LLC or individual entrepreneur in Georgia: how to choose

A limited liability company (LLC) is a legal entity separate from the people who own it. It enters into contracts, holds assets and owes debts in its own name. An individual entrepreneur (IE) is not a separate entity: it is a natural person registered with the Public Registry to carry on business in their own name.

Both forms are open to foreign nationals without residence in Georgia, and both can be registered remotely by power of attorney. The differences lie in liability, tax, who can take part and how counterparties see the business.

The shareholders of an LLC are, as a rule, not personally liable for the company's obligations: a creditor of the company looks to the company's assets. An individual entrepreneur answers for business debts with everything they own.

Where the business signs significant contracts, employs staff or carries professional risk, limited liability alone is often a sufficient reason to choose an LLC.

An individual entrepreneur is taxed on profit at the general personal income tax rate, unless they obtain small business status. With that status, turnover is taxed at 1% while annual turnover does not exceed 500,000 GEL. The status is not available for every activity: activities that require a licence or permit and certain professional services, consulting among them, are excluded.

An LLC pays profit tax at 15% only when it distributes profit to its owners, and on certain payments treated as distributions. Profit kept in the company and reinvested is not taxed. Both forms must register for VAT once taxable turnover exceeds 100,000 GEL in any continuous twelve months.

For a single professional with an eligible activity and moderate turnover, the 1% status is difficult to improve on. For a business that will reinvest its profit, or whose activity is excluded, the LLC usually wins.

An individual entrepreneur is one person; there are no partners or investors. An LLC can have any number of shareholders, individuals or companies, and a director who need not be a shareholder. If you expect a co-founder, an investor or a sale of the business, start with an LLC.

Banks open accounts for both forms after their compliance review. Larger counterparties, in Georgia and abroad, often prefer to contract with a company, and some require it. An LLC also separates business money from personal money more clearly, which simplifies accounting and audits.

Choose an individual entrepreneur with small business status if you work alone, your activity is eligible, your turnover will stay within 500,000 GEL a year and your liability risk is low. Choose an LLC if you have or expect partners or investors, employ staff, sign significant contracts, will reinvest profit, or your activity is excluded from the status.

There is no direct conversion from an IE to an LLC: moving later means registering a company and transferring the business. Getting the form right at the start saves that step. The official registration fee is 26 GEL for an IE and 200 GEL for an LLC.