example broadcasting (radio and television), civil aviation, and maritime cabotage (carrying cargo or passengers between Turkish ports). If your activity touches a regulated field, confirm the ownership rules before you commit to a structure; we check this as part of setting up a Turkish LLC.

Taxation: Personal Income Tax vs Corporate Tax

Tax treatment is a decisive factor and depends heavily on expected profit.

Sole proprietorship - progressive personal income tax

Profits are taxed in your hands under personal income tax on a progressive, bracketed scale running from 15% to 40% across five brackets. The bracket thresholds are adjusted for inflation each year. At low profit levels this can be efficient; as profits rise you climb into higher brackets, which often makes the structure less attractive for a growing business.

Limited liability company - corporate tax, then dividend tax

An LLC pays corporate income tax at 25% on company profits (30% for financial-sector companies). Since 1 January 2025, a domestic minimum corporate tax also applies: the company calculates tax under the standard rules and under a minimum-tax floor (broadly 10% of corporate income before certain exemptions and deductions) and pays whichever is higher.

When the company then distributes profit to shareholders as dividends, a dividend withholding tax of 15% applies (raised from 10% by Presidential Decree No. 9286, effective 22 December 2024). For a foreign shareholder, that headline 15% can often be reduced under an applicable double-taxation treaty between Turkey and your country of residence - which is exactly the kind of point worth modelling before you choose a structure.

Social Security, Accounting and the Cost of Running Each

Setup is a one-off; running the structure is a monthly reality. Two recurring costs decide a lot for solo founders.

Social security (Bağ-Kur / 4-b)

A sole proprietor insures themselves under Bağ-Kur (4/b) and pays premiums on a declared earnings base. An LLC shareholder who is also a manager falls under the same 4/b regime - so on this point the two structures are broadly similar for the owner. The practical difference is that an LLC can also employ staff (including the founder, in some setups) under the 4/a employee regime, which changes the social-security and payroll picture as you grow.

Accounting and compliance burden

• Sole proprietorship: can often use a simplified business ledger (işletme defteri), with lighter bookkeeping and lower accountant fees. A good fit for modest, single-person activity.
• LLC: must keep double-entry books, engage a certified accountant (SMMM), and meet e-invoice (e-fatura) and e-ledger (e-defter) obligations once turnover thresholds are crossed. More structure, more cost, more credibility.

For a one-person consultancy testing the market, the lighter compliance of a sole proprietorship is a real saving. For a business that will sign substantial commercial contracts with Turkish counterparties, the LLC's formality is usually worth the extra cost.

Credibility, Continuity, Transfers and Exit

Beyond tax and liability, the structures differ in how the market treats them, how the business survives over time, and how easily you can leave.

• Credibility: banks, suppliers and corporate clients often perceive an LLC as more established than an individual business, which can matter for credit lines, tenders and large contracts.
• Continuity: a sole proprietorship is tied to its owner and does not have perpetual existence. An LLC continues as a legal person independent of changes in its shareholders.
• Transferability and investment: LLC shares can be transferred and new shareholders admitted, which makes share transfers and bringing in investors straightforward and gives you a clean way to sell the business. A sole proprietorship cannot issue shares, which limits fundraising and exit options.
• Closing it down: a sole proprietorship can be wound up quickly and cheaply - deregister and you are largely done. An LLC requires a formal liquidation that typically runs several months and involves registry steps, creditor protection and a final tax clearance. Anxious founders should weigh the cost of exit, not just entry.

Setup Timeline and What Foreigners Need

Both structures are open to foreigners, and you do not need to live in Turkey to own either. The paperwork and timeline differ.

Sole proprietorship

Registered with the relevant tax office and the trade registry / chamber, with comparatively light paperwork. A foreign founder will need a Turkish tax number and a residence or work basis appropriate to the activity; registration is usually fast.

Limited liability company

Incorporated by drafting articles of association, registering with the Trade Registry (Ticaret Sicili), obtaining a tax number, and completing notarised signatures and - for foreign founders - translated and apostilled documents (passport, and corporate documents if a foreign company is a shareholder). Much of it can be handled remotely through a Turkish lawyer holding a power of attorney, so you need not travel for every step.

A Turkish company can also support work-permit and residence applications and is the standard vehicle for serious foreign investment, which is one more reason many foreigners choose the LLC even when a sole proprietorship would be cheaper to start.

Which One Is Right for a Foreign Founder?

There is no universally "better" structure - the right choice depends on your goals. As a general guide:

• A sole proprietorship can suit a single freelancer or consultant testing a low-risk, modest-revenue activity who wants minimal setup, light accounting and a quick exit - provided you are comfortable with full personal-liability exposure.
• A limited liability company is the usual recommendation for foreigners who want personal-asset protection, plan to grow, intend to raise capital or take on partners, or want a credible vehicle for banking, contracts and work or residence permits.

Many foreign investors in Turkey ultimately choose an LLC for the liability shield and flexibility alone. Make the decision with current tax figures and your specific plans in mind; a Turkish lawyer can confirm the structure and current statutory requirements before you commit.

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