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Sole Proprietorship Formation in Türkiye

Setting up a sole proprietorship (şahıs işletmesi) in Türkiye: determining the taxation method, the notice of commencement of business, registration with the trade registry or the tradesmen’s registry, and Bağ-Kur and accounting arrangements.

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Overview

A sole proprietorship (şahıs işletmesi) is a business through which a natural person carries on a commercial or craft activity in their own name. In everyday Turkish it is also called a “şahıs şirketi”. The business has no legal personality separate from its owner; transactions are carried out in the owner’s name, and the owner is personally liable for the business’s debts.

The first step in formation is to determine the nature of the activity. Under Turkish law, a person whose economic activity relies more on their own physical work than on capital, and whose income does not exceed the limit set by Presidential decision, is a tradesman (esnaf). A business that aims to generate income above that limit is a commercial enterprise (ticari işletme), and its owner is deemed a merchant (tacir). (Turkish Commercial Code No. 6102, Art. 11, 12, 15) This distinction determines the registry entry and the chamber registration.

At formation, it is also determined whether profit will be determined under the simplified method (basit usul) or the actual method (gerçek usul). For the simplified method, all of the general and specific conditions must be met: the owner personally works in the business, the annual rent of the business premises (or, if the premises belong to the owner, the equivalent rent) does not exceed the limit in the law, the owner is not subject to income tax under the actual method because of another activity, and the annual purchases, sales or business revenue remain within the limits in the law. (Income Tax Law No. 193, Art. 46–48)

Even if these conditions are met, the activities listed in the law and the business groups and places determined by the President cannot use the simplified method. (Income Tax Law, Art. 51) From 1 January 2026, in provinces with a metropolitan municipality, persons engaged in manufacturing, the purchase and sale of goods (excluding itinerant retail sales without opening business premises or retail sales at markets), construction, motor vehicle maintenance and repair, restaurants and similar businesses, the operation of entertainment and leisure venues, and urban passenger transport in districts whose population exceeds 30,000 according to the latest data published by the Turkish Statistical Institute (TÜİK) as of the last day of the previous calendar year are taxed under the actual method. In these districts, former towns (belde) and villages that lost their legal personality and became neighbourhoods (mahalle) and whose population does not exceed 2,000 are outside the scope for activities other than urban passenger transport. In provinces without a metropolitan municipality and in districts whose population does not exceed 30,000, this Decision does not apply; there, the conditions in Income Tax Law Art. 47–48 are applied. (Presidential Decisions No. 10380 and 10679)

At KEYBIZ CPAs & Advisors, we provide advice on determining the taxation method, the notice of commencement of business, registry entries and the post-formation accounting setup when a sole proprietorship is formed. If you are considering a structure with partners or with limited liability, see our Limited Liability and Joint Stock Company Formation in Türkiye page.

Differences Between a Sole Proprietorship and a Limited Liability Company

Sole ProprietorshipLimited Liability Company
Legal PersonalityNone; the business operates in the owner’s nameHas its own separate legal personality
LiabilityThe owner is personally liable for the business’s debtsShareholders are not liable for the company’s debts; they pay the capital they have committed (Turkish Commercial Code, Art. 573/2). They are liable for public receivables that cannot be collected, in proportion to their capital shares (Law No. 6183 on the Collection Procedure of Public Receivables, Art. 35)
Minimum CapitalNot prescribedTRY 50,000
TaxIncome tax at progressive rates (Income Tax Law No. 193, Art. 103)Corporate tax; the general rate is 25%. A reduced rate applies to certain profits such as export profits; the 12.5% rate provided by Law No. 7582 for industrial and agricultural production profits applies, subject to its conditions, in 2027 and subsequent periods (Corporate Tax Law No. 5520, Art. 32/1, 7, 8)
Determining ProfitPersons who meet the conditions in Income Tax Law Art. 47–48 can use the simplified method; persons falling within the scope of Income Tax Law Art. 51 and Presidential Decision No. 10380 (including, from 1 January 2026, manufacturing, trading, construction, vehicle maintenance and repair, restaurant, entertainment venue and urban passenger transport activities in districts of metropolitan provinces with a population over 30,000) are subject to the actual methodBooks are kept on the balance sheet basis (Tax Procedure Law No. 213, Art. 176)
FormationNotice of commencement of business to the tax office; merchants register with the trade registry, tradesmen with the tradesmen and craftsmen registryRegistration with the trade registry; the notice of commencement of business is made by the trade registry directorate (Tax Procedure Law No. 213, Art. 153)
Limited Liability and Joint Stock Company Formation

Sole Proprietorship Formation Process

  1. Determining the Activity and the Taxation Method

    The field of activity, the business address and whether the owner will be a merchant or a tradesman are determined. The method for determining profit is then chosen:

    • General and specific conditions: Persons who personally work in their own business, whose business premises rent and annual purchases, sales or business revenue do not exceed the limits in the law, and who are not subject to income tax under the actual method because of another activity have their profit determined under the simplified method (basit usul). (Income Tax Law No. 193, Art. 46–48)
    • Conditions based on location and activity: Those listed in Income Tax Law Art. 51 cannot use the simplified method. From 1 January 2026, in provinces with a metropolitan municipality, manufacturing, the purchase and sale of goods (excluding itinerant retail sales without opening business premises or retail sales at markets), construction, motor vehicle maintenance and repair, the operation of restaurants and of entertainment and leisure venues, and urban passenger transport in districts with a population over 30,000 are subject to the actual method. In these districts, former villages and towns that became neighbourhoods and whose population does not exceed 2,000 are outside the scope for activities other than urban passenger transport. (Presidential Decision No. 10380)
    • Those not subject to the simplified method keep books on the business account basis (işletme hesabı esası) or the balance sheet basis (bilanço esası). (Tax Procedure Law No. 213, Art. 176–178)

    Because the monetary limits are updated every year by the revaluation rate, the current amounts are checked at the time of application. The district population is determined according to the latest data published by TÜİK as of the last day of the previous calendar year. (Annex to Presidential Decision No. 10380, Art. 1)

  2. Notice of Commencement of Business to the Tax Office

    The notice of commencement of business (işe başlama bildirimi) is filed with the tax office (vergi dairesi) within ten days of the business start date. The notice may be filed by the owner personally or by an authorised professional accountant (meslek mensubu). (Tax Procedure Law No. 213, Art. 153, 168) After the notice, the tax office carries out an on-site inspection (yoklama) at the business premises.

    Documents usually prepared:

    • Identity document
    • Lease agreement or title deed information for the business premises
    • Permits or licences required for the type of activity

  3. Registration with the Trade Registry or the Tradesmen’s Registry

    • Merchants (tacir): Within fifteen days of opening the business, they have it registered with the trade registry (ticaret sicili) and announced (Turkish Commercial Code, Art. 40/1), and they register with the chamber of commerce or chamber of industry where they are located. (Law No. 5174 on Chambers and Commodity Exchanges, Art. 9)
    • Tradesmen and craftsmen (esnaf ve sanatkâr): They register with the tradesmen and craftsmen registry (esnaf ve sanatkâr sicili). Registration with the professional chamber cannot be made before the registry entry. (Law No. 5362 on Professional Organisations of Tradesmen and Craftsmen, Art. 6)

  4. Bağ-Kur and SGK Registrations

    The owner’s insurance under Article 4/b (Bağ-Kur, the social security scheme for the self-employed) starts on the date the income tax liability begins. For persons exempt from income tax, this date is the date of registration with the tradesmen and craftsmen registry. (Social Security and General Health Insurance Law No. 5510, Art. 4, 7)

    If employees will be hired, the workplace is notified to the Social Security Institution (SGK), and an employment start notice (işe giriş bildirgesi) is filed for the employees. (Law No. 5510, Art. 8, 11) For details, see our Payroll Services page.

  5. Books, Documents and Returns

    Books are kept and documents are issued according to the chosen method. Those subject to the simplified method do not keep books; their obligations regarding notification, documentation and record retention continue. (Income Tax Law No. 193, Art. 46)

    The post-formation accounting setup is established at this stage.

Frequently Asked Questions

Are a “Şahıs Şirketi” and a Sole Proprietorship the Same Thing?

In everyday Turkish, a business run by one person is called a “şahıs şirketi”; its legal name is sole proprietorship (şahıs işletmesi). The general partnership (kollektif şirket) and the limited partnership (komandit şirket), which the Turkish Commercial Code classifies as partnerships (şahıs şirketleri), are separate company types formed with more than one partner. (Turkish Commercial Code, Art. 124)

Is Capital Required to Open a Sole Proprietorship?

The law does not prescribe a minimum capital for a sole proprietorship. For a limited liability company, the minimum capital is TRY 50,000.

When Is the Notice of Commencement of Business Filed?

It is filed with the tax office within ten days of the business start date. The notice may be filed by the owner or by an authorised professional accountant. (Tax Procedure Law No. 213, Art. 168)

Who Can Use the Simplified Method?

First, all of the general and specific conditions in Articles 47 and 48 of the Income Tax Law must be met: personally working in one’s own business, not being subject to income tax under the actual method because of another activity, and the rent of the business premises and the annual purchases, sales or business revenue not exceeding the limits set in the law. Because the amounts are updated every year, they are checked at the time of application. (Income Tax Law, Art. 46–48)

Even if the conditions are met, the activities listed in the law cannot use the simplified method. (Income Tax Law, Art. 51) In addition, from 1 January 2026, in provinces with a metropolitan municipality, persons engaged in manufacturing, the purchase and sale of goods, construction, motor vehicle maintenance and repair, the operation of restaurants and of entertainment and leisure venues, and urban passenger transport in districts with a population over 30,000 are taxed under the actual method. Itinerant retail sales without opening business premises or retail sales at markets, and activities other than urban passenger transport in former towns and villages in these districts that became neighbourhoods and whose population does not exceed 2,000, are outside the scope. Taxpayers in the districts within the scope who were previously under the simplified method are also taxed under the actual method from 1 January 2026. (Presidential Decisions No. 10380 and 10679)

What Is the Young Entrepreneur Exemption?

For full taxpayer (tam mükellef) natural persons for whom an income tax liability is established for the first time and who have not completed the age of twenty-nine when the liability begins, the part of the profit earned during three tax periods starting from the year they commence business, up to the amount of the second bracket of the income tax tariff, is exempt from income tax. The conditions include notifying the start of business within the legal period and carrying on the business personally. (Income Tax Law No. 193, Additional Art. 20)

When Does Bağ-Kur Coverage Start?

On the date the income tax liability begins; for tradesmen exempt from income tax, on the date of registration with the tradesmen and craftsmen registry. (Law No. 5510, Art. 7)

Can a Sole Proprietorship Later Be Converted into a Company?

A commercial enterprise can be transferred as a whole. (Turkish Commercial Code, Art. 11/3) The transfer of a sole proprietorship to a capital company is a separate process, and its tax consequences are assessed separately.

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