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How to Establish a Profitable Small Business in Turkey
Are you considering establishing a company in Turkey? If your response to that question is yes, here is a comprehensive guide on starting a business in Turkey as a foreigner, as well as the legal requirements. Starting a small business in Turkey is an exceptional opportunity for many foreign investors around the globe.
Turkey has drawn international investment in recent years as a result of its own unique trade location between Asia, Europe, and the Middle East. Numerous public and international firms have opened facilities in and around Turkey’s major cities, demonstrating the country’s worldwide prominence.
Istanbul and Ankara are home to the great bulk of these bigger enterprises. The country is a fantastic business destination for entrepreneurs, thanks to its booming economy, geopolitical position, potential growth possibilities, the hardworking business community, and young population.
Foreign investors have been able to gain Turkish citizenship and its associated privileges by starting a business in Turkey since 2017. Foreign people who make a specific amount of investment and generate jobs or maintain the deposit are granted Turkish citizenship.
You can obtain your Turkish citizenship by making a capital investment of at least $500,000, creating at least 50 jobs, purchasing immovable property in Turkey worth $250,000, keeping a deposit of at least $500,000 in Turkish banks for at least three years, or purchasing government debt securities worth at least $500,000 and keeping them for at least three years.1
These are just a few of the reasons why starting a small business in Turkey can be both promising and profitable. You can always hire an expert law firm in Turkey to handle your business affairs.
- Opening Hours of Banks in Turkey
- How to Open a Bank Account in Turkey as a Foreigner?
- Presidency of The Republic of Turkey | Investment Office
So, if you’re willing to take advantage of Turkey’s huge investment potential, these are the measures you’ll need to follow before getting started.
How to Start a Profitable Small Business in Turkey as a Foreigner
Before we get started, here is an article that might interest you; “Reasons to Start a Business in Turkey.”
1. Identify an Opportunity in Turkey
In most cases, foreigners in Turkey contemplate establishing a business where the language barrier will not be an issue. They open pubs, cafes, restaurants, and property management companies, or they start a company that caters only to ex-pats. Do you want to learn about; “Opening a Catering Business in Turkey?” Check out our other article and learn more information.
This, though, is a bit shallow. This concept also ignores the reality that, even if you own a pub where the bulk of your customers are Europeans, you will find it impossible to communicate if you don’t speak Turkish at all. You’ll have to acquire your goods and deal with local consumers.
Allowing this obstacle to limit your ideas is a mistake because Turkey provides you with a market for a range of enterprises, including construction and agriculture. Allowing your alternatives to be limited by an unfounded fear of business in a dynamic setting is a mistake.
2. Check if Your Business idea Will Work in Turkey
It’s quite tempting to rush ahead and expand your business once you’ve had your “aha!” moment and discovered a wonderful investment opportunity in Turkey. However, you should double-check that your amazing concept will work before proceeding. For this, you should check with local ex-pats in Turkey and experienced business agencies and law firms.
Make sure you choose a qualified legal adviser who is familiar with Turkish business regulations and has successfully assisted ex-pats in establishing successful enterprises in the past. It’s also highly beneficial if you have prior experience working in the same field in other countries.
Establishing and maintaining a restaurant or hotel without prior expertise is extremely tough and prone to failure. Even with experience, there remains a substantial possibility of failure. Even if you lack directly relevant experience, you may discover that you possess highly transferrable abilities.
For instance, you may have operated as a vehicle mechanic for many years but believe there are greater prospects in Turkey as a mechanic (engineer) caring after foreigners’ yachts. It’s also critical that you understand everything you can about the country. Speak with any ex-pats you know, as well as complete strangers. People are frequently quite helpful.
3. Put Together a Turkish Business Plan
Your objectives, why they’ll work, how you’ll attain them, and how you’ll fund the business are all written out in a business plan. Surprisingly, business plans are uncommon in Turkey, at least at the level of enterprises that are often established by an international clientele.
Organizing a documented business plan, on the other hand, is critical to your company’s success. Putting things down on paper and working out all the statistics generally uncovers a slew of possible issues and roadblocks.
Even if you don’t need to present the strategy to anybody, it’s indeed essential. Keep in mind that creating a thorough business strategy is mostly for your benefit. The mere act of thinking things out and making a strategy increases your likelihood of succeeding substantially.
Meanwhile, it’s worth noting that a Turkish-format business plan will vary from one prepared and submitted to your bank or business partners in the United States, Germany, or the United Kingdom. Those plans, in turn, will generally vary significantly from one another.
This isn’t an issue if the company plan is just for your use. However, if you intend to seek funding, present to a bank, or include a local partner, it must be in the structure that the audience is most familiar with.
Aside from the language, there are two major distinctions between a Turkish format business plan and, say, a UK format business plan. The first is that your CV is given far more weight in the Turkish plan (resume). Not just your professional experience, but also your personal life and general experience.
Second, instead of the three or four years that are more usual in other countries, Turkish company plans frequently include financial forecasts for the next twelve years. So don’t be put off by the prospect of creating a Turkish business plan. Your Turkish accountant can transform your business plan into Turkish format once you’ve completed it.
4. Register Your Business in Turkey
The Turkish Commercial Code establishes several legal business structures, all of which are accessible to foreigners. The limited company, which requires a minimum of one partner and 5,000 Turkish liras (₺) in capital, is one of the most common corporate structures for small and medium enterprises since it is very straightforward to set up.
- Investment Guide in Turkey | Establishing a Business
- Establishing Company in Turkey (PDF)
- Capital Market Board in Turkey
The Joint-Stock Company (JSC), which requires a minimum capital of 50,000 Turkish liras (₺) and at least one shareholder on the Board of Directors (BoD), is better suited to larger projects. It has to be registered with the Capital Market Board in Turkey and have a stock certificate issued to it.
For further reading on Joint-Stock Companies in Turkey, check out our article on; “Open a Joint Stock Company in Turkey” and learn more information about the matter.
Regardless of the legal framework you choose, you must register with the Trade Registry System (MERSIS) in Turkey, which requires notarized copies of the company’s statuses and the partners’ identification documents, a tax identification number for the company, and bank receipts stating that at least 25% of the capital has been deposited and another 0.04 percent has been transferred.
For further reading on corporate tax in Turkey, check out our article on; “Corporate Taxation in Turkey” and learn more information about the matter.
The minimum monthly gross wage in Turkey is 2,825 Turkish liras (The minimum wage in Turkey for 2021 was determined as 3.577.50₺ gross and 2.825.90₺ net).2 Furthermore, the employer is required to contribute to the social security fund (22.5 percent of earnings) as well as the national unemployment insurance system (2 percent of wages). Employees should not work more than 45 hours per week, with 1.5 hours of overtime compensated. Workers are entitled to double compensation when they labor on public holidays.
5. Choose an Appropriate Location for Your Business in Turkey
Most firms will require some sort of location to function from. Turkey has a large number of business properties available for rent. It comes in various shapes and sizes, from luxurious to relatively cheap. For the majority of individuals, renting or owning a property is the most practical option; however, your accountant can advise you on which option is best for you.
The primary reason that renting is the greatest alternative is that it conserves your available funds. It will be difficult to replace or supplement that funds from any other resource.
However, yet another major drawback of operating a business from a rented property is that if your property owner terminates your tenancy agreement, which he can do each year on the anniversary of the tenancy agreement once the initial period stated in the lease has passed.
The owner of the property will be left with not only all of the enhancements you have decided to make to the premises but also a ready-made property of certain value. This is why many people choose to own the land where they run their business. The biggest disadvantage of buying a property is that it costs a lot of money.
Furthermore, the cost of acquiring and selling commercial property is fairly high (about 10% and 5% of the building’s worth, respectively), and you may find that you exceed the premises rapidly or that they are inappropriate for other reasons. That money is subsequently squandered for your business in Turkey.
Working from home is another option for starting a business. This may not be practical in many situations, and it may be difficult if you’re running a bar, but it may be a very valuable means of determining if your business will thrive and deferring big expenses until it does.
While no special license is required to operate from home, if your firm is registered at your home address, you should expect a visit from the tax office. This is to ensure that the business is legitimate and that any claims or deductions you make are justified.
6. Obtain Sufficient Financing for Your Business in Turkey
Obtaining finance for a new business founded by a foreigner who has recently moved to Turkey can be exceedingly difficult. No one would want to give money to a newcomer to the nation.
However, you may be able to collect financing from banks or individual investors in Turkey, but this will typically only be allowed if you have a large amount of accessible security and/or personal guarantees from Turkish residents of some standing.
Are you interested in other types of investment options in Turkey? Check out our article on; “Types of Investment Funds in Turkey” and learn more information.
As a result, most people starting businesses in Turkey would fund them directly or partially via friends and family. Some people choose to support their company by taking out a mortgage on a residence they already own. Typically, such property would have been owned for a long time.
They’d simply go to their bank, extract the value, and utilize the money to support their company concept. This can be accomplished with the help of a “personal needs loan” program. This is a loan in which the banks agree to either raise the amount of an existing mortgage or provide a new mortgage on a property that has never been mortgaged before.
These loans are theoretically still accessible. Loan-to-value (LTV) ratios will be modest, generally between 40 and 50 percent. Monthly interest rates will generally be 1.5 percent (measuring interest monthly in this way is very common in Turkey). This is still significantly more expensive than a standard mortgage, which may cost as little as 1% per month.
7. Identify The Appropriate Business Partners in Turkey
While you may choose to start a small business solely on your own, this is how the majority of foreigners in Turkey do so. However, many people understand the value of having a competent associate. This may be a Turkish local or another ex-pat.
Each has its own set of benefits and drawbacks. If you want to find Turkish associates in your area, there are two main options. Advertisement and referral. 90 percent of strong partnerships in Turkey are the result of referrals. Referral here means that you need to be referred by a friend or family.
Nobody would feel comfortable replying to a publicly posted offer. Your accountant or lawyer may be able to refer you to people he/she knows who is a good fit for your skillset and company concept. Keep in mind that finding the proper partnership might be difficult.
To put it plainly, many scam artists seek to profit from naive foreigners. Those conmen may be Turkish at times, but you are far more likely to be targeted by someone of your own ethnicity. This is because they find it simpler to earn your trust and because they know enough about how things function in Turkey to look credible.
When it comes to creating a partnership or joint venture, you must do your homework. When it comes to creating a partnership or joint venture, due diligence should be a two-way street: they should want to know as much about you as you want to know about them. If this is not the case, you should be skeptical.
8. Establish Your Business in Turkey and Fulfill Your Obligations as a Business Owner.
Consider that every form of business in Turkey is obliged to accomplish the following, with the exception of those managed through public corporations, which have more onerous obligations:
- Pay your taxes on a monthly (or, in certain circumstances, three-month) basis. This will include any taxes due by any firm you own or if you don’t own a firm, your own taxes. For this, you’ll need to hire an accountant in Turkey. You can contact us about this.
- Pay for your insurance policies, such as directors’ indemnity, possible business insurance, and so on.
- You must make your social security payments on a monthly basis (for yourself and for any employees).
- Your accountant must file your tax declaration every month; you will have to pay your accountant a bookkeeping charge to do so.
These are your major responsibilities, but your accountant will inform you of any additional requirements specific to your business in Turkey.
Final Words and Conclusions on; “How to Start a Profitable Small Business in Turkey as a Foreigner”
Recent laws aimed at attracting foreign investment have made it simpler than ever to start a business in Turkey. It’s simple to see why Turkey appeals to new businesses: half of the country’s 70% of the population is under the age of 30, and they’re becoming more educated and solvent, with money to spend.
Also, keep in mind that when starting a new business in Turkey, it’s all too easy to overlook some of the little details that might make a big impact a few years down the road.
One of these things is to safeguard your company’s name, as well as any applicable trade or service marks and other “intellectual property” rights. This is something you should discuss with the lawyer who is advising you on the formation of your company.
- Turkish Government 2019, accessed 17 June 2021, <https://www.invest.gov.tr/>
- Lucy Halse, Envoyglobal 15 January 2021, accessed 17 June 2021, <https://resources.envoyglobal.com/>