Establishing a sole proprietorship is a process that occurs quite quickly compared to other types of companies. If you are taking a step to establish a company to realize your dreams, starting with a sole proprietorship gains you many advantages.

In order to benefit from these advantages, you need to learn well how to establish a sole proprietorship and its differences from other company types. You can start scrolling down the page to find answers to all the questions in your mind.

What is a Sole Proprietorship?

Companies established by real persons are called sole proprietorships. The biggest advantage provided by this type of company, which can be opened either with or without partnership, is that it can be easily closed at any time.

You can easily prepare the documents you need to open a sole proprietorship with the help of a financial advisor and start your commercial activities immediately with a petition.

What are the Types of Sole Proprietorships?

There are three different types of sole proprietorships: collective, limited partnership (commandite), and ordinary (adi) partnership. These types differ from each other on whether there will be a partnership in the company structure and the distribution of tasks among the partners.

Collective Company

It is a type of company established by real persons where the partners have unlimited liability to the company. The profit obtained by the company at the end of the year is distributed according to the partners' capital. It is mandatory to make an agreement in order to prevent problems in situations such as profit distribution or other rights among individuals.

Commandite Company

It is the type preferred by individuals who want to continue under a company operating commercially. Compared to other sole proprietorships, the partnership structure is larger and these partnerships are determined around a contract. In the commandite company type, some partners have unlimited liability (commandit-e) while some partners (commandit-er) are liable up to the capital they contribute.

Ordinary Company

It is a type of company that has capitalized the asset of the founder without a legal personality. It is one of the most established company types by entrepreneurs in our country.

Can a Home Address Be Used for a Sole Proprietorship?

To establish a sole proprietorship, you can show your home address as the headquarters of the company. If the house belongs to you or your relative, you can submit the title deed during the establishment process and determine your workplace address as the location where your house is. If the place you want to use as a workplace is a rental, you can give your home address by paying a 20% withholding tax on top of the price you pay every month.

What is the Cost of Establishing a Sole Proprietorship?

The cost of opening a sole proprietorship can be generally grouped under 5 headings. Expenses can be classified as the capital you consider for the company (changes according to the work you do, your partnership structure, and the agreements made), notary expenses (prices are the same across the country but the amounts can be updated during the day), accounting expenses (amounts may vary according to many factors such as the activity region and corporate identity of the firm you will hire), and trade and tax chambers expenses.

Transaction to be MadeCostAccountant Cost250-600 (Varies according to the region and the firm you will hire)Accountant Proxy Amount192 TLSingle Signature Declaration147 TLStamp Duty87.30 TLWorkplace Opening FeeCalculated according to the principles determined by the municipality of your region.Rent AmountThe amount to be known here is that in addition to the rent of the place you hire, there is a 20% plus withholding tax fee.Photocopy Fees1.5-10 TLCost table required to establish a sole proprietorship

These amounts specified for the cost of starting a sole proprietorship are simple illustrative issues. If you receive additional services on different subjects, such as consulting services, prices may vary.

Who Can Establish a Sole Proprietorship?

In addition to the well-known 18-year age limit for establishing a sole proprietorship, you must legally enter the status of a merchant. Apart from these, you can open a company under certain rules, regardless of religion, language, or race.

Can Civil Servants Establish a Sole Proprietorship?

Since civil servants work within the public body, they do not have the status of merchants, so it is impossible for them to build a sole proprietorship. However, depending on the type of company, civil servants can be block partners in the company. However, they cannot take any duty in these companies other than being a partner.

Can Insured Employees Establish a Sole Proprietorship?

While you are working somewhere as an insured employee, you can open a company in your own name. Currently, there is no obstacle for this in the labor law. However, if you signed a contract with the institution you work for when starting work, you need to pay attention to the clauses of this contract.

If there is a clause in your contract stating that the employee cannot work in another job or establish a business, the company you work for can unilaterally terminate your contract without paying you any compensation.

How to Establish a Sole Proprietorship?

During the process of establishing a sole proprietorship, you need to work continuously in coordination with the tax office. After completing the documents required to open a sole proprietorship, you can start the company opening transactions either yourself or by giving proxy to your accountant at the tax office. The steps you need to apply are as follows:

• Step: You must gather signature registration and declaration, photocopy of the founder's ID card, and residence information.

• Step: Company registration transaction is made.

• Step: You must apply to get a tax identification number.

• Step: You must buy and certify the necessary books for accounting.

• Step: An inspection report is prepared.

• Step: The tax identification number application is completed and you receive your tax number.

• Step: You can apply for and receive the tax and cash register plates.

• Step: You must issue invoice, expense, and waybill documents.

• After these transactions, you must publish an announcement in the official gazette and also register with the chamber of commerce.

• Step: You must obtain a license to open and operate a workplace from the municipality of your region.

• Step: You must finish your SGK or BAĞ-KUR transactions.

How to Establish a Sole Proprietorship through E-Devlet?

Although the above steps are necessary to establish a sole proprietorship, you can make a declaration of starting work through e-devlet for commercial, agricultural, and self-employment activities that require tax liability establishment by real persons. Requirements to establish a sole proprietorship through e-devlet are as follows:

• After entering the e-devlet system, you must switch to the Interactive Tax Office section.

• Then, click on the tab named Transactions in the system, and click on Registry Declarations and Starting Work notifications respectively.

• Correctly fill in the information consisting of 5 steps regarding the job details that will appear on the screen.

• After entering all information completely and correctly, inspection date information arrives on the phone you use. Inquiry officers come to the address you specified as the workplace and inspect your office along with your documents.

How to Get a Tax Plate for a Sole Proprietorship?

To get a tax plate for a sole proprietorship, you must enter the website of the Revenue Administration. Then you must click on the Internet Tax Office tab.

Then, by filling in the username and password sections in the E-declaration, you must select the Tax Plate Information tab.

You can get your tax plate after filling in the taxpayers' Tax Identification numbers and national ID numbers for each partner separately.

What are the Monthly Expenses of a Sole Proprietorship?

Those who want to establish a sole proprietorship calculate the initial opening cost, but you should take your monthly expenses into consideration. Apart from the product costs you will pay, there are amounts you have to pay to the government every month.

Monthly Expense TypeCostMonthly Accountant FeePrices may vary between 250-600 TL.VAT Declaration87.30 TLWithholding Tax Declaration (Once every 3 months)87.30 TLAnnual Income Tax Declaration132.30 TLWorkplace Rent and other workplace expensesTransaction fees depending on the person

What are the Tax Brackets for Sole Proprietorships?

Tax rates for sole proprietorships vary according to the status of your income. In our country, tax rates can start from 15% and rise up to 40%.

Sole Proprietorship Tax BracketsTax RateFor incomes of 32,000 TL15%More than 70,000 TL (4,800 TL for 32,000 TL)20%More than 250,000 TL (12,400 TL for 70,000 TL)27%More than 880,000 TL (61,000 TL for 250,000 TL)35%In case of more than 880,000 TL (281,500 TL for 880,000 TL)40%

How to Calculate Sole Proprietorship Tax?

Sole proprietorship tax rates are calculated based on tables determined by the government. The government bills you on 4 different taxes based on the law. If you are the founder or one of the partners, you can calculate the amount of tax you will pay to the government by calculating with the rates specified in these tables over the gross amount you have.

Can a Sole Proprietorship Get a POS Device?

In the process of establishing a sole proprietorship, you can obtain a POS device if you provide the necessary documents. You can have a POS device for your company by taking the power of attorney, copy of the identity card of the individual who founded the company, signature declaration, and tax plate to the bank of your choice.

Can Import Be Done with a Sole Proprietorship?

If you obtain the customs declaration, you can perform both export and import if you wish. However, the customs declaration is not sufficient for some countries and the state may request additional documents.

What Are the Advantages and Disadvantages of Establishing a Sole Proprietorship?

The advantages of establishing a sole proprietorship are as follows:

• You can start your commercial life in the market you want in a short time.

• Its costs are lower compared to other types of companies.

• You have tax exemption according to the income you earn.

• The costs of transactions such as book certification are lower compared to other types.

• Since the transaction volume of the company you established is not high, accounting fees are more affordable.

• In case things do not proceed as you want, you can close your business in 1 day.

• Liability and authority belong entirely to the company owner.

The disadvantages of establishing a sole proprietorship are as follows:

• The reputation of the company you opened in the eyes of banks is lower compared to other types.

• Credit process may take longer.

• Your tax rate varies between 20% and 40%.

What Are the Differences Between a Sole Proprietorship and a Limited Liability Company?

Sole proprietorships (ordinary, commandite, collective) and limited liability companies differ in type. Limited liability companies are in the capital type and all company affairs must proceed within a specific procedure. By reviewing the table below, you can learn the differences between a sole proprietorship and a limited liability company.

Sole ProprietorshipsLimited Liability CompaniesCan be established with very low costs:Costs are higher compared to sole proprietorships.Since it is an income tax payer, tax is requested based on its earned income.Since it is subject to corporate tax, an amount is requested at a constant rate of 23%.You can establish the company via e-devlet.You will be continuously active due to prolonged transactions because of procedures.You are responsible towards third parties up to your own asset.You are responsible towards third parties up to the share value of your company.You do not have to notify capital.You must make a minimum capital notification of 10,000 TL.You can close your company within one day.The liquidation process can take up to 1 year.

What Are the Differences Between a Sole Proprietorship and an Anonymous Company?

You can quickly learn the differences between sole proprietorships and Joint Stock (Anonymous) companies by examining the table below.

Sole ProprietorshipsJoint Stock CompaniesTransactions and establishment phases can be carried out quickly.Transactions and establishment phases are slower, procedures are more difficult.By its nature, it has a low-profile structure in the eyes of banks and the government.By its nature, it has a higher-profile structure in the eyes of banks and the government. Bank loan process occurs faster.It can be difficult to gain trust in attracting investors and other transactions.It is safer in terms of attracting investors.

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Frequently Asked Questions About Establishing a Sole Proprietorship

You can check the answers to the questions frequently asked by entrepreneurs who want to establish a sole proprietorship below:

How Much Tax Does a Sole Proprietorship Pay?

Sole proprietorships are obliged to pay tax according to their trade volume and profit. Among these taxes are corporate tax, income tax, and VAT. The amount of these taxes may vary depending on the location and field of activity of the company.

Is It Risky to Open a Sole Proprietorship?

Any attempt to pitch a business can involve certain risks. However, looking from the perspective of establishing a sole proprietorship, we can say that starting this type of business is less risky compared to other business types.

In particular, in sole proprietorships, only the personal assets of the company owner are held liable in a limited way for the debts of this business. Therefore, looking from the perspective of the company owner, sole proprietorship establishment can be a less risky option compared to other business types.

Does It Make Sense to Establish a Sole Proprietorship?

Establishing a sole proprietorship can be a logical option for many people. Especially for small and medium-sized business owners, initiating a sole proprietorship allows you to spend less time and effort in the establishment and management process.

Also, financial liabilities are lower in sole proprietorships, and therefore, it can be a less risky option for company owners. However, it may not be a logical option for everyone. For example, for large-scale enterprises, establishing a sole proprietorship may not be advantageous in terms of financial liabilities.

Is It a Crime to Establish a Sole Proprietorship While Working?

While working at a workplace in Turkey, you do not need the permission of your workplace to establish a sole proprietorship. In this case, you are not legally considered to have committed a crime. However, you must act in accordance with the rules of your workplace and your employment contract.

For example, during the working hours of your workplace, you should take care not to harm the activities of your workplace. In addition, you must comply with the financial and confidentiality obligations of your workplace. Therefore, while working at your workplace, you can also establish your own business, but you need to pay attention to the rules and obligations of your workplace during this process.

How Many Types of Sole Proprietorships Are There?

There are three types of sole proprietorships. These are sole proprietorship types that can be established as collective, commandite, and ordinary.

Is a Shop Mandatory for a Sole Proprietorship?

When establishing a sole proprietorship, having a physical shop is not mandatory. However, there must be an address where your company operates. This address can be used as the place where your company operates. For example, you can also use an address such as your home or office.

Can a Name Be Given to a Sole Proprietorship?

Sole proprietorships can be established using the name and surname of the owner, as well as using another name. For example, a name like "Galaxy Technology" can also be used.

This type of name specifies the field of activity of the company, but does not include the owner's first and last name. Therefore, a name is given to a sole proprietorship, and this name indicates the field of activity of the company and the companion's name.