Entrepreneur’s Journal: Key Differences Between a Joint Stock Company and a Sole Proprietorship

 

Structure of a Joint Stock Company

 

A joint stock company is a legal entity whose capital is divided into shares and is managed by one or more shareholders. In this type of company, there is a Board of Directors that carries out the duties assigned by the General Assembly formed by the shareholders. The Turkish Commercial Code provides comprehensive regulations to ensure that joint stock companies operate with flexibility and commercial reliability. Joint stock companies may be established with one or more partners.

One of the main differences compared to limited liability companies is the minimum capital requirement. Shareholders who wish to establish a joint stock company must commit to a minimum paid-in capital of TRY 100,000. However, this does not mean that the entire capital must be paid at the time of incorporation. According to the Turkish Commercial Code, at least one-quarter of the capital must be paid before registration, and the remaining amount must be completed within 24 months following incorporation.

Joint stock companies may engage in any commercial and economic activities that are not prohibited by law. The fields of activity must be clearly stated in the company’s articles of association. The articles of association must include all provisions required by law. Today, the articles of association can easily be prepared through the MERSİS system, and registration procedures can be completed quickly.

Since share transfers can be made through share certificates in joint stock companies, the transfer of ownership is relatively easy. The liability of shareholders for company debts is limited solely to the amount of capital they have committed. If the company’s assets are insufficient to cover its debts, creditors cannot pursue the personal assets of the shareholders. This feature is extremely important for startups and entrepreneurs.

Many startups may face difficulties in fulfilling their obligations after being established and commencing operations, and they may fall under a heavy debt burden. In such cases, while the owner of a sole proprietorship may be personally liable for a large amount of debt, shareholders of a joint stock company are only responsible up to the amount of capital they have committed. This limited liability structure allows partners to take greater risks and to achieve higher returns if successful. In addition, the complexity of the shareholding structure and the detailed exit processes reduce risk for investors and make investment decisions easier.

 

Differences Between a Joint Stock Company and a Sole Proprietorship

Since we discussed the characteristics of sole proprietorships in detail in our previous article, we will move directly to a comparison here:

• Sole proprietorships are more flexible for managing small amounts quickly, whereas joint stock companies generally have slower capital movements.
• From the perspective of partners, joint stock companies are much safer than sole proprietorships. This is due to both limited liability and the fact that commercial decisions are made by the Board of Directors.
• A startup that begins as a sole proprietorship and later converts into a joint stock company is generally considered a safer investment for investors.