When it comes to establishing a company, choosing the right corporate structure is a crucial decision that can significantly impact your business’s operations, growth, and legal obligations. In this post, we’ll delve into a detailed comparison between two widely recognized company types – Limited Liability Companies (LLCs) and Joint Stock Companies (JSCs), both on a global scale and specifically in the context of Turkey. By understanding the key differences and advantages of each, you’ll be better equipped to make an informed choice tailored to your business goals and local legal requirements.
LLC vs. JSC In Turkey
In Turkey, an LLC (Limited Liability Company) is great for small to medium-sized businesses due to its simpler structure and lower costs.
A JSC (Joint Stock Company) is more suitable for larger enterprises needing significant capital, offering more flexibility for growth and investment.
Moving forward, we’re going to look into various parameters to find the differences between an LLC and JSC.
Minimum Capital Amount
In Turkey, the minimum capital amount required to establish an LLC is 50,000 TL, whereas for a JSC, it’s 250,000 TL. This difference in capital requirements can influence the accessibility and financial commitment of prospective business owners.
Registered Capital Compatibility
LLCs in Turkey aren’t compatible with the registered capital system, whereas JSCs can either be established in a way that’s compatible with this system or transition to it later. The registered capital system allows capital increases without formalities, providing flexibility for JSCs.
Number of Partners
Both LLCs and JSCs can be established with a single shareholder. However, an LLC can have up to 50 shareholders, while JSCs have no restriction on the maximum number of shareholders. Note that JSCs exceeding 500 shareholders are required to be offered to the public.
Management and Authority
In an LLC, at least one shareholder must also be a manager. In contrast, in a JSC, there’s no mandatory requirement for company partners to serve on the board of directors, offering more flexibility in governance.
Issuance of Bonds and Share Transfers
LLC shareholding certificates are not considered securities, and share transfers require notarized written agreements. JSCs can issue bonds and handle share transfers more easily through transfer of possession, allowing for greater market flexibility.
Taxation in Share Transfer
For both LLCs and JSCs, VAT is not applied to share transfers. However, there are differences in income tax implications. Shares of both types are subject to income tax, but JSC shareholders holding shares for at least 2 years can enjoy full exemption. For LLCs, the exemption isn’t applicable.
Taxation in Share Transfer to Legal Entity
Both LLCs and JSCs face VAT on share transfers held for less than 2 years. Both also have a 75% capital increase tax exemption for shares held for at least 2 years.
Liability for Public Debt
In LLCs, shareholders are liable for public receivables in proportion to their capital contributions. In JSCs, shareholders aren’t generally liable for public debts unless they are also on the board of directors, which entails unlimited responsibility.
Squeeze Out
While an LLC shareholder can be squeezed out under specific conditions, JSC shareholders, in principle, cannot be squeezed out.
Bookkeeping
Both company types require maintaining various records, including general ledger, inventory, shareholders’ stock register, general assembly meeting and negotiation book. For JSCs, the decision of the board book is an additional requirement.
Employing a Legal Counselor
LLCs aren’t obligated to employ a legal advisor regardless of their capital. In contrast, JSCs with capital exceeding 1.250,000 TRY must hire an in-house or independent legal advisor.
Conclusion
Choosing between an LLC and a JSC depends on your business objectives, financial resources, and risk tolerance. This comparative analysis sheds light on the key differentiators of these company types, both globally and within the Turkish context. By considering factors such as capital requirements, governance flexibility, taxation, and liability, you can make an informed decision that aligns with your company’s long-term vision and aspirations. Always consult with legal and financial experts before finalizing your corporate establishment choice.
