How the two company types differ on number of shareholders, share transfers, liability, management and investment.
The first legal choice when starting a commercial venture is the company type. The two most common in Turkey, the joint stock company and the limited liability company, differ materially in liability, management and capital.
Incorporation and shareholders
Both types can be formed by a single shareholder. A limited company can have at most 50 partners; a joint stock company has no upper limit. In a joint stock company a part of the capital must be paid at incorporation and the minimum capital is higher than for a limited company. Current amounts are changed by Presidential decisions, so check them before incorporating.
Share transfers
In a joint stock company share transfers are in principle free, although transfer restrictions can be set in the articles. In a limited company a transfer requires a written contract made before a notary and general assembly approval. This makes the limited company slower for admitting new partners and investors.
Liability
In both types shareholders are in principle liable up to the capital they have committed. In a limited company partners may be subject to additional payment and ancillary obligations if the articles provide for them, and may be held liable to a limited extent for the company's unpaid public receivables.
Management structure
A limited company is managed by one or more managers, and partners have a strong say in the general assembly. In a joint stock company the board is an organ independent of the general assembly; tools such as corporate governance, independent directors and delegation of authority (internal directive) are more flexible.
Investment and growth
Venture funds, angel investors and companies planning an IPO generally prefer a joint stock company. It is easier to structure privileged shares, an authorised capital system and employee stock options in a joint stock company.
Cost and operation
A limited company costs less to set up and maintain, and general assembly formalities are simpler. A joint stock company requires more formalities for board meetings, the share ledger and general assembly proceedings.
Which to choose?
- A limited company for one-person or two- to three-partner family-type businesses
- A joint stock company for businesses planning to receive investment, grow or go public
- Converting later (limited to joint stock) is possible but incurs notary and registration costs
When deciding, consider your partnership plan, your three- to five-year growth goals and investor expectations together. Our incorporation packages include a free preliminary discussion on choosing a company type.