Forming a Company: LLC vs Sole Proprietorship for Affiliates

When a Bursa-based affiliate switched from sole proprietorship to an LLC structure in 2024, the net annual savings hit 38,000₺. The question is whether you've crossed the threshold where the same math works for you — typically monthly revenue above 40,000₺.

Sole Proprietorship: Cheap Setup, Personal Risk

Setup runs about 800₺ in Turkey — notary, tax office registration, and a starter accounting fee. You pick an activity code (73.12.03 advertising/marketing services is the canonical one for affiliates). Tax burden is progressive 15-35% income tax plus 20% VAT and Bağ-Kur social premiums.

Bookkeeping is simple — a single Operation Book is enough, no mandatory e-Ledger. The catch: unlimited personal liability. Your house, your car, your savings are all reachable if a chargeback wave, brand lawsuit, or tax assessment goes against you.

Limited Company (Ltd. Şti / LLC): Higher Setup, Better at Scale

LLC setup costs 5,000-7,000₺: notarized articles, trade registry filing, accountant retainer, and the minimum capital requirement (50,000₺ since the 2024 reform). Tax: 25% corporate plus ~10% withholding on dividends — roughly 32.5% effective.

The hidden gotcha is non-deductible expenses (KKEG in Turkish): undocumented spend, 30% of private vehicle costs, lavish meals, all inflate your taxable base. Run a monthly KKEG audit with your accountant or the numbers don't work.

The Threshold: 40K₺ Monthly Rule

The break-even sits near 40,000₺ monthly net income. Below that, sole proprietorship wins on simplicity and low overhead. Above it, three forces tip toward LLC:

• Corporate tax is flat 25%; sole-prop hits the 35% bracket.
• Office, equipment, SaaS — fully deductible inside an LLC.
• Banking credibility opens doors with B2B clients and credit lines.

The Bursa case: 720,000₺ revenue in 2023 (sole prop) paid 251,000₺ in tax/SGK. The same revenue in 2024 (LLC) paid 213,000₺. After the extra 24,000₺ accounting fee, net win was 14,000₺.

FAQ

Are affiliate commissions VAT-taxable? Yes for Turkey-resident affiliates (20% VAT). Commissions from foreign networks like Amazon or Awin qualify as service export and are VAT-exempt, but you still file.

Can I roll back from LLC to sole prop? Liquidation takes 6-12 months and costs 8,000-15,000₺. Project 2 years before switching either way.

Do social premiums apply in both? Yes — directly in sole prop, paid as managing director in an LLC. 2026 floor is around 5,500₺/month.

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