Collective Company in Turkey | Structure, Liability & Registration

What is a Collective Company?

A Collective Company is a type of partnership regulated under the Turkish Commercial Code where all partners are real persons and carry unlimited and joint liability for company debts. Unlike capital companies such as the Joint Stock Company (A.Ş.) or the Limited Company (Ltd. Şti.), the collective company is a private company and best suited for small-scale or family-owned businesses.

Key Characteristics

• Partners: Must be real persons (no legal entity partners allowed).
• Liability: Partners are second-degree and unlimited liable for company debts. Creditors may pursue company assets first, but if insufficient, they can pursue partners personally.
• Management: Each partner has both the right and duty to manage the company, unless the company contract assigns management to one or several partners.
• Capital Requirement: There is no minimum capital requirement for establishing a collective company.

Compare with Limited Partnership in Turkey, where liability can be mixed (limited and unlimited partners).

Establishment Requirements

• At least two partners are required.
• The company agreement must be drawn up and signed by all founders.
• The agreement should specify:
  • Company trade name,
  • Business scope,
  • Partner contributions,
  • Management rights,
  • Profit and loss distribution.
• Registration is made at the Trade Registry Directorate, accompanied by notarised signature declarations of partners.

For detailed paperwork, see Documents for Company Registration in Turkey.

Advantages & Disadvantages

Advantages:

• Simple setup with no capital threshold.
• High trust and flexibility among partners.
• Direct personal involvement in management.

Disadvantages:

• Unlimited personal liability exposes partners’ personal assets.
• Not attractive for scaling or foreign investment.
• Less credibility compared to capital companies like A.Ş. or Ltd. Şti.

Suitability for Foreign Investors

Foreign entrepreneurs rarely choose the collective company model, since it offers no liability protection. Instead, most foreign investors prefer the Limited Company or Joint Stock Company.

However, it may be relevant for small partnerships where partners personally trust each other and seek a straightforward setup without capital requirements.

Dissolution & Liquidation

A collective company may be dissolved if:

• One of the partners withdraws or passes away, unless otherwise agreed in the contract,
• The General Assembly decides termination,
• Bankruptcy occurs.

Liquidation follows general rules for partnerships. See: Liquidation of a Company in Turkey.

Professional Guidance

Because partners bear unlimited liability, drafting the company contract carefully is essential. MFY Legal assists in preparing agreements, registering collective companies, and ensuring compliance with Turkish law.

Contact us to ensure your partnership agreement provides clarity and protects your interests.