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Economic Enterprise

Economic enterprises is a frequently used method in the fundraising efforts of non-governmental organizations.

Economic enterprises, which are also included in the fundraising activities of non-governmental organizations, are commercial structures that associations can establish to achieve their goals apart from donations, aid, rental income or other incomes.

An economic enterprise is an enterprise that is owned or affiliated with associations or foundations and offers commercial, industrial and agricultural services and products, excluding economic enterprises such as capital companies, joint stock companies, limited liability companies or cooperatives. The association may establish an economic enterprise in case it needs additional income to achieve its objectives other than the income it receives.

The info-note on "Commercial Enterprise Management for Associations and Foundations - Frequently Asked Questions" prepared by STGM gives you an overview of the subject. You can also check out STGM video series called "How to Manage Commercial Business in NGOs"

Preview image for the video "İktisadi işletme nedir ve iktisadi işletmeye neden gerek duyulur?".

 Please note that both resources are in Turkish only.

Commercial enterprises of associations or foundations in Turkey are subject to all law and legislations that may concern them during their operations. Although the administrative board of association has appointed an executive to the commercial enterprise, it is still responsible for the management and administration of the commercial enterprise. However, a commercial enterprise is subject to followings;

1) Commercial law 2) Law of Obligations 3) Law of Associations 4) Civil Law, in case, the commercial enterprise is affiliated with a foundation 5) Corporate Tax Law 6) Value Added Tax (VAT) Law 7) Labor Law, in case of employment of staff 8) other laws and regulation are in relation with its operational areas (e.g. Ministry of Agriculture in case of food production?

In order to establish an economic enterprise, first of all, "economic enterprise can be established" must be included in the statute of the association. After that, a board of directors decision must first be taken to establish the economic enterprise.

When the economic enterprise makes a profit, dividends can be transferred to the association after the necessary tax deductions are made. Any cash transfer from the economic enterprise to the association is a profit share and withholding payment is required.

It is possible to transfer funds from the association to the economic enterprise. This is a debt transaction. In order to avoid any problems in the audit in such transactions, the Board of Directors must take a decision about "the money will be transferred to the economic enterprise for which business" before the transfer.