What Business Structure to Open in Georgia: IE vs LLC

Choosing what business structure to open in Georgia sets your tax rate, your personal liability and the bookkeeping the law requires. On ₾200,000 of turnover, the same business can owe ₾2,000 in tax under one structure and more than ₾23,000 under another. One person selling services under ₾500,000 a year usually pays the least tax as an individual entrepreneur with Small Business Status. An LLC usually suits a business with co-owners, exposure to claims or profit to reinvest.

Company Types in Georgia: Comparison Table

The Law of Georgia on Entrepreneurs recognises six legal forms. Foreign founders nearly always register one of two, an individual entrepreneur (IE) or a limited liability company (LLC).

IE and LLC are legal forms, registered at the Public Service Hall. Small Business Status, Micro Business Status, Virtual Zone and International Company Status are tax statuses, each applied for separately at the Revenue Service.

Structure	Tax on business income	Limit or condition	Owner’s liability	Bookkeeping
Individual with Micro Business Status	0% of turnover	Under ₾30,000 a year, no employees	No company, held by an individual	Lighter reporting than the monthly declaration
IE with Small Business Status	1% of turnover, 3% after the ceiling is crossed	Under ₾500,000 a year, activity not on the prohibited list	Unlimited, personal	Invoices and receipts only, until a VAT obligation arises
IE without a status	20% of profit, expenses deductible	No ceiling	Unlimited, personal	Full income and expense accounts from the first day
LLC	15% plus 5% dividend withholding on distributed profit, 0% on retained profit	Any legal activity, no ceiling	Limited to the company	Full accounts from incorporation, SARAS reporting by category
LLC with Virtual Zone status	0% on IT products it created and sold outside Georgia	Software production in Georgia, no minimum trading history	Limited to the company	Full accounts, exempt and taxable income separated every month
LLC with International Company Status	5% on profit, 5% on salaries, 0% on dividends	2 years of experience, local substance, 98% of revenue from permitted activities	Limited to the company	Full accounts, other revenue tracked against a 2% cap

Whichever structure you choose, VAT registration is mandatory once taxable turnover goes above ₾100,000 in any rolling 12 months, and the rate is 18%.

Individual Entrepreneur vs LLC Tax: Example on ₾200,000 of Turnover

Take a service business with ₾200,000 of annual turnover and a 60% margin, which is ₾120,000 of profit.

Structure	How the tax is calculated	Tax
IE with Small Business Status	1% of ₾200,000 of turnover	₾2,000
IE without a status	20% of ₾120,000 of profit	₾24,000
LLC, all profit distributed	15% corporate tax of ₾18,000, then 5% withheld from the ₾102,000 dividend	₾23,100
LLC, all profit kept in the company	Nothing is distributed	₾0

For a solo owner who takes out everything the business earns, the IE with the status pays ₾21,100 less than the LLC. The LLC costs less when profit stays in the company, because corporate income tax is charged when profit is distributed, and profit left in the company is taxed at 0% with no time limit.

Which Business Structure to Choose in Georgia: 8 Common Situations

An IE with Small Business Status usually has the lowest tax, but it is unavailable to a business with a co-owner or a prohibited activity. Where more than one of the situations below applies, co-owners, liability and a prohibited activity decide the structure before the tax rate does.

Solo Freelancer Under ₾500,000 Turnover: IE With Small Business Status

An IE with Small Business Status is usually the lowest-tax structure for one person who sells their own services, expects less than ₾500,000 of turnover a year and works in an activity that is not prohibited. The 1% tax is charged on turnover with no deductions, so ₾100,000 invoiced costs ₾1,000. The income also has to count as Georgian-source.

An IE that has only registered pays the standard 20%. The 1% rate needs a second application, for Small Business Status, which the Revenue Service grants.

Turnover Under ₾30,000 With No Employees: Micro Business Status

Micro Business Status taxes turnover under ₾30,000 a year at 0%. It allows no employees, and its list of eligible activities is narrower than for Small Business Status, with ordinary trade and resale restricted more tightly.

Passing ₾30,000 or hiring anyone starts a period of 15 calendar days to apply for Small Business Status. If the application is late, income earned from 1 January of that year until the new status is granted is taxed at 20%. On ₾25,000 of turnover the saving against the 1% regime is ₾250.

Low Margins, Resale or Subcontracting: 1% of Turnover vs 20% of Profit

The 1% is charged on gross turnover, so it costs more when most of the revenue passes through to suppliers. At a net margin of 5% the two taxes cost the same, because 1% of the turnover and 20% of the profit are then the same amount. Below 5%, the 20% rate is cheaper. A reseller with ₾400,000 of turnover and a 3% margin earns ₾12,000 of profit and pays ₾4,000 under Small Business Status, against ₾2,400 as an IE without the status.

Subcontracting has the same effect on the ceiling. An agency that bills ₾600,000 and passes ₾400,000 to subcontractors has crossed ₾500,000 on the full ₾600,000. A business with these numbers should compare an IE without the status and an LLC, because both tax profit and not turnover.

Business With Partners or Investors: LLC Required

An IE always has exactly one owner. It cannot take on a partner, issue shares or raise outside investment. A business with a co-founder or an investor needs an LLC, which can have one or more owners in any agreed proportion and has no minimum share capital.

The standard charter approved by the Ministry of Justice covers a single-owner or evenly split company. Unequal voting rights, investor vetoes or restrictions on selling a stake need a custom charter. A shareholders agreement is a separate private contract between the owners that covers exit, deadlock and disputes, and it is not filed with the registry.

Personal Liability: Individual Entrepreneur vs LLC

An IE is not a separate legal person. Under Article 3(1) of the Law on Entrepreneurs, the owner is personally liable to creditors with all of his or her assets. An LLC is a separate legal person, and liability for its debts is limited to the company.

If the contracts you sign or the staff you employ expose the business to claims, choose an LLC whatever the tax rate. A bank or landlord dealing with a new LLC with no trading history sometimes asks a director or major shareholder to guarantee a first lease or credit line personally, and that guarantee creates personal exposure for that one obligation.

Reinvested Profit: 0% Tax on Profit Kept in an LLC

Corporate tax of 15% and dividend withholding of 5% apply only when an LLC pays profit out. A company that reinvests all of its ₾120,000 of profit owes ₾0 for that year, and one that distributes half owes ₾11,550.

An owner who withdraws everything each year pays 19.25% through an LLC, so the lower tax depends on leaving money in the business. Money in an LLC’s account belongs to the company, and personal spending from it is taxed as a distribution at 15%.

Activities Prohibited Under Small Business Status

Some activities cannot hold Small Business Status at any turnover. Government Resolution No. 415 of 29 December 2010 excludes medical, architectural, legal and notarial services, auditing, consulting including tax consulting, currency exchange, banking, insurance, financial intermediation, gambling and activities that need a licence or permit.

The Revenue Service reads the registered activity code and the wording of contracts and invoices, so work billed as consulting risks exclusion from the status. If your work is on the prohibited activities list, the 1% is unavailable and the choice is between an IE at 20% of profit and an LLC.

Turnover Over ₾500,000: 3% Rate and Loss of Small Business Status

Crossing ₾500,000 in a year does not end Small Business Status. The rate rises to 3% for the rest of that calendar year and returns to 1% on 1 January. Crossing the ceiling in two consecutive years revokes the status from 1 January of the third year, and the business then pays 20%.

It is not settled in published guidance whether a business over the ceiling pays 3% only on the excess or on all of that year’s turnover, so plan for the ₾500,000 turnover threshold before you reach it. An LLC has no turnover ceiling. An IE cannot be converted into an LLC. The switch is a new LLC registration, a transfer of the contracts and the banking to the company, and the closure of the IE.

Virtual Zone and International Company Status for IT Companies

Both IT statuses require an LLC, so an IE cannot hold either. A solo developer with turnover under ₾500,000 usually starts as an IE with Small Business Status.

Virtual Zone status, granted under the Law of Georgia on Information Technology Zones, takes corporate tax to 0% on IT products the company created and sold to clients outside Georgia. The law sets no minimum trading history, headcount or revenue. Sales to Georgian clients, salaries at 20% and dividend withholding at 5% stay under the standard rules.

The Revenue Service has moved toward requiring evidence that the development happened in Georgia. A Virtual Zone company that cannot show it can be asked to restate past filings at 15%, with penalties and interest.

International Company Status, with its tax treatment in Article 23 of the Tax Code, sets 5% on profit, 5% on salaries and 0% on dividends. The applicant has to document two or more years of work in one of the permitted IT or maritime activities, show qualified staff and operating costs in Georgia, and earn no more than 2% of its revenue from outside the permitted list. A new company meets the two-year test only through a partner enterprise that owns more than 50% of its shares or a non-resident enterprise it represents.

A company cannot hold both statuses at once. A separate innovation framework, in force since 2025, adds three more statuses that cannot be combined with either. Published summaries still describe its relief schedule differently, so confirm the rate before relying on it.

Bookkeeping and Filing Requirements for Each Structure

Bookkeeping and filing duties depend on the legal form and the registrations a business holds, and a year with little activity does not reduce them.

• Micro Business Status. Reporting is lighter than the monthly declaration, but it is not a full exemption. Amendments in March 2026 changed procedural details, so confirm the exact filing duty with the Revenue Service.
• IE with Small Business Status. A declaration is due by the 15th of every month, including months with no income. There is no duty to keep formal accounts of income and expenses, only the invoices and receipts behind each transaction. Once a VAT obligation arises, proper accounts of income and expenses are required, and the rate stays at 1%.
• IE without a status. Full income and expense accounts from day one, since a cost can only be deducted if it is documented.
• LLC. Full accounts from the day of incorporation and a corporate tax declaration by the 15th of every month, even when nothing is owed. Every LLC also sits in a SARAS reporting category, and the annual financial statements that category requires are due by 1 October of the following year.
• Virtual Zone and International Company Status. Everything an LLC keeps and files. A Virtual Zone company also records exempt and taxable income separately every month, and an International Company tracks revenue from outside the permitted list against the 2% cap.

An IE or an LLC that buys services from outside Georgia also declares and pays 18% reverse VAT on them, with or without a VAT registration. A first employee adds payroll and pension declarations on the same 15th deadline. An IE taxed at the standard 20% files an annual income tax return before 1 April.

Accounting Cost for Each Business Structure

The price of outsourced accounting depends on how the business is registered. The ranges below are researched market figures and are not our price list.

Structure	Typical market range a month
IE with Small Business Status, not VAT registered, few invoices	Roughly ₾100 to ₾350
IE without a status, full income and expense accounts	Roughly ₾250 to ₾550
VAT-registered IE or simple LLC	Roughly ₾300 to ₾900
LLC with employees, payroll and pension	Roughly ₾500 to ₾1,300
Virtual Zone or International Company Status LLC	Roughly ₾800 upward, often quoted individually

Our own prices are set by transaction count, where one bank statement row, invoice, payment or expense is one transaction. IE accounting for an entrepreneur who is not registered for VAT is on the Lite package, at ₾180 a month for up to 10 transactions, ₾315 for 11 to 30 and ₾495 for 31 to 60. A simple LLC with no VAT registration and no employees pays the same Lite prices for LLC accounting.

VAT registration, employees, Virtual Zone status or International Company Status moves the business to the Business package, at ₾315, ₾495 and ₾855 for the same bands. All package prices exclude 18% VAT, and more than 60 transactions a month is quoted.