What is a Sole Proprietorship?
A sole proprietorship is a type of legal entity where the responsibilities of its partners are unlimited. Established by one or more individuals with shared goals, these partnerships are referred to as sole proprietorships, where decisions and responsibilities are considered personal.
Establishing a sole proprietorship is simpler, less costly, and faster compared to other types of companies, which is why it is frequently chosen by individuals entering e-commerce and similar businesses.
Documents Required to Establish a Sole Proprietorship
To set up a sole proprietorship, you may choose to work with a financial advisor who will provide detailed information about the required documents and payments. However, setting up a sole proprietorship is generally much faster compared to other company types. Typically, the necessary inspections are completed, and your legal entity is registered within 2 business days, depending on the region's workload. The required documents for company establishment are:
- Power of Attorney for Financial Advisor
- Copy of Property Deed or Rental Agreement
- Copy of ID Card
- Passport-sized Photograph
- Signature Declaration
- Proof of Residence
- Vehicle Purchase Invoice and Registration (if applicable)
You must inform the tax office of your company's address, which can be a home, office, virtual office, or shop. If the property is rented, a rental agreement; if owned, a copy of the property deed, will be included in the file with the contract you make with the financial advisor.
Costs of Establishing a Sole Proprietorship in 2021
The expenses for establishing a sole proprietorship in 2021 are as follows:
- 2 copies of ID Card
- Start-up Form (can be filled out through e-Government)
- Rental Agreement for the business premises or property deed if owned
- 2 copies of Proof of Residence (can be obtained for free from e-Government)
- 2 Signature Declarations (obtained from any notary, average cost is 100 TL)
- Stamp Duty for Tax Office (50 TL)
- Financial Advisor's Service Fee (500-700 TL)
- Cash Register (if needed, 1000-1500 TL)
- Company Seal (20 TL)
Does a Sole Proprietor Pay Rental Withholding Tax?
Withholding tax is a type of tax paid across all commercial sectors. One-quarter of the monthly tax amount is calculated as withholding tax and paid in lump sums every three months. If the property is not rented but owned by the individual, or if the rental is between companies, this tax does not apply.
What Are the Expenses of a Sole Proprietorship?
Every tax-paying individual must file a tax return. The annual tax items for a taxpayer include:
- Monthly VAT Return (58.80 TL stamp duty)
- Quarterly Withholding Tax Return (58.80 TL stamp duty)
- Quarterly Income Tax Return (91.70 TL stamp duty)
- Annual Income Tax Return (122 TL stamp duty)
Income Tax Brackets for Sole Proprietorships in 2021
Unlike other capital companies, tax calculations for sole proprietorships are divided into brackets based on income. The details of the tax brackets, ranging from 15% to 40%, are:
- Up to 22,000 TL: 15%
- For income over 22,000 TL up to 49,000 TL: 3,300 TL plus 20% on the excess
- For income over 49,000 TL up to 120,000 TL: 8,700 TL plus 27% on the excess
- For income over 120,000 TL up to 600,000 TL: 27,870 TL plus 35% on the excess
- For income over 600,000 TL: 195,870 TL plus 40% on the excess
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