Sole proprietorships are the simplest form of business. Except for banking and stock trading, individuals can operate in any field by opening a sole proprietorship. Easy to establish and generally simpler to close than other business forms, this model lets you operate across a wide range of activities—from e-commerce to hairdressing, neighborhood grocery stores and produce stands. Setting up a sole proprietorship is a straightforward process. With complete documentation, you can register and start operations in as little as two business days.
What Is a Sole Proprietorship?
A sole proprietorship is a business structure where owners have unlimited liability. It can be formed by a single person or by a small group and does not constitute a separate legal entity; it is treated as a “natural person.” Under commercial law, there are three types of partnerships typically considered in this category:
- Ordinary Partnerships (Adi Şirketler): The business does not have assets separate from the owner. This simplest form of partnership is governed by contract law.
- General Partnerships (Kolektif Şirketler): Formed by natural persons where partners are jointly and severally liable with their entire assets for the company’s debts.
- Limited Partnerships (Adi Komandit Şirketler): Established by at least two natural persons, with some partners having limited liability while others retain unlimited liability.
How to Set Up a Sole Proprietorship
When you decide to open a sole proprietorship, follow the required steps in order. If none of the steps are skipped, the registration process can be completed within two business days. The first step is to complete the registration procedures.
After registration, you proceed with tax office formalities and licensing. You can complete these steps yourself or through your accountant or certified financial advisor.
The overall sequence of steps is typically as follows:
- Register the company with signature circular, ID copy, signature declaration and residence information.
- Apply to the tax office for an account number.
- Obtain and certify required ledgers.
- Complete the tax office inspection and prepare the inspection report.
- Acquire a cash register and tax plate.
- Obtain invoice books, delivery notes and expense vouchers and affix required stamps.
- Publish the company announcement in the trade registry gazette if necessary.
- Complete chamber registration.
- Obtain business opening and operation permits from the municipality.
- Complete Social Security (SGK) and Bağ-Kur registration procedures.
Required Documents
With complete documentation, a sole proprietorship can be established within two days. The documents typically required for registration include:
- Signature circular
- Signature declaration
- Copy of ID (2 copies)
- Residence certificate (2 copies)
- Workplace application form (completed via e-Government)
- Lease agreement or property deed
- Power of attorney for the accountant (if an accountant will act on your behalf)
- Passport-size photos (2 copies)
Taxation
Income tax for sole proprietorships starts at 15% and rises progressively up to 40% as taxable income increases. Compared with other business types, the initial tax bracket for sole proprietorships is relatively low. For this reason, accountants often recommend starting as a sole proprietorship and converting to a different company type later if needed.
Based on earlier progressive brackets, typical income tax bands and effective amounts can be summarized as:
- Income up to 24,000 TL: 15%
- Income up to 53,000 TL: 3,600 TL for the first 24,000 TL, and 20% on the remaining portion up to 29,000 TL
- Income up to 130,000 TL: 9,400 TL for the first 53,000 TL, and 27% on the remaining portion up to 77,000 TL
- Income up to 650,000 TL: 30,190 TL for the first 130,000 TL, and 35% on the remaining portion up to 520,000 TL
- Income exceeding 650,000 TL: 212,190 TL for the first 650,000 TL, and 40% on the excess
In addition to income tax, sole proprietorships are subject to quarterly provisional tax calculated on net profits, 20% withholding taxes on applicable payments, and stamp duties. If the business owner has no other employment with social security contributions, Bağ-Kur premiums apply; employee social security contributions must be paid for each worker, which should be included among business expenses.
Costs
Initial setup costs for a sole proprietorship start from around 800 TL. Compared with other business forms, initial expenses are lower. Typical setup and operational cost items include:
- Signature declaration (notary): 147 TL (for two copies)
- Stamp fee (tax office): 50 TL
- Accountant power of attorney (notary): 192 TL
- Accountant opening fee: 250–500 TL
- Cash register: approximately 1,200 TL
- Company stamp: 25 TL
- Invoice books (5 volumes): 180 TL
- Chamber registration fee: 358 TL
Ongoing costs during operation may include:
- Bağ-Kur premium (monthly, owner): ranges depending on declared income
- Employee cost (monthly, all-inclusive): average indicated amounts for payroll
- Account book certification fees: varies by ledger type
- Withholding and regular tax filing fees: periodic filing costs for monthly, quarterly and annual returns
- Stopaj (withholding): typically 20% on rents, salaries, professional fees and similar payments
How Long Does It Take to Establish a Sole Proprietorship?
Establishment is usually completed within two business days. To ensure fast processing, submit all required documents and allow the tax office inspection to conclude without issues so the official report can be issued.
How Is a Sole Proprietorship Closed?
Closure can be initiated with a petition prepared by your accountant. If there has been no activity in the last month, you can usually close the company retroactively for the previous 30-day period. The liquidation process proceeds quickly once closure is started. To close smoothly, ensure the following:
- All tax returns for active periods are prepared and taxes are paid.
- No outstanding Bağ-Kur or Social Security debts remain.
- E-invoice subscriptions are canceled if used.
- Fixed assets recorded as expenses have invoices issued in the owner’s name.
- Submit the accountant-prepared petition and any unused invoice books to the tax office for closure.
- After SGK workplace closure application, chamber deregistration and municipal permit cancellations, the company is liquidated.
How Does a Sole Proprietorship Differ from Other Company Types?
Sole proprietorships differ from other company types in three main ways:
- They are easy to set up and to close.
- Initial establishment costs are low.
- Owners are personally liable with their entire assets for company debts.
Advantages of a Sole Proprietorship
Key advantages include:
- Fewer documents are required and establishment can be completed within two days.
- No initial capital requirement for formation.
- Can be founded by a single person.
- Low setup costs.
- Lower tax rates at lower income brackets.
- Lower accounting and ledger certification fees.
- Faster liquidation with less paperwork.
Disadvantages of a Sole Proprietorship
Common drawbacks include:
- Progressive taxation can lead to higher taxes as income grows.
- Limited potential for formal corporate structuring or growth.
- Personal assets are liable for business debts.
- Lower prestige with banks when seeking business loans.
Which Company Type Is Best for E-Commerce?
For e-commerce you can start as a sole proprietorship, or opt for a limited or joint-stock company. Choosing the right model depends on your plans: if you want to keep startup costs low and launch quickly, a sole proprietorship is often recommended. Starting as a sole proprietorship lets you keep initial expenses down and begin operating online quickly.
As your e-commerce business grows, rising tax brackets and potential investment needs may justify converting to a capital company. You can transition from a sole proprietorship to a limited company and later to a joint-stock company to take advantage of the legal and financial benefits offered by corporate forms.