Types of entrepreneurship in Georgia

Owing to a moderate level of taxation, simple registration and business leading, low cost of bank services, and all-round state support, popularity of Georgia among foreign investors had greatly increased. Many citizens of CIS and neighbor countries consider Georgia as one of the places for making business. The reason is not only the loyal system of taxation; the country offers many advantages for those who wish to start business, e.g. products made in Georgia can be duty-free supplied to markets of Europe and certain other countries. It is also important for most businessmen that Georgia does not participate in the system of automatic exchange of information, which guarantees the high confidentiality of business.

Organizational-legal forms of entrepreneurship in Georgia

Any aspects regarding registration of business in Georgia are regulated by the Law “On entrepreneurship”, which was approved on 28.10.1994. Subject to the Article 2 of this legislative act, economic activity can be performed in the form of:

• solidary responsibility company;
• limited liability company;
• joint stock company;
• cooperative;
• limited partnership;
• sole proprietor.

As shown by statistic on 1 February 2019, the most popular form of entrepreneurship in Georgia among legal entities is limited liability company (41,44%), but still there are more sole proprietors (53,63%):

Regarding prevalence of types of activity, active businessmen give preference mostly to trading (34,09%).

The top place in the rating of attractiveness of regions for business is reasonably taken by the capital of Georgia, Tbilisi. 42,49% of all active legal entities and sole proprietors work here. The second and third places are taken by Imeretiya (13,52%) and Ajaria (10,06%).

Information on companies, entities, and sole proprietors в Georgia can be obtained any time in the Register of proprietor and non-proprietor (non-commercial) legal entities. The register is public and can be accessed 24/7 by anyone. The register address is https://enreg.reestri.gov.ge. Search through the register can be made under the following positions:

• identification or personal tax number;
• name of company;
• type of entrepreneurship;
• email of company.

Registration of legal entities and proprietors в Georgia is made by the National Agency of Public Register, which belongs to the structure of the Ministry of Justice. The Agency enters the information in the register, after which a company, entity or proprietor is considered officially registered. Documents for registration are accepted in Houses of Justice. The procedure itself can be accelerated – the price is 200 lari, and documents for a company will be ready the same day. If you pay 100 lari, documents will be ready the next day. Registration of a sole proprietor is cheaper, 50 or 20 lari, respectively.

Peculiarities of registration of a sole proprietor in Georgia

Sole proprietor is the most common form of business in Georgia. The number of proprietors on 1 February 2019 made more than 96 thousand people. Such high demand of this form of business is explained by simplicity of registration – to become a proprietor, a person should provide only an identifying document and an application.

Still, before addressing the House of Justice for registration as a proprietor, the following should be considered:

• an application shall state two addresses: location of business and correspondence address;
• in its business, a sole proprietor may only use his/her name;
• a non-resident can also be registered as a sole proprietor. He/she should provide the international passport and state in the application: full name, location of the business, his/her personal number, email and correspondence address (different from legal address), as well as date of completion and signature.
• a proprietor is liable before creditors with all his/her property;
• if property at the stated addresses is not owned by him, then rental agreement or notarized consent of the owner is necessary;
• sole proprietors do not pay the income tax provided that they do not use hired labor, and their income for year does not exceed 30 000 lari. If income from business makes 30 000 to 500 000 lari, they should pay the turnover tax in amount of 1%. Where the income is even more, the amount of tax increases to 3%.

The main benefits of this form of business:

• easy registration;
• low taxation.

Among drawbacks are:

• requirement on available legal address (but this is mandatory for any type of business in Georgia);
• responsibility for late fulfillment of obligations is guaranteed by all his property.

Peculiarities of registration of a limited liability company in Georgia

Limited liability company is a company which is only responsible before creditors with its assets, while founders are responsible before each other only with their shares of capital. One person can be a participant of LLC.

Due to easy registration and absent requirements to the amount of capital, such form of business is the most popular among legal entities in Georgia. Moreover, the applicable legislation does not prohibit non-residents to participate in establishment of limited liability companies.

Nevertheless, sole proprietors who wish to register LLC also should provide the available legal address. In fact, this is a significant obstacle in establishment of a legal entity, which can be easily eliminated. Obtaining the address for registration can be in special companies.

To register a limited liability company, the following is necessary:

• standard application signed by company founders;
• by-law;
• decrees on assignment of directors (one director as minimum);
• constitutive documents (if one of participants of company is a legal entity);
• samples of signatures of company founders.

It should be mentioned that the Georgian legislation does not provide submission of documents verifying the contribution to form the company capital. The bill is only necessary when opening a bank account in a bank.

The supreme management body of LLC is meeting of partners. Please keep in mind that the company capital is divided in shares only once, without the right to issue new shares.

Peculiarities of registration of joint stock companies in Georgia

Joint stock companies are legal entities which capital is formed by issue of securities (shares). JSC is responsible before creditors only with its property; participants of JSC are not liable under its obligations.

The amount of capital of joint stock companies, as in case with LLC, is not limited by law. The register of shareholders should always be filed by an independent registrar, if the number of participants of a company does not exceed 50. If there are less shareholders, a company may file the register independently or use services of an independent registrar.

Participants of JSC should every year, within 2 months after publication of an annual report, hold a general meeting of shareholders, if not provided otherwise by the by-law. Besides, subject to legislation, if the number of participants of the company exceeds 100 a supervisory board should be established, which comprises 3 to 21 members of the company.

Benefits of this form of ownership include:

• company capital can be increased by issue of extra shares;
• names of beneficiaries are not shown in the public register;
• shareholders are not liable under company obligations;
• non-residents can be participants of the company.

Considering complexity of management and big amounts of reporting, this form of ownership can be reasonably used at establishment of big companies. Currently in Georgia 876 joint stock companies are operating. This is the second by popularity form of business among legal entities, but the gap between the number of active LLC and JSC is quite big (74 856 vs. 876).

Peculiarities of registration of solidary responsibility company in Georgia

Solidary responsibility companies are companies where several participants lead commercial activity under one brand name. Responsibility before creditors are born by all participants together with all their assets.

Such active legal entities in Georgia are few, only 231.

The list of documents necessary for registration of a solidary responsibility company is similar to LLC.

Peculiarities of registration of cooperatives in Georgia

A cooperative is a legal entity established with the purpose of satisfying interests of its participants; obtaining income is not its primary objective. Depending on type of activity, cooperatives can be: raw-material, agricultural, or customer.

Responsibility of cooperatives before creditors is limited only by their property. The supreme body of such association is the general meeting of members. If the number of participants of the cooperative exceeds 200, a meeting of representatives is held instead of a general meeting.

It should be also noted that the management of the cooperative should include at least 2 directors, who are elected for 4 years.

A very complicated mechanism of management in this form of business, as well as inability to attract extra financing by issue of shares, stipulate the small number of active cooperatives in Georgia – only 228.

Peculiarities of registration of limited companies in Georgia

Limited companies are companies where partners operate while using one brand name. Participants of a company are divided in two types: full and limited. ПThe first are liable under obligations of a legal entity with all their property, the second – only within their contributions. Limited partners neither participate in management of a company.

The number of limited companies in Georgia is the smallest, only 21.

Peculiarities of registration of branches of foreign companies in Georgia

Branches of foreign companies in Georgia have status of permanent establishments and are taxed under the local legislation.

To register a branch, the following set of documents should be provided:

• application;
• decree on assignment of a manager and his passport;
• information on company and its supervisory body;
• by-law of the parent company;
• permission for establishment of the branch;

A legal address of a branch is the place of its actual location.

Typical peculiarities of legal entities and sole proprietors in Georgia

Georgia attracts businessmen from all over the world and especially from neighbor countries and CIS, due to the absence of red-tape and simplicity of business operations. But before starting a company one should consider the following peculiarities similar in all forms of business:

• mandatory presence of a legal address – must be verified by rental agreement or notarized consent of the property owner;
• documents for registration are submitted in Georgian, therefore it is recommended to bring an interpreter;
• non-residents can register as sole proprietors and can be founders of legal entities;
• no requirements to amount of the authorized capital, it does not have to be verified at registration of a company;
• Georgian taxation is very loyal; it is even more lucrative if a company ire registered in the Free industrial zone or obtained a status of a person of virtual zone;
• company may have several directors. It is recommended to have at least two directors, while one would be a resident speaking Georgian. This will help in negotiations with representatives of state bodies.

Most non-residents, when starting a company in Georgia, choose the LLC form because it optimally suits small businesses and does not require profound reporting. To realize bigger projects, a joint stock company is used more often. If you decided to start a business in Georgia but have doubts about the procedure, please address us at: [email protected]. We will help you not only in starting business in Georgia, but also in making it effective.