If you are thinking about opening a business in Georgia, you have quite a few business structures to choose from, with taxation as low as 0% in some cases.
This article summarizes your main options, including the two most common: LLC (Limited Liability Company) and Individual Entrepreneur (sole proprietor).
Based on your business activities and your goals, you can assess the options and decide exactly which is the most favorable choice. Your business structure affects how/what taxes are paid, how liabilities are determined, and what kind of tax declarations you file.
Summary Of Business Structures
In this table you can read about each of the main types of business you can open in Georgia. For more details on each, please read the additional information in the article below.
Individual Entrepreneur (IE)
BEST FOR: Businesses with a single operator and very low liability concerns. Freelancers.
This is a business run by one individual for their own benefit. An Individual Entrepreneur is a natural person, not a legal entity, who is liable to creditors personally and whose assets are not separated from the business.
As an IE (Individual Entrepreneur) your basic obligations may be:
- 20% Income Tax on net income
- 2%+2% pension contribution if you are a Georgian permanent resident/citizen (optional)
An Individual Entrepreneur can operate under the name of its owner or under a chosen name. In any case, the business is not legally a different entity from the individual. That creates risks, because personal assets might be used to pay your business liabilities. However, the advantages of Individual Entrepreneurship are its simplicity, ease of setup, and nominal costs.
For most IEs the other most attractive advantage is the incredibly low taxation rate that you may be able to qualify for.
If you are working as a freelancer, for example, becoming an Individual Entrepreneur in Georgia might be the most beneficial option since you would also have the possibility to get Small Business Status, which means that you would only pay 1% tax on your gross turnover. So long as your gross annual turnover is below 500,000 GEL, you should qualify.
Some Key Considerations With Small Business Status:
- Business turnover of less than 500,000 GEL (approx $165,000 USD) annually.
- 1% to 3% tax on gross turnover, depending on total turnover (For Georgian permanent residents/citizens, you can pay a voluntary contribution of 2%+2% towards pensions).
- VAT of 18% if your VATable turnover exceeds 100,000 GEL in any 12 month period. Read More About VAT here.
- Be physically present in the Republic of Georgia at least 183 days per tax year, and remain a tax resident of Georgia.
- You are the sole operator (individual) of the business. However, you can still have employees.
- Your business activity must not be on the list of prohibited business activities.
- You do NOT need to be a permanent resident or citizen of Georgia.
Read our full guide for Individual Entrepreneurs and Small/Micro Business Status, and learn how to register as an IE with Small Business Status.
Limited Liability Company (LLC)
BEST FOR: Businesses with potential liabilities and 1 or more directors.
A Limited Liability Company is the most popular business form in Georgia.
Different from Individual Entrepreneurs, the liability of an LLC is limited to its own assets. The company may be established by one person or by several partners, who might invest capital or start a company with zero capital. There are no minimum capital requirements in Georgia. The capital of an LLC is divided into shares. Shares are transferable assets subject to meeting certain requirements (of the charter and/or the law).
Key Benefits of an LLC:
- Seperate Legal Entity
- Limited Liability means you will not be personally liable for debts if the company goes bankrupt or is sued (unless the protection of limited liability was abused).
- Zero capital investment required to open an LLC.
- One or more people can own an LLC.
- An LLC can be owned by a Georgian and foreign natural person or legal entity.
- Directors do not have to be Georgian residents or even visit Georgia to open an LLC here.
- Employees can be from Georgia or elsewhere.
- Company profits are not taxed until they are distributed to individuals (and not taxed at all if distributed to another Georgian company).
Read our comprehensive guide to LLCs and find out how to register your LLC in Georgia.
Taxes paid by LLCs and other Georgian legal entities
Typical taxes that apply to most legal entities in Georgia.
Key Tax Information:
- 15% Corporate Tax – at the time of distribution
- 5% Personal Dividend Tax – at the time of distribution
- 0% Dividend Tax when distributed to other legal entities in Georgia
- 20% Tax on employee salaries (If employees are Georgian permanent residents/citizens, additional 2%+2% for pensions)
- VAT of 18% if gross VAT Taxable turnover exceeds 100,000 GEL in any 12 month period. Read More About VAT.
Joint Stock Company (JSC)
BEST FOR: Large corporations with multiple shareholders looking to raise capital
A Joint Stock Company is a legal entity whose liability to creditors is limited to its own assets and whose capital is divided into shares, classes, and quantities, which are set by the company charter.
Unless otherwise noted in the charter, the corporation can issue ordinary and preferred shares. Shareholders are not liable for JSC’s obligations. Usually, JSC is incorporated by large companies operating in Georgia.
JSC is very similar to an LLC with the key difference that its shares are publicly traded. It is easier to raise capital as an JSC as it can issue new shares.
Solidary Responsibility Company (SRC)
BEST FOR: This business structure is very rarely used, but in some specific cases, it may be necessary.
A solidary responsibility company is a legal entity where several persons (partners) jointly, under one firm name, are occupied with the business operations.
The partners of the SRC are liable before the creditors of the company directly and personally, with their whole property.
Limited Partnership (LP)
BEST FOR: Companies who want to raise capital for business from a small group of investors, especially family, friends, or people in the community.
In Limited Partnership there are 2 kinds of partners, limited partners and general partners. Limited partners invest a certain amount of money and they are liable for that amount, while general partners’ liability is personal and not separated. You need at least one general and one limited partner to start a limited partnership.
BEST FOR: Natural persons or legal entities working in agriculture.
A Georgian Cooperative is a legal entity. Its liability to creditors is limited to its own assets.
Usually in Georgia, you will find agricultural cooperatives.
Only Georgian citizens can establish and become members of a cooperative. Citizens of foreign countries can be associated members of a cooperative, without holding its shares.
Virtual Zone Status
BEST FOR: Certain types of IT companies
This is not a business structure or legal entity but is a special status that can be gained if your business works in certain sectors of the IT industry. If you qualify, you could benefit from 0% Corporate Tax and 0% VAT on sale of software to foreign clients. You can read more about the Virtual Zone Status in our linked guide.
Choose Your Business Structure
Because each business form comes with different tax consequences, you will want to make your selection wisely and choose the structure that most closely matches your business’s needs.
General information might be enough to get started thinking about your business setup, but individual nuances and requirements within each business type mean it’s worth discussing your exact situation with a tax advisor prior to deciding how to proceed. Mistakes in the initial setup phase can lead to unexpected tax implications later on.
We can help you identify future problems and avoid them. Book a free tax consultation.