What is a Joint-Stock Company? How to Establish a Joint-Stock Company?

A joint-stock company is a type of company that we frequently encounter in today's business world and is preferred by many entrepreneurs. To briefly explain for those who wonder what a joint-stock company means; a joint-stock company is a company model established on the basis of a specific capital, where capital shares can be transferred without being bound to a specific legal form.

Now let’s explore the details of joint-stock companies, how they are established, and the important steps to consider in this process in depth!

What is a Joint-Stock Company?

The most basic answer to the question of what is a joint-stock company is that it is a type of commercial company whose capital is divided into shares and has at least one partner. It is one of the most common types of companies in Turkey.

In such companies, the liability of the partners is limited to the amount of shares they own, and their personal assets are not at risk for company debts. Therefore, the answer to what is a joint-stock partnership and other details must be known by entrepreneurs.

Joint-stock companies can be public or closely held. Publicly held companies can be traded on the stock exchange, while closely held companies are limited to specific investors only.

One of the most striking features of joint-stock companies is their capital structure and corporate governance framework. For this reason, large-capitalized enterprises usually prefer to be established as joint-stock companies.

What are the Features of a Joint-Stock Company?

The characteristics of joint-stock companies distinguish them from other types of companies, both corporate and operational. Here are the prominent features of joint-stock companies:

• Capital base: Joint-stock companies must have a certain capital. This capital is divided into shares, and the value represented by each share must be specified in the company's articles of association.

• Liability of the partners: Partners of a joint-stock company are only liable to the extent of the capital they contribute to the company. In other words, their personal assets cannot be recuperated for company debts.

• Management: The management of joint-stock companies is carried out by the board of directors. The board of directors is elected by the general assembly of partners.

• Auditing: Joint-stock companies are subject to independent auditing. This audit ensures that the company's financial situation is presented in a transparent and accurate manner.

• Transfer of shares: Shares in joint-stock companies are freely transferable. However, restrictions on this may be imposed in the company's articles of association.

• Public offering: Joint-stock companies can be public or closely held. Publicly traded companies can be listed on the stock exchange and offer their shares to the general public.

How Many Partners Can a Joint-Stock Company Have?

According to the Turkish Commercial Code, the number of partners in a joint-stock company starts with at least one partner and theoretically has no upper limit. That is, joint-stock companies can be established with an unlimited number of partners. This flexibility allows the joint-stock company type to be preferred in businesses where large investments and broad participation are required.

Especially when it comes to publicly traded companies, thousands or even tens of thousands of investors can become partners in a joint-stock company. However, the role and responsibility of each partner within the company is only to the extent of the capital they contribute.

Therefore, the personal assets of the partners are not at risk for the company's debts. This structure makes joint-stock companies an attractive option for investors.

Is a Joint-Stock Company a Legal Entity?

A joint-stock company has a legal entity. A legal entity can have legal rights and obligations and is recognized as a separate entity in its own right. According to the Turkish Commercial Code, joint-stock companies acquire legal personality from the moment they are registered and announced.

In this way, joint-stock companies can acquire rights, incur liabilities, sign contracts, and sue or be sued in their own name.

These features provided by legal personality allow the joint-stock company to conduct its operations independently and perform legal transactions separately from its partners. 

Advantages of Joint-Stock Companies

Joint-stock companies have many advantages. Some of these are as follows:

• Personal assets are not at risk thanks to the limited liability of the partners.

• It offers the opportunity to raise large capital by reaching a wide investor base.

• Shares can be easily transferred.

• Independent legal transactions are carried out through the legal entity.

• It has a professional management structure.

• It has the potential to be traded on the stock exchange and go public.

• Company continuity is maintained during changes in partnership.

• It addresses different investor requirements by issuing privileged shares.

Disadvantages of Joint-Stock Companies

As with any type of company, there are some disadvantages of joint-stock companies. Here are the disadvantages of a joint-stock company.

• Establishment and operating costs are higher compared to other company types.

• It requires a strict management and audit structure.

• It is subject to more auditing due to public disclosure and transparency obligations.

• Direct communication between partners can be weak.

• Distribution of profits is usually carried out on an annual basis.

• There are more bureaucracy and legal requirements.

• Partners' control over the company is limited.

• In publicly traded companies, shareholders may not participate directly in decision-making processes.

How to Establish a Joint-Stock Company?

Establishing a joint-stock company in Turkey is carried out by following certain steps. The establishment process includes many stages, starting from determining the company name to the completion of official business.

1. Determine a unique name for your company

As a first step, you should choose a unique and memorable name for your company. This name should reflect the scope of activity of your company and should not be confused with other company names.

The name you choose is very critical to create a positive first impression in the minds of your customers.

Furthermore, checking the Trade Registry Gazette is essential to ensure that the chosen name is not already in use by another business. This step lays the foundation for your company's corporate identity.

2. Determine capital and distribute shares

According to Turkish laws, there is a minimum capital amount determined for the establishment of a joint-stock company. You can establish your company with capital above this amount.

You need to perform a share distribution to determine which partners will cover how much of the capital you set. Share distribution shows in detail how capital will be divided among the individuals or institutions financing your company.

3. Prepare the company agreement

The company agreement (articles of association) is an official document containing basic information about the operation of your company. This contract covers the main scope of activity of your company, capital structure, management bodies, how profit and loss will be shared, and other important articles. It is essential to prepare the agreement in accordance with the law and in a way that protects the rights of the parties.

4. Apply to the Trade Registry Office

For your company to officially start its activities, you must apply to the nearest Trade Registry office. During the application, you must present the articles of association you prepared, identification details of the partners, and other necessary documents. Upon successful application, your company is registered in the trade registry.

5. Deal with Tax Office and Social Security Institution transactions

Following the registration process, you must register your company with the local tax office. With this registration, you can obtain your tax plate. At the same time, you must register with the Social Security Institution to ensure your employees have access to social security benefits.

6. Obtain required permits from the local authority

You need to obtain an opening and operating permit from the municipality where your workplace is located. In addition, various local government permits or licenses may be required depending on your area of activity. These permits ensure that your company legally conducts its operations.

7. Print and register share certificates

In joint-stock companies, the printing and registration of share certificates represent the shares of the partners in the company. These certificates state the capital structure of the company and the share owned by the partners. Reflecting the rights and responsibilities of shareholders, these certificates are a legal requirement.

8. Open a bank account for your company

You must open a bank account to facilitate your company's financial operations and ensure the recording of transactions made on behalf of the company. Your company account is used for invoicing, payroll, tax payments, and all other financial transactions.

Once you decide on which bank you want to open an account with, you can apply to your bank with your company's registration certificate, tax plate, authorized signature circulars, and other necessary documents. Banks' company account opening processes and requested documents may vary. Therefore, it is recommended that you contact the branch of the relevant bank before applying.

9. Launch your joint-stock company

After completing all incorporation transactions and obtaining the necessary permits, you can start your company's operations. At this stage, first inform your employees and provide training suitable to the company's line of work. At the same time, you can promote your company by planning your marketing and advertising strategies. 

Adopting a systematic approach to topics like customer relationship management, logistics, and supply chain management helps your company operate efficiently and successfully. Value innovation and ongoing learning for the continuous growth and development of your company.

Documents Required for Establishing a Joint-Stock Company

There are legal obligations to be fulfilled when establishing a joint-stock company, and certain documents must be prepared and submitted during this process. According to the legal legislation in Turkey, the documents required to be submitted when establishing a joint-stock company are as follows:

• Articles of Association

• General Assembly of Partners Decision

• Signature Declaration

• Trade Registry Gazette Announcement

• Bank Letter of Guarantee

• Letter of Consent

• Copy of Tax Plate

• Photocopies of Identity Cards

• Notarized Partnership Declaration

• Announcement of Establishment to be Published in the Official Gazette

These documents are generally the papers requested for establishing a joint-stock company in Turkey. However, it should not be forgotten that additional documents may be requested based on sectorial or special situations. Therefore, it is beneficial to gather up-to-date information from the relevant authorities before starting the company.

Differences Between Joint-Stock and Limited Liability Companies

There are some differences between joint-stock and limited liability companies. These are:

• Initial capital: Joint-stock companies have a higher minimum capital requirement compared to limited companies.

• Number of partners: Limited companies can be established with a maximum of 50 partners, whereas there is no upper limit in joint-stock companies.

• Management: The board of directors is essential in joint-stock companies; managers/directors are in charge of limited companies.

• Share certificates: While joint-stock companies can print share certificates, limited liability companies cannot.

• General assembly meetings: Annual general meetings are mandatory for joint-stock companies, whereas there is no such obligation for limited liability companies.

• Auditing: Independent auditing is mandatory in joint-stock companies; this might be mandatory for some limited companies.

• Establishment process: The joint-stock company establishment procedure is more complex compared to a limited company.

• Transfer: While shares are freely transferred in joint-stock companies, the consent of the partners is required in limited companies.

What are the Company Name Rules in Joint-Stock Companies?

The trade name of joint-stock companies must be a name that reflects the company's scope of activity. However, it is not enough for the trade name to only indicate the operational field; the phrase "Anonim Şirket" or "A.Ş." must be appended to the end of the name. This phrase clearly states to the public that the company is a joint-stock company.

According to the Turkish Commercial Code, the name must not be misleading and must reflect the real and primary scope of activity of the company. Additionally, it is forbidden to use the same or similar trade name already used or registered by another company.

If a joint-stock company changes its scope of activity, it must also align its trade name with this change. Correct and appropriate selection of the trade name holds great importance for the legal status of the company and its perception by the public.

Tax Status of Joint-Stock Companies

Tax rates for joint-stock companies are regulated under the Corporate Tax Law in Turkey. Joint-stock companies are obliged to pay a portion of their profits to the state as Corporate Tax.

The corporate tax rate to be applied to joint-stock companies is generally 20%. However, this rate may change with certain exceptions and deductions. Additionally, withholding tax is levied on the dividend payments distributed by companies. 

Tax rates for joint-stock companies may change over time depending on financial policies, economic conditions, and fiscal policies determined by the state. For joint-stock companies to fulfill their tax liabilities, they must prepare a balance sheet and income statement at the end of the fiscal year, and pay the calculated taxes over these documents within a specified period.

Therefore, it is of great importance for the officials managing the financial affairs of joint-stock companies to have up-to-date information regarding tax legislation and rates.

How Much is the Cost of Establishing a Joint-Stock Company?

The cost of establishing a joint-stock company varies depending on various factors. The most fundamental variable is the capital of the joint-stock company.

According to the Turkish Commercial Code, a minimum capital for a joint-stock company is specified, and the answer to the question "What is the minimum capital for a joint-stock company?" is this minimum capital amount. However, this fee only covers the cost of capital. 

Other expenses to be encountered during the establishment process include notary fees, trade registry fees, announcement costs, and similar expenses.

These costs vary depending on the chosen services, the company's scope of activity, the sector, and targets. It is necessary to pay attention to these factors in order to clearly determine the total establishment cost.