When launching a business in Georgia, foreign investors typically choose between two primary legal structures: the Limited Liability Company (LLC) and the Individual Entrepreneur (IE). Each offers distinct advantages in terms of taxation, liability, setup requirements, and ongoing obligations. The best choice depends on your business model, revenue expectations, and whether you plan to operate alone or with partners.
This article provides a detailed comparison to help foreign investors make an informed decision tailored to their business goals in Georgia.
Overview of Business Structures in Georgia
Georgia’s legal system is designed to be simple and foreigner-friendly. Both LLCs and Individual Entrepreneurs can be 100% foreign-owned, and both structures can be registered in as little as one business day. Neither structure requires Georgian citizenship or residency, and the entire process can be completed remotely with a notarized Power of Attorney.
The key differences lie in taxation, liability, and complexity.
1. Limited Liability Company (LLC)
An LLC (შპს / შიდა პარტნიორული კომპანია) is the most common legal entity in Georgia for businesses involving multiple shareholders, planned growth, or those requiring a more formal structure.
Key Features:
- Legal identity separate from the owner(s)
- Can have one or more shareholders (individuals or companies)
- Owners’ liability limited to their capital contribution
- Suitable for a wide range of business activities, including those that need business partners, contracts with government or large clients
Taxation:
- Subject to Corporate Income Tax (15%), but only on distributed profits (Estonian model)
- Reinvested profits are tax-free
- 5% dividend tax when profits are paid to shareholders
- Subject to VAT (18%) if annual turnover exceeds 100,000 GEL or if voluntarily registered
- Must maintain accounting and monthly tax reporting
Setup and Maintenance:
- No minimum capital required
- Charter and registration with Public Registry
- Typically requires an accountant or accounting software
- Ideal for companies seeking credibility, investment, or long-term scalability
2. Individual Entrepreneur (IE)
The Individual Entrepreneur model is popular among solo business owners, freelancers, and small-scale service providers. It offers simplified registration and highly favorable tax treatment for low-to-mid revenue businesses.
Key Features:
- Operates under personal legal identity of the business owner
- Designed for solo operators or single-employee businesses
- Full personal liability for business obligations (unlike LLC)
- Cannot have shareholders or partners
Taxation:
- Eligible for Small Business Status if annual revenue is below 500,000 GEL
- Under Small Business Status:
- 1% income tax on turnover (can increase to 3% if threshold is exceeded)
- No dividend or corporate tax
- 1% income tax on turnover (can increase to 3% if threshold is exceeded)
- Not subject to VAT unless voluntarily registered
- Very low administrative burden; simplified accounting and tax reporting
Setup and Maintenance:
- Fast and simple registration (same-day approval)
- Minimal or no legal/administrative costs
- Ideal for freelancers, consultants, online business owners, real estate agents, or Airbnb operators managing personal property
Key Considerations for Foreign Investors
| Criteria | LLC | Individual Entrepreneur (IE) |
| Legal Liability | Limited to capital invested | Full personal liability |
| Ownership | One or more shareholders | Only one person (no partners) |
| Tax Rate | 15% on distributed profit + 5% div. | 1% on turnover (if under 500,000 GEL) |
| VAT | 18% (mandatory if over 100,000 GEL) | Not required unless voluntarily registered |
| Accounting | Full accounting & reporting | Simplified tax filing |
| Ideal for | Scalable or multi-partner businesses | Freelancers and small operators |
| Setup Time | 1 day | 1 day |
| Registration Cost | ~150–300 GEL | ~20–30 GEL |
| Remote Registration | Possible with Power of Attorney | Possible with Power of Attorney |
When to Choose an LLC
An LLC is recommended for foreign investors who:
- Intend to scale their operations or raise capital
- Want to limit their personal liability
- Plan to have business partners or investors
- Need credibility to contract with larger entities or apply for licenses
- Expect to reinvest profits into the company (tax-efficient due to Estonian model)
When to Choose an Individual Entrepreneur
An Individual Entrepreneur structure is more suitable for:
- Solopreneurs, consultants, and digital service providers
- Airbnb hosts managing one or two personal properties
- Freelancers (IT, marketing, creative services)
- Investors operating under 500,000 GEL annual revenue
- Those seeking minimal bureaucracy and the lowest effective tax rate
Conclusion
Georgia offers flexible, transparent legal structures tailored to businesses of all sizes. For small, service-based operations run by a single individual, the Individual Entrepreneur model offers simplicity and an ultra-low 1% tax rate. However, for investors planning to scale, bring on partners, or reinvest profits into a growing venture, an LLC provides the necessary framework and legal protection.
Choosing the right structure can significantly impact your tax burden, liability, and growth opportunities. It’s strongly recommended that foreign investors consult a local accountant or legal advisor to determine the best option based on their goals and expected revenue.
