Partnership Structures in Turkey
Turkey recognizes two main partnership structures under the Turkish Commercial Code (TCC): the collective company (kollektif şirket) and the commandite company (komandit şirket). Both are personal partnerships where at least some partners bear unlimited personal liability for the company’s debts.
These structures are rarely chosen by foreign investors compared to LLCs or JSCs. However, understanding them is useful when evaluating all available options or when inheriting an existing partnership structure.
Collective Company (Kollektif Şirket)
Definition
A collective company is a partnership formed by two or more natural persons (real persons only — not legal entities) to conduct commercial activities under a joint trade name. All partners bear joint and unlimited liability for the company’s obligations.
Key Characteristics
- Minimum partners: 2 (all must be natural persons)
- Maximum partners: No legal limit, but typically small groups
- Liability: All partners bear unlimited, joint, and several liability
- Management: All partners have the right and obligation to manage unless the partnership agreement provides otherwise
- Capital: No minimum capital requirement
- Taxation: Partners are taxed individually on their share of profits (personal income tax, not corporate tax)
Profit and Loss Sharing
The partnership agreement defines profit and loss sharing ratios. In the absence of an agreement, profits and losses are shared equally among partners.
Dissolution
A collective company dissolves upon:
- Agreement of all partners
- Death of a partner (unless the agreement provides for continuation)
- Bankruptcy of a partner or the company
- Court order
Use Cases
Collective companies are occasionally used by small family businesses, professional groups (before sectoral regulations required incorporation), or traditional craftsmen. They offer no liability protection and are therefore not recommended for foreign investors or any business with meaningful asset exposure.
Commandite Company (Komandit Şirket)
Definition
A commandite company is a hybrid partnership with two classes of partners:
- General partners (komandite ortaklar): Bear unlimited personal liability for all company debts — similar to partners in a collective company
- Limited partners (komanditer ortaklar): Liability is limited to their capital contribution
Key Characteristics
- Minimum partners: At least 1 general partner and at least 1 limited partner
- General partners: Must be natural persons
- Limited partners: Can be natural persons or legal entities
- Management: Only general partners can manage the company. Limited partners cannot participate in management (or risk losing their limited liability protection)
- Capital: No minimum capital requirement
- Taxation: Depends on partner type (see below)
Capital Commandite Company (Sermayesi Paylara Bölünmüş Komandit Şirket)
A special variant of the commandite company where the limited partners’ capital is divided into shares. This resembles a hybrid between a commandite company and a joint stock company. It is rarely used in practice.
Tax Treatment of Commandite Companies
The tax treatment distinguishes between the two partner classes:
| Partner Type | Tax Treatment |
|---|---|
| General partners | Personal income tax on their share of profits |
| Limited partners | Corporate income tax if legal entity; personal income tax if natural person |
This dual tax treatment adds complexity and is one reason the structure is uncommon in modern business practice.
Comparison: Partnership Structures vs. Capital Companies
| Feature | Collective | Commandite | LLC | JSC |
|---|---|---|---|---|
| Partner/shareholder type | Natural persons only | Mixed | Any (natural/legal) | Any (natural/legal) |
| Liability | Unlimited (all) | Unlimited (general) / Limited (limited) | Limited | Limited |
| Minimum capital | None | None | 50,000 TRY | 250,000 TRY |
| Management | All partners | General partners only | Appointed manager(s) | Board of directors |
| Tax | Personal income tax | Mixed | Corporate tax 25% | Corporate tax 25% |
| Foreign ownership | Complex (residency implications) | Complex | Fully permitted | Fully permitted |
| Recommended for foreign investors | No | No | Yes | Yes |
Registration of Partnerships
Despite their personal nature, both collective and commandite companies must be registered with the Trade Registry Office (Ticaret Sicil Müdürlüğü). The partnership agreement (şirket sözleşmesi) must be:
- Drafted in Turkish
- Signed by all partners before a notary
- Submitted to the Trade Registry with identity documents of all partners
- Published in the Turkish Trade Registry Gazette
The partnership must also:
- Register with the local tax office
- Register with SGK if employing staff
- Obtain any sector-specific licenses
Why Foreign Investors Rarely Use These Structures
For foreign investors, the primary deterrents are:
- Unlimited liability — At least some partners face personal liability, which is incompatible with modern risk management
- Residency implications — General partners who actively manage must typically reside in Turkey or hold appropriate permits
- Limited transferability — Transferring partnership interests is more complex than transferring LLC shares
- Tax inefficiency — Personal income tax rates (up to 40%) can be higher than corporate tax (25%)
- No foreign entity as general partner — General partners must be natural persons, preventing a foreign company from being a general partner
For the vast majority of foreign business purposes in Turkey, an LLC provides the optimal balance of simplicity, liability protection, tax efficiency, and formation ease. See our LLC formation guide.
Converting a Partnership to a Capital Company
If you have inherited or are part of an existing partnership and wish to convert to an LLC or JSC, Turkish law permits conversions through a formal transformation (tür değiştirme) process under TCC Articles 180–190. Key steps include:
- Preparing a transformation plan and balance sheet
- Shareholder/partner approval
- Independent audit (for certain transformations)
- Trade Registry filing for the new entity type
- Deregistration of the old entity
Professional legal and accounting assistance is required for the conversion process.
Frequently Asked Questions
Can a foreign company be a partner in a Turkish collective company? No. General partners in a collective company must be natural persons (individuals). Legal entities cannot be partners in a collective company.
Can a foreign company be a limited partner in a commandite company? Yes. Foreign companies can be limited partners in a commandite company, since limited partners can be legal entities. However, the structure still has a natural person general partner bearing unlimited liability.
Is there a minimum number of partners in a commandite company? Yes — at least one general partner and at least one limited partner, for a minimum total of two partners.
Are collective and commandite companies common in Turkey? These structures were more common historically. Today, the LLC dominates as the preferred small business structure. Collective and commandite companies are rarely formed by new investors, though some older businesses continue to operate under these structures.