Differences Between Joint Stock Companies and Limited Liability Companies: Which One Should You Choose?

• Ali Rıza Deniz

Differences Between Joint Stock Companies and Limited Liability Companies: Which One Should You Choose?

One of the most common questions for entrepreneurs and business people who want to establish a company in Turkey is what the differences are between a joint stock company (A.Ş.) and a limited liability company (Ltd. Şti.), and which one should be preferred. This guide aims to facilitate your decision-making process by comparing the fundamental characteristics, advantages, and disadvantages of both types of companies.

What is a Joint Stock Company?

Joint stock companies have capital divided into shares, with shareholders' liability for company debts limited to their invested capital. This structure is typically suitable for large-scale investments and businesses with potential for public offering.

Features of a Joint Stock Company:

• High capital requirement,
• Ability to issue shares,
• Management through a board of directors,
• Potential to attract a wide range of investors.

What is a Limited Liability Company?

Limited liability companies have capital divided according to the partners' shares, with each partner's liability limited to their own share. This structure is ideal for small and medium-sized enterprises, offering less bureaucracy and lower setup costs.

Features of a Limited Liability Company:

• Lower capital requirement,
• Partnership structure based on capital shares,
• Management usually conducted by the partners,
• Suitability for personal and close business relationships.

Comparison and Choice Management and Structure

While A.Ş. has a more complex management structure, Ltd. Şti. offers a simpler and more flexible setup. A.Ş. is managed through board of directors and general assembly meetings, whereas Ltd. Şti. allows direct participation of partners in decision-making processes.

Capital and Investment

A.Ş. generally requires larger capital and can easily increase capital through issuing shares. Ltd. Şti. can be established with less capital and capital increases are achieved through additional investments by the partners.

Liability

In both types, partners' personal assets are protected against company debts, but partners in a Ltd. Şti. can be held directly liable in some cases.

When making your decision, consider factors such as the scale of your business, financing needs, management preferences, and growth plans. Each type of company serves specific needs and goals. Choosing the most suitable type of company for your business model is a critical step towards the success of your business.