Unlimited Partner Liability in Turkish Company Forms: What Foreign Investors Must Know

The Liability Question No One Asks Until It Is Too Late

Foreign investors setting up a business in Turkey typically focus on capital requirements, registration timelines, and tax incentives. The legal structure of the company — and what it means for personal liability — rarely gets the attention it deserves. Then a company runs into financial trouble, and partners discover that their personal assets are exposed to creditor claims they had no idea existed.

Turkish company law, governed primarily by the Turkish Commercial Code No. 6102 (Türk Ticaret Kanunu — TTK), draws a sharp line between company forms where partners bear unlimited personal liability and those where they do not. Getting this distinction wrong before you sign the incorporation documents can cost far more than the company itself.

This article explains which Turkish company forms create unlimited partner liability, how that liability operates in practice, and where even the supposedly "safe" limited liability company (limited şirket) has an exception that catches investors off guard.

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Overview: Turkish Company Forms and Liability

TTK recognises six company types. For practical purposes, the four most relevant are:

| Company Form | Turkish Name | Partner Liability | |---|---|---| | Joint-stock company | Anonim şirket (A.Ş.) | Limited to share capital | | Limited liability company | Limited şirket (Ltd. Şti.) | Limited — with tax-debt exception | | General partnership | Kollektif şirket | Unlimited and personal | | Commandite company | Komandit şirket | Mixed — see below |

Foreign investors almost always choose an anonim şirket or limited şirket precisely because liability is capped at the capital contributed. The kollektif şirket and komandit şirket are far less common in practice but still used — particularly by local businesses and family enterprises — and they carry fundamentally different risk profiles. See our comparison of joint-stock vs. LLC structures for the capital and governance differences.

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Kollektif Şirket: General Partnership and Unlimited Liability

The Statutory Basis

A kollektif şirket is a commercial partnership formed by at least two natural persons or legal entities to operate a commercial enterprise under a common trade name. Under TTK Article 236(1), every partner in a kollektif şirket is personally and jointly liable for the company's debts to an unlimited extent. There is no cap. The partner's home, bank accounts, and other personal assets are all reachable by company creditors.

Yargıtay (the Turkish Court of Cassation) confirmed this principle as recently as 2019 in a decision from the 23rd Civil Chamber: unlimited partner liability in a kollektif şirket extends to all company obligations incurred during the partner's membership, regardless of which partner caused the debt.

The Secondary Liability Rule

Creditors cannot bypass the company and go straight after a partner's personal assets. TTK Articles 211–303 (the full kollektif şirket chapter) establish a secondary liability sequence: the creditor must first pursue the company. Only if that pursuit proves fruitless — meaning the company's assets are insufficient or enforcement has failed — can the creditor then proceed against the partner personally.

The Istanbul Anadolu 4th Civil Court of First Instance articulated this explicitly in 2021:

"Şirket alacaklısı, öncelikle şirkete başvurmalıdır. Şirkete yapılan başvuru sonuçsuz kalırsa, şirket ortağına başvurmak mümkün hale gelir. Diğer bir deyişle, şirket ortağının şirket alacaklılarına karşı sorumluluğu sınırsız olmakla birlikte, ikincil nitelik taşımaktadır."

(Translation: "The company's creditor must first apply to the company. If that application proves fruitless, proceeding against the partner becomes possible. In other words, while a partner's liability to company creditors is unlimited, it is secondary in nature.")

Practical implication: secondary liability does not mean safe. Once the company cannot pay, the partner becomes a primary target. Many investors mistake "secondary" for "unlikely to happen."

Partner Creditors vs. Company Creditors

During insolvency, TTK Article 239 establishes a priority rule that cuts in the other direction: a partner's personal creditors cannot reach the company's assets until the company's own creditors are satisfied first. The company estate is ring-fenced for company debts. This protects the company from a partner's personal financial disasters — but it does nothing to protect the partner from the company's financial disasters.

What Triggers Personal Liability

• Supplier invoices the company cannot pay
• Bank loans taken by the company
• Lease obligations for business premises
• Tax debts of the company (note: different rules apply to limited şirket — see below)
• Court judgments against the company
• Contractual penalties

The partner's personal liability tracks every debt the company incurred while that person was a partner.

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Komandit Şirket: The Two-Tier Liability Structure

A komandit şirket (commandite company) has two classes of partners:

• Komandite ortaklar (general/active partners): personally and unlimitedly liable for company debts, identical to partners in a kollektif şirket. Under TTK Article 325(1), in a sermayesi paylara bölünmüş komandit şirket (commandite company with shares), the komandite partner's unlimited liability is explicit.
• Komanditer ortaklar (limited/silent partners): liability is capped at their capital contribution. They cannot participate in management. If they do participate in management — even informally — courts have held that the limitation may be lost.

The practical danger in komandit şirketi lies in misidentifying which class you belong to, or in a limited partner drifting into management activities. Either error converts a capped liability into an unlimited one.

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Limited Şirket: The Tax-Debt Exception

The limited şirket (LLC) is the most popular vehicle for small and medium enterprises in Turkey. Under Turkish company law, partners' liability is ordinarily limited to their capital contribution — they are not personally liable for commercial debts beyond that amount.

However, there is a statutory carve-out for public law claims.

Amme Alacakları and Personal Liability

When a limited şirket cannot pay tax debts, social security contributions, or other public-law obligations (amme alacakları), Turkish tax law allows the state to pursue partners directly, pro rata in proportion to their shareholding. This is not a discretionary enforcement choice — it is a statutory right of the tax administration and social security authority.

Yargıtay's 17th Civil Chamber confirmed in 2019 that a partner's personal assets can be seized for the company's unpaid tax obligations. The 21st Civil Chamber confirmed in 2016 that this liability follows the share, not the person: when a share is transferred, the transferee inherits the company's pre-existing tax liability attributable to that share.

This has a critical consequence for share acquisitions. If you buy a stake in an existing limited şirket and that company has undisclosed tax arrears, you become personally liable for the tax debt proportional to your new shareholding — even for periods before you joined.

This is why tax due diligence is not optional when acquiring shares in a Turkish LLC. See our article on minority shareholder risks in Turkish LLCs for related acquisition risks.

What Is Covered by the Exception

| Obligation Type | Partner Exposure | |---|---| | Trade creditors (suppliers, contractors) | None — limited liability applies | | Bank loans | None — limited liability applies | | Corporate income tax arrears | Yes — personal liability pro rata | | VAT arrears | Yes — personal liability pro rata | | Social security premium arrears | Yes — personal liability pro rata | | Customs duties | Yes — personal liability pro rata |

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Three Practical Traps to Avoid

Trap 1: Liability After the Company Is Closed

Winding up a kollektif şirket does not automatically extinguish a former partner's liability. Debts that arose during the partnership period remain the partner's personal obligation even after dissolution. The statute of limitations runs from the date the claim became enforceable against the company — not from the dissolution date.

Trap 2: The Company Type Conversion

Converting a kollektif şirket into an anonim şirket is possible under TTK. But it does not erase liability for pre-conversion debts. Yargıtay's 23rd Civil Chamber confirmed in 2015 that partners of the original kollektif şirket remain personally liable for all debts incurred before the conversion, even after the newly formed joint-stock company has assumed those debts on paper. The anonim şirket's assumption is not a novation — old creditors retain their claims against former partners.

Trap 3: Buying Into a Company With Tax Arrears

As described above, acquiring shares in a limited şirket transfers the seller's proportionate tax liability to the buyer. Sellers are not required by default to disclose tax arrears in a share purchase agreement — Turkish law does not impose an automatic disclosure duty on this point. Buyers must conduct their own due diligence through the tax authority (Gelir İdaresi Başkanlığı — GİB) and obtain written confirmation that no tax arrears exist.

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Frequently Asked Questions

Can a foreign national be a partner in a kollektif şirket in Turkey?

Yes. Turkish company law does not prohibit foreign nationals from being partners in a kollektif şirket. However, foreign partners who accept unlimited liability expose their assets in Turkey and, depending on their home country's enforcement treaties with Turkey, potentially abroad as well. This is a significant risk factor that should be assessed before incorporation.

If I leave a kollektif şirket, does my liability end immediately?

No. You remain liable for all debts incurred while you were a partner, regardless of when you resigned. Liability for post-exit debts ceases, but the existing obligations follow you until they are paid or the statute of limitations expires.

Can creditors ignore the secondary liability rule and sue me directly?

In principle, no. Turkish law requires creditors to pursue the company first. In practice, creditors who obtain a court judgment against the company and are unable to collect will quickly turn to partners. The procedural step of "pursuing the company first" is typically satisfied by a failed enforcement attempt (icra takibi sonuçsuz kalması), which can happen quickly if the company has no assets.

Is there a way to limit liability in a kollektif şirket by contract?

Partners can agree among themselves on internal liability-sharing arrangements, but such agreements bind only the partners inter se — they do not affect creditors' rights. A creditor who is not party to the agreement can still pursue any partner for the full amount, leaving that partner to seek contribution from the others under the internal agreement.

Does the tax-debt exception in a limited şirket apply to the company's managing director if they are not a partner?

Turkish tax law does impose personal liability on legal representatives of a limited şirket (typically the müdür/managing director) for tax debts arising during their tenure. This liability is independent of shareholding. A non-partner managing director can therefore face personal liability for company tax debts under the Public Collections Law (6183 sayılı Amme Alacaklarının Tahsil Usulü Hakkında Kanun).

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How Mona Hukuk Can Help

The choice of company structure is one of the most consequential legal decisions a business makes in Turkey, yet it is often treated as a formality. Our corporate law team advises foreign investors on:

• Selecting the right legal entity based on liability exposure, tax treatment, and operational needs
• Due diligence for share acquisitions in existing Turkish companies, including tax arrear searches
• Structuring exits from partnerships to minimise residual liability risk
• Managing the transition when converting one company type to another

If you are considering entering or leaving a Turkish business structure, contact us before documents are signed.

Contact us at contact@monahukuk.com or call +90 (242) 606 14 32 to schedule a consultation in Antalya.