What Is a Limited Liability Company, and Who Is It Suitable For?

The short answer to what a limited liability company is: a limited liability company (Ltd. Şti.) is a capital company established by one or more natural or legal persons under a trade name, with a defined capital, in which the partners’ liability is, as a rule, limited to the capital share they have subscribed. In Turkey, it is one of the first choices of small and medium-sized businesses, family businesses and foreign investors. Its formation is relatively simple and its management flexible. On the other hand, it has its own specific rules on matters such as share transfers and public debts.

In this article, we explain the legal definition of a limited liability company, what the abbreviation LTD Şti means, its 7 key features and how it differs from a joint stock company. At the end of the article, we also discuss which investor profile it suits best.

What is a limited liability company, and how is it defined in the law?

A limited liability company is one of the five types of commercial company governed by the Turkish Commercial Code (TTK), and the law treats it, together with the joint stock company, as a capital company. Under Article 573 of the TTK, the company is established by one or more natural or legal persons. Its share capital is defined, and this capital consists of the sum of the partners’ capital shares.

The same article states clearly that partners are not liable for the company’s debts. Partners pay only the capital share they have subscribed and, if provided for in the articles of association, fulfill additional payment and ancillary performance obligations (additional obligations undertaken by contract). A limited liability company may be established for any economic purpose and subject not prohibited by law.

You can access the current text of the law, together with its amendments, on the Turkish Commercial Code (TTK) No. 6102 (mevzuat.gov.tr) page. The provisions on limited liability companies are set out in Articles 573 to 644 of the law.

What does LTD Şti mean, and how is the abbreviation “ltd” written out?

The answer to what LTD Şti means is simple: it is the abbreviation of “Limited Şirketi” (limited liability company) and is usually written with periods in trade names. “Ltd” stands for the word “limited” and indicates that the partners’ liability is limited.

There is a detail here that most sources overlook. Under Article 43 of the TTK, the trade name of a limited liability company must include the words “limited şirket.” If the trade name includes the first name or surname of a natural person, the words indicating the company type cannot be abbreviated. In this case, the trade name must be registered in its full form, that is, as “Limited Şirketi.”

Features of a limited liability company: 7 key points

The features of a limited liability company determine how the company will operate from formation to closure. The seven points below cover the topics most often asked about when choosing a company type.

1. Number of partners: from one to fifty

Under Article 574 of the TTK, the number of partners cannot exceed fifty. The lower limit is one; in other words, the company can be established with a single partner. If the number of partners later falls to one, this is notified to the managers in writing within seven days, and the managers have the single-partner structure registered and announced.

In single-partner limited liability companies, this partner exercises all the powers of the general assembly alone. Resolutions adopted by the sole partner in the capacity of the general assembly must be in writing to be valid. A mistake we often see in practice is that these resolutions are adopted verbally and not recorded.

2. What is the minimum capital?

The share capital of a newly established limited liability company must be at least 50,000 TL. Article 580 of the TTK sets this amount at 10,000 TL and authorizes the President to increase it up to tenfold. Presidential Decree No. 7887, published in the Official Gazette of November 25, 2023, raised the amount to 50,000 TL as of January 1, 2024.

For existing companies whose capital is below this amount, Provisional Article 15 was added to the TTK by Law No. 7511. Under this article, these companies must raise their capital to the statutory amount by December 31, 2026; otherwise, the company is deemed dissolved (dissolved automatically). The Ministry of Trade may extend this period by one year at a time, at most twice.

You do not need to deposit the entire capital on the day of formation. Under the TTK, the requirement to pay 25% of cash shares before registration does not apply to limited liability companies. Because the joint stock company provisions apply by analogy, share amounts are paid within 24 months following registration. The nominal value of capital shares must be at least 25 TL or multiples thereof.

3. Partners’ liability is limited to their capital share

The main reason limited liability companies are preferred is limited liability. As a rule, for a debt the company owes to a supplier or bank, the creditor cannot pursue the partner’s personal assets. The partner’s risk remains limited to the capital share they have undertaken to contribute to the company.

There is an important exception to this rule, and the next heading explains exactly that.

4. How does liability for public debts work?

For public receivables such as taxes, the limited liability rule works differently. Under Article 35 of Law No. 6183 on the Procedure for the Collection of Public Receivables, partners of a limited liability company are directly liable, in proportion to their capital shares, for public receivables that cannot be collected from the company in whole or in part. In this case, the administration can pursue the partner directly.

The same article also sets a rule for a partner who transfers their share. If a share is transferred, the transferor and the transferee are held jointly and severally liable for public receivables relating to the period before the transfer. For this reason, examining the company’s tax debt position before buying a share prevents a surprise that may arise later.

Apart from the partners, legal representatives also bear liability. Under Repeated Article 35 of the same Law, public receivables that cannot be collected from the legal entity may be collected from the personal assets of the legal representatives. In a limited liability company, the legal representative is usually the manager.

5. Share transfers require notarization and a general assembly resolution

Among the features of a limited liability company, share transfers are the topic that surprises investors most. Under Article 595 of the TTK, a capital share is transferred in writing, and the parties’ signatures are notarized. Unless otherwise provided in the articles of association, the approval of the partners’ general assembly is also required for the transfer, and the transfer becomes valid upon this approval.

Unless the articles of association provide otherwise, the general assembly can refuse approval without giving a reason. If it does not refuse within three months of the application, it is deemed to have given approval. The articles of association may also prohibit share transfers entirely; in this case, the partner’s right to withdraw from the company for just cause is reserved.

6. Management and representation lie with the managers

A limited liability company is managed and represented by its manager or managers. Under Article 623 of the TTK, management and representation may be assigned by the articles of association to one or more partners, to all partners or to third parties who are not partners. However, at least one partner must have the right to manage and the authority to represent.

If there is more than one manager, the general assembly appoints one of them as chair of the board of managers. The appointment and dismissal of managers and the determination of their remuneration are among the non-transferable powers of the general assembly. The ordinary general assembly meeting is held every year within three months from the end of the accounting period.

7. Taxation: corporate income tax liability

As a legal entity, a limited liability company is subject to corporate income tax. Under Article 32 of Corporate Income Tax Law No. 5520, corporate income tax is levied at a rate of 25% on corporate earnings. A different rate is provided for banks and certain financial institutions; an ordinary trading or service company is subject to the general rate.

During the year, the company files advance tax returns, and at year end a corporate income tax return, and keeps its books on the balance sheet basis. When dividends are distributed to partners, withholding tax also comes into play. Because earnings of a sole proprietorship are subject to progressive personal income tax, it is advisable to evaluate the option of incorporating with your accountant as earnings increase.

Who are limited liability companies suitable for?

Limited liability companies generally suit businesses with a fixed, small number of partners that raise their capital from their own resources rather than the stock exchange. The profiles we see most often among our clients are:

• Tradespeople and self-employed professionals who want to incorporate from a sole proprietorship and separate their personal assets from commercial risk
• Businesses in which family members are partners and shares are not meant to pass outside the family
• Foreign investors starting operations in Turkey for the first time who want to keep the structure simple
• Small and medium-sized ventures in consulting, software, trade and services

The fact that share transfers require notarization and general assembly approval is an advantage for those who want the partnership to remain closed. If you aim to bring in investors, have shares change hands frequently or go public in the future, a joint stock company is generally a more suitable option. The final decision, however, should be made based on your field of activity, partnership structure and growth plan.

Limited liability company or joint stock company?

The question of what a limited liability company is is often asked in comparison with a joint stock company. Both types are capital companies and are subject to corporate income tax. The difference lies in the capital amount, management structure, share transfers and liability for public debts. The table below summarizes the main differences; we will cover the joint stock company in detail in a separate article.

Managers and work permits in a limited liability company with foreign partners

Foreign natural or legal persons can become partners in a limited liability company in Turkey and can be appointed as managers; the law requires the managers’ nationality to be stated in the articles of association. If a legal entity is chosen as manager, a natural person is designated to perform this role on its behalf. If a foreign manager will actually work in Turkey or receive a salary from the company, the question of a work permit arises in most cases. This is a process that runs separately from company formation and needs to be planned separately.

Points to clarify before you set it up

The structure of a limited liability company is determined by the articles of association signed on the day of formation. Changing it later is possible but requires a general assembly resolution and registration. For this reason, we recommend clarifying the answers to the following questions before formation:

• How many partners will the company be established with, and how will the shares be distributed?
• Who will be the manager, and will they represent the company alone or jointly?
• How much will the capital be, and when will it be paid?
• Will a right of first refusal (the other partners’ priority right to buy) be granted on share transfers?
• Is the scope of activity drafted broadly enough to cover future business as well?

We explained the formation steps, documents and trade registry process in detail in our how to set up a company guide. You can find our other articles on company types in the Company Formation in Turkey category, and answers to short questions on our frequently asked questions page.

Last updated: 17.10.2026