What is a Sole Proprietorship? Entrepreneur's Guide 2026

A sole proprietorship is a type of company that can be established and operated by a single individual, with low incorporation costs and minimal paperwork. Because all authority rests with the founder, decisions are made quickly; as income increases, the progressive income tax rate also increases. The right choice depends on expected turnover and growth rate.

What is a sole proprietorship?

A sole proprietorship is a low-cost type of company that can be established and operated by a single individual. The legal entity is not separate from the founder; meaning the founder is also liable for the company's debts and obligations with their own assets. This structure is preferred by individual entrepreneurs who want quick setup and low initial costs.

How does the process of establishing a sole proprietorship work?

An agreement is reached with a financial advisor/accountant; the commencement of employment form is filled out by the accountant and submitted to the tax office.
The necessary documents are prepared: 2 copies of the identity card, 2 copies of the residence certificate, signature declaration, power of attorney for the accountant, and business certificate (rental agreement or photocopy of the title deed).
Registration with the relevant chamber (Chamber of Commerce or Chamber of Craftsmen) is completed according to the field of activity.
A tax office inspection is carried out and a tax certificate is issued.
Installation is usually completed within 1-3 business days.

What are the advantages and disadvantages of a sole proprietorship?

Advantages	Disadvantages
Less paperwork, faster setup process.	The founder is personally liable for company debts with their own assets.
Since all authority rests with the founder, quick decision-making is possible.	As income increases, the tax rate also gradually increases.
Relatively low accounting/bookkeeping costs compared to a limited company.	Compared to the fixed corporate tax rate in a limited company, it may be at a disadvantage for those with high income.
It can be opened with low initial capital.	Corporate image/trust perception may be weaker in some sectors compared to limited companies.

As of 2026, the progressive income tax brackets for commercial income are approximately as follows: up to 190,000 TL: 15%, 190,000-400,000 TL: 20%, 400,000-1,000,000 TL: 27%, 1,000,000-5,300,000 TL: 35%, above 5,300,000 TL: 40% (source: Section 4). These rates are determined annually; for exact and current rates, confirmation should be obtained from the Revenue Administration or your financial advisor.

Sole Proprietorship or Limited Liability Company? What are the Establishment Costs?

Pen	Sole Proprietorship (approximately 2026)	Notes
Establishment cost	1,500 - 5,000 TL	Including fees for accountant, notary, and chamber of commerce registration.
Monthly accountant fee	1,000 - 3,000 TL	It varies depending on the type of business and transaction volume.
Responsibility	The founder's personal assets are also liable.	In a limited company, liability is limited to the amount of capital invested.

For a small-scale, one-person, low-risk venture, a sole proprietorship is a quick and economical start. As turnover grows, or if there are plans for partnerships/investors, a transition to a limited liability company should be considered; this transition decision should be made with the support of a financial advisor.

Sample Establishment Process

An entrepreneur who started providing consulting services chose a sole proprietorship due to its low initial cost and quick setup; he completed the incorporation with his financial advisor in 3 days and saved time by migrating his accounting/invoicing processes to a digital infrastructure.

Frequently Asked Questions

What is the biggest difference between a sole proprietorship and a limited liability company?

Liability scope: in a sole proprietorship, the founder is liable for company debts with their personal assets; in a limited liability company, liability is limited to the contributed capital.

How long does it take to set up a sole proprietorship?

If all the necessary documents are in order, the registration process is usually completed within 1-3 business days.

How is tax calculated for a sole proprietorship?

Income tax is calculated according to a tiered income tax rate system; as income increases, the applied rate also increases progressively. Since current brackets may change annually, confirmation should be obtained from the Revenue Administration.

Is an accountant required to set up a sole proprietorship?

It is legally required that the notification of commencement of employment and regular tax/social security procedures be handled through a financial advisor/accountant.

Ready to digitize your accounting and billing processes after starting your company? Try Entranet for free .

Accounting | Finance | Taxation

Muhasebe, finans yönetimi, vergilendirmeler