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What to Consider Before Launching a Turkish Company?

  1. Understanding the business and legal environment
  2. Choosing the right business structure
  3. Raising capital
  4. Navigating cultural differences
  5. Staying compliant

Understanding the business and legal environment

The business climate in Turkey is currently characterized by a mix of positive and negative factors.

On the positive side, Turkey's economy has been growing steadily in recent years, with a strong manufacturing sector and a growing consumer market. The government has also implemented a number of policies and incentives aimed at attracting foreign investment and promoting entrepreneurship.

However, the country also faces a number of challenges, including high inflation, a large current account deficit, and a high level of public debt. Additionally, there are concerns about political instability and a lack of transparency in some areas of the economy.

In terms of taxes, Turkey has a relatively high corporate income tax rate of 20%, but there are a number of deductions and incentives available to companies that meet certain criteria. Value added tax (VAT) is also imposed at a rate of 18%.

The labor laws in Turkey are considered to be relatively favorable to workers, with strong protections in areas such as minimum wage, overtime pay, and vacation time. However, there are certain industries where there are specific regulations to be followed, like manufacturing or construction.

When it comes to setting up a company in Turkey, the process generally involves registering with the Trade Registry Office, obtaining the necessary licenses and permits, and obtaining a tax number. The process can be completed online, although it requires some company information, like company name, articles of association, and capital. It is advisable to hire a local legal professional or consult with a specialized consultancy to assist with the registration process and to ensure compliance with all relevant laws and regulations.

As for the specific industries, it's worth noting that some sectors, such as energy and telecommunications, are subject to more stringent regulations and oversight than others. Additionally, foreign investors may be subject to certain restrictions or limitations when operating in certain industries.

 

Choosing the right business structure

In Turkey, the most common forms of business structure are the limited liability company, partnership, and sole proprietorship. Here is an overview of each structure and its pros and cons:

  1. Limited Liability Company (LLC): This is the most popular form of business structure in Turkey. LLCs are separate legal entities from their owners and shareholders, meaning that the company's liabilities are separate from the personal liabilities of the shareholders. LLCs must have at least one shareholder, and the minimum share capital is TL 10,000. LLCs are suitable for most businesses, with the exception of some regulated industries that require a higher level of capitalization.

Pros: -Limited liability for shareholders -Easy to raise capital through the sale of shares -Flexible management structure

  • Separate legal entity from the shareholders

Cons: -Higher compliance and reporting requirements -Shares are publicly tradeable

  1. Partnership: A partnership is a business structure in which two or more individuals share the profits and liabilities of a business. There are several types of partnerships in Turkey, including the general partnership, limited partnership, and commandite partnership.

Pros: -Easy to establish -Flexible management structure -Lower compliance and reporting requirements -Complementary skills and knowledge of partners can be leveraged

Cons: -Unlimited personal liability for partners -difficulty in raising capital -Limited ability to transfer ownership

  1. Sole Proprietorship: A sole proprietorship is a business that is owned and operated by a single individual. In Turkey, it is also known as an "individual enterprise." These businesses are not considered separate legal entities from their owners, meaning that the owner is personally liable for all debts and obligations of the business.

Pros: -Easy to establish and operate -Lower compliance and reporting requirements -Complete control over the business

Cons: -Unlimited personal liability for the owner -difficulty in raising capital -Limited ability to transfer ownership

In general, a Limited Liability Company is suitable for most businesses, especially medium and large companies. For small business and startups, a Sole proprietorship or a general partnership might be more suitable, but keep in mind that it has unlimited personal liability. It's important to consult with a legal professional or specialized consultancy to determine the best business structure for your particular company and to ensure compliance with all relevant laws and regulations.


Raising capital

Here are some common options for raising capital to start a business in Turkey, along with tips on how to approach potential investors and put together a solid business plan:

1.    Bank Loans: Banks in Turkey offer various types of loan options for businesses, including working capital loans, investment loans, and export loans. To be eligible for a loan, businesses typically need to provide collateral and have a solid credit history. It is important to have a well-prepared business plan and financial projections to demonstrate the viability of the business to the bank.

2.    Government Grants: The government of Turkey offers various types of grants and incentives to businesses, including research and development grants, export grants, and startup grants. To be eligible for these grants, businesses typically need to meet certain criteria and go through a competitive application process. A good business plan and a clear explanation of how the grant will be used can help increase the chances of success.

3.    Venture Capital: There is a growing venture capital industry in Turkey, with a number of firms actively investing in early-stage and growth-stage companies. To attract venture capital, a business should have a clear and compelling value proposition, a strong management team, and a viable path to profitability. A well-prepared business plan and a pitch deck can help to increase the chances of success.

4.    Crowdfunding: Crowdfunding is becoming more popular in Turkey, it allows startups and small businesses to raise funds from a large number of people through the internet. To be successful with crowdfunding, a business should have a compelling story, a clear and achievable fundraising goal, and a solid marketing strategy to promote the campaign.

When approaching potential investors, it's important to clearly articulate the value proposition of the business and the potential return on investment. It's also important to be prepared to answer questions about the market, the competition, and the financial projections of the business. A solid business plan is also essential, as it lays out the details of the business, including the market opportunity, the product or service, the target customer, the marketing and sales strategy, and the financial projections.

In general, it's important to be realistic about the amount of capital that is needed and to be prepared to present a well-thought-out plan that demonstrates the viability of the business and the potential for returns on investment. It is always recommended to consult with a professional in the field or specialized consultancy to help with the preparation of the financial projections and the business plan.


Navigating cultural differences

1.    Hierarchy and Respect: Turkey has a hierarchical culture, where respect for authority and age is highly valued. It's important to be aware of the formal titles and positions of those you are doing business with and to address them accordingly. It is also common to use formal and polite language when communicating with clients and business partners.

2.    Communication style: Turkish culture places a high value on personal relationships and building trust. As a result, business meetings in Turkey often involve a significant amount of small talk and building personal connections before getting down to business. Additionally, direct communication is not always appreciated and it's common for people to use indirect language or hint at what they mean, rather than stating it directly.

3.    Decision-making: Business decisions in Turkey are often made through consensus and it's common for decisions to involve multiple levels of management and for the process to take longer than in other cultures. In addition, it's important to be aware that business relationships in Turkey can be highly personal, and that personal connections can play a large role in decision-making.

4.    Business Hours: Office hours in Turkey tend to be longer than in other countries, usually from 9am to 6pm, Monday through Friday, with a lunch break in the middle of the day. But as for weekends, businesses and offices tend to be closed on both Saturday and Sunday, with only few exceptions like in tourism industry.

5.    Gift-Giving: Gift-giving is an important part of Turkish culture and can be used to build relationships and show appreciation. It's a good idea to bring a small gift to a first business meeting or to celebrate the signing of a contract.

6.    Dress Code: Business dress in Turkey is generally more formal than in other countries. Men are expected to wear suits and ties, while women should dress conservatively and avoid revealing clothing.

It is important to keep in mind that, although these cultural differences can sometimes cause misunderstandings or delays, they are also part of the unique business environment in Turkey and can be used to establish positive and long-lasting business relationships. It's always best to be aware of and respectful of the local customs and culture when conducting business in a foreign country.

 

Staying compliant

 

it's extremely important for businesses operating in Turkey to stay compliant with all relevant laws and regulations to avoid potential fines, penalties, and legal problems. Here are a few examples of laws and regulations that businesses in Turkey need to be aware of:

1.    Employment laws: Businesses in Turkey are subject to a wide range of employment laws, including laws on minimum wage, overtime pay, vacation time, and termination of employment. Businesses must also provide a safe and healthy work environment and comply with laws on discrimination and equal opportunity.

2.    Tax laws: Businesses in Turkey are subject to a range of taxes, including corporate income tax, value-added tax (VAT), and payroll taxes. Businesses must register for taxes, file tax returns, and pay taxes in a timely manner to avoid penalties.

3.    Environmental regulations: Businesses in Turkey are subject to laws and regulations designed to protect the environment, such as regulations on air and water pollution, waste management, and the use of hazardous materials. Businesses must comply with these regulations to avoid fines and to protect the environment.

4.    Data protection: Businesses in Turkey are also subject to regulations related to the protection of personal data, this includes regulations to protect the data of employees, clients, and customers. Businesses must ensure that they are protecting personal data in compliance with the General Data Protection Regulation (GDPR) and other relevant laws.

To stay informed about changes in laws and regulations that may affect the business, it's a good idea to consult with a legal professional or specialized consultancy that is well-versed in the specific laws and regulations that apply to your business. Additionally, government websites and local Chambers of Commerce can be a useful resource for staying informed about changes in laws and regulations.

It's important to stay informed and up to date on any relevant laws and regulations and compliance with them, as failure to do so could lead to penalties and legal problems that could harm the reputation of your company. This is why it is crucial to have a legal professional or specialized consultancy on the team or to consult with one periodically to ensure compliance.