What is a Sole Proprietorship? What Are the Types of Sole Proprietorships? How to Establish a Sole Proprietorship?

What is a Sole Proprietorship What are the Types of Sole Proprietorship
What is a Sole Proprietorship What are the Types of Sole Proprietorships How to Establish a Sole Proprietorship

A sole proprietorship is defined as a commercial enterprise that can be established with a single person or a small number of partners. This company structure, where the partners are held personally responsible for income, expenses and debts, is especially preferred by young entrepreneurs and new business owners due to its fast, easy and low-cost establishment advantages.

The advantages of establishing a sole proprietorship are:

  • Compared to joint stock and limited company types, the cost of establishing a sole proprietorship is lower.
  • Since a small number of documents are required during the establishment of a sole proprietorship, the entire process is usually completed within 1-2 business days.
  • Since it is subject to the gradual tax system, it offers a low-rate income tax advantage for businesses with low initial earnings.
  • Financial advisor and accounting service fees paid monthly are lower than other types of companies.
  • Closing a sole proprietorship is as easy as establishing it. The closing process is usually completed within 1-2 business days.

What Are the Types of Sole Proprietorships?

There are different sole proprietorship structures in Turkey, where the relations between partners are determined by law. According to the Turkish Commercial Code, the types of sole proprietorships are:

  • Collective Company: There is no upper limit on the number of partners of collective companies established with at least two partners. According to this company structure with legal personality, which was established only with the partnership of real persons, the partners have unlimited secondary liability to the creditors. In other words, debts that cannot be paid by the company pass into the responsibility of the partners. It should also be noted that there is no capital requirement for establishing a collective company.
  • Limited Company: The limited partnership stands out as one of the sole proprietorship companies where the partners have varying degrees of responsibility towards the creditors. During the establishment phase, a written agreement is made stating that one of the partners is limited and the other is unlimited liability for the debts. While only natural persons can be partners with unlimited liability, partners with limited liability can be natural or legal persons.

In addition to these, there is another type of sole proprietorship called “Ordinary Partnership”, which is regulated by the Turkish Code of Obligations instead of the Turkish Commercial Code. This partnership structure, which was established with at least two persons, does not have its own legal personality and trade name. Since the company does not have a legal personality, the partners are held primarily responsible to the creditors.

How to Establish a Sole Proprietorship?

The sole proprietorship is quickly set up in a matter of days after completing the necessary paperwork and start-up costs. You can read the steps required to establish a company from the tax office or e-government in the next heading.

The cost of establishing a sole proprietorship varies according to the amount of payments to be made for the following services and documents:

  • Signature statement from notary public,
  • Tax office contract stamp duty,
  •  Company establishment and electronic ledger registration service fee,
  • If the accountant will manage the process, the fee paid to the notary for power of attorney.

In addition to these, after the establishment of the company, the stamp duty, insurance premium and withholding tax of the VAT return must be paid every month. Also, depending on the type of your business, you may need to use cash register POS. With İşbank POS solutions, you can discover the most suitable POS type for you and benefit from many advantages.

What You Need to Do to Establish a Sole Proprietorship

Now that you have learned the cost and conditions of establishing a sole proprietorship, you can proceed to the establishment stage by collecting the necessary documents. You can establish the company by going to the tax office where your business address is affiliated or online.

Documents required to establish a sole proprietorship from the tax office:

  • Copy of identity document,
  • 2 passport photos,
  • Notarized signature statement,
  • 2 residence certificates.

If there is an accountant or financial advisor to manage the application process on your behalf, you need to get an accountant power of attorney from a notary public.

Here are the steps you need to follow to set up a sole proprietorship online:

  1. Login to the Interactive Tax Office (https:/ivd.gib.gov.tr) affiliated to the Revenue Administration with your e-government password.
  2. After logging in to the platform, select Start Transaction > Liability Transactions > Job Start Notice from the menu on the left.
  3. At the first stage of company establishment, you are required to enter the activity address and activity code of your workplace. Depending on the type of your business, you can show your home, virtual office or rented shop as an address. You can find the activity code of your business by searching for the NACE code on the internet.
  4. In the next step, you should enter how many workers you will employ, if your workplace is rented, details about it and the frequency of payments subject to withholding. If you are wondering what withholding is, you can read our article on this subject.
  5. Then choose your company's taxation method. At this stage, you will encounter two options as simple method and real method. You can get an opinion from your accountant for the most appropriate taxation for your job.
  6. Enter your start date.
  7. At the last stage of establishing a sole proprietorship, you need to select notification channels for e-notification.

Within a few days after completing all the steps of the application, you will receive a notification stating the polling date for your business address. After the control by the tax officers, you can get your company's tax plate by re-entering the Interactive Tax Office.

Günceleme: 04/01/2023 08:36

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