What Is a Sole Proprietorship?

A sole proprietorship is a type of business that is usually established by a single individual, but it can also be formed with partners. In this business model, the owners have unlimited liability, meaning they are personally responsible for the company’s debts.

Because the setup process is simple and fast, it is one of the most commonly preferred company types. When established as a partnership, however, it is subject to certain legal conditions. Below, we take a closer look at the key characteristics of sole proprietorships.

If one of the partners wishes to transfer or sell their share, the approval of all partners is required. Since partnership transfers are quite difficult, sole proprietorships are generally established by a single person.

The founder or partners of a sole proprietorship are legally considered real persons and are liable for company debts with their entire personal assets. The steps for establishing a sole proprietorship and the required documents are explained in the following sections.

Advantages and Disadvantages of Establishing a Sole Proprietorship

For small and medium-sized businesses and new entrepreneurs, setting up a sole proprietorship offers many benefits. Naturally, there are also some drawbacks. Let’s review both in detail.

Advantages of a Sole Proprietorship

The establishment cost is much lower compared to other company types.
Fewer documents are required, making the process straightforward.
Once the necessary paperwork is submitted, the company can usually be established within 1–2 days.
Thanks to the progressive income tax system, businesses with lower profits pay lower taxes.
Accounting and financial consultancy expenses are generally lower.
Ledger notarization fees are more affordable.
Closing the company is as quick and easy as opening it.

Disadvantages of a Sole Proprietorship

Since these businesses are considered small-scale, loan and POS applications may take longer to be approved.
As income increases, the tax rate also rises and can reach up to 40%.

How to Establish a Sole Proprietorship: Step by Step

Many people who want to bring their business ideas to life often ask the question: How do you start a company?

To establish a sole proprietorship, you must first collect the required documents and complete the procedures at the tax office. These steps can be carried out personally or through a certified public accountant by granting a power of attorney.

After an inspection by tax office officials, if all requirements are met, the company can be established within a few days. The main steps are as follows:

Residence information, ID copy, and signature documents of the founder are prepared
Company registration procedures are completed
An application for a tax identification number is submitted
Legal books are obtained and notarized
An inspection (site visit) report is prepared
The tax certificate is issued
Invoice, delivery note, and expense voucher documents are obtained
An announcement is published in the trade registry gazette and registration with the relevant chamber is completed
Workplace opening and operating license is obtained
Social Security (SGK) and self-employment (Bağ-Kur) registrations are completed

Today, many of these procedures can also be completed online via e-Government, without visiting the tax office.

Establishing a Sole Proprietorship via e-Government

Log in to the Interactive Tax Office using your e-Government credentials
Click on Transactions, then select Registry Notifications and Start of Business Notification
Complete the five-step business information form
After submission, the inspection date will be sent via SMS
Tax officers will visit the workplace to conduct document and location checks

Required Documents

The documents required to establish a sole proprietorship include:

A fully completed application form (available online or from the tax office)
Two copies of an ID card
Two passport-sized photographs
Two notarized signature declarations
Two residence certificates
Lease agreement or title deed copy
Power of attorney if the application is submitted by an accountant

How to Obtain a Tax Certificate

A tax certificate can be easily generated and printed through the Interactive Tax Office system. It can also be obtained through a certified public accountant or the chamber of commerce you are registered with.