The different forms of establishment in Türkiye: commercial representation, Joint-Venture or subsidiary
The different forms of establishment in Türkiye: commercial representation, Joint-Venture or subsidiary
Expanding into Türkiye is a strategic step for companies looking to access new markets. However, selecting the right form of establishment is a crucial decision that depends on your objectives, industry, and resources. Here is an overview of the main options: commercial representation, joint venture, or subsidiary, along with their respective advantages and disadvantages.
1. Commercial representation: a light solution to explore the market
Commercial representation is often the first step for companies seeking to test the Turkish market without committing significant resources. This usually involves setting up a liaison office or working with a local agent or distributor.
Advantages:
- Lower costs: no need to establish a legal entity in Türkiye, which limits initial investments.
- Flexibility: allows you to understand the market and develop local relationships before making a larger commitment.
- Simplified administration: a liaison office is tax-exempt as it does not conduct direct commercial transaction.
Disadvantages:
- Limited scope: you cannot issue invoices or sign commercial contracts directly from the liaison office.
- Dependence on the local partner: if working with an agent or distributor, your success will largely depend on their performance.
2. Joint venture: a strategic partnership with a local player
A joint venture involves partnering with a Turkish company to share resources, expertise, and risks. This option is particularly suited for industries requiring local know-how or for entering highly competitive markets.
Advantages:
- Access to local networks: benefit from your Turkish partner’s experience and business relationships.
- Risk-sharing: costs and responsibilities are divided between both parties.
- Enhanced credibility: partnering with a local player can facilitate market entry.
Disadvantages:
- Management complexity: requires effective coordination and alignment with your partner.
- Potential conflicts: disagreements on management or strategic objectives may arise if expectations are not clearly defined from the outset.
- Due diligence required: choosing the wrong partner can jeopardize your expansion efforts.
3. Subsidiary: full control for long-term market presence
Establishing a subsidiary in Türkiye is the most structured and committed approach. It involves creating a local legal entity, either as a limited liability company (Limited Şirketi) or a joint-stock company (Anonim Şirketi).
Advantages:
- Full control: you manage operations directly and make all strategic decisions.
- Independence: a subsidiary allows you to establish your own identity in the Turkish market.
- Access to tax incentives: foreign investors can benefit from specific advantages, particularly in free zones or for strategic projects.
Disadvantages:
- High initial costs: setting up and operating a subsidiary requires significant financial resources.
- Increased responsibilities: you bear full responsibility for risks and legal obligations.
- Complex administrative processes: establishing a local entity requires thorough knowledge of Turkish regulations.
4. How to choose the right option?
To determine the best establishment model, it is essential to clarify your priorities:
- Testing the market: a commercial representation is ideal for starting with minimal risks.
- Partnering with a local player: a joint venture is relevant if you need a partner for market access or complex projects.
- Long-term investment: a subsidiary is the best choice if you seek full control and a lasting presence in Türkiye.
Conclusion: a key decision for success in Türkiye
Each form of establishment in Türkiye offers unique advantages but also comes with challenges. A thorough analysis of your objectives, industry, and available resources is essential to making the right choice.
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