When launching a business in Georgia, one of the first and most critical decisions you will face is choosing the right legal structure. The two most popular options for foreign founders and local specialists are an Individual Entrepreneur (IE / ინდივიдуальный предприниматель) and a Limited Liability Company (LLC / შპს).

While both structures offer access to Georgia’s business-friendly environment, they serve entirely different business models, risk profiles, and tax strategies. Here is how to determine which one fits your goals.

1. Individual Entrepreneur (IE): Simplicity and Exceptional Tax Perks

The IE structure is designed for solo founders, freelancers, consultants, remote IT professionals, and small service providers.

• Tax Advantages: The crown jewel of the Georgian IE is the Small Business Status (Matirebiuli Stātusi). If your annual revenue stays under 500,000 GEL, your income tax drops to an incredible 1%. If revenue exceeds the limit, a 3% rate applies under specific conditions.
• Easy Management & Withdrawal of Funds: Unlike an LLC, an IE does not need to pay corporate profit tax when withdrawing money. All business revenue is essentially your personal income once received, and you can transfer or withdraw funds freely without extra dividend taxes.
• Liability Warning: An IE has unlimited personal liability. This means your personal assets can theoretically be exposed if the business incurs debts or legal claims. For service-providers with low operational risks, this is rarely an issue, but it is a factor to consider.

2. LLC (Limited Liability Company): Scale, Partnerships, and Asset Protection

An LLC is a corporate entity best suited for businesses with multiple partners, physical goods trading, retail, high-liability operations, or those planning to attract outside investment.

• Asset Protection: Your liability is strictly limited to your share capital in the company. Your personal savings, property, and personal assets remain protected from corporate liabilities.
• The Estonian Tax Model (Reinvested Profits): Georgia operates a corporate tax system similar to Estonia’s. Distributed profits (dividends) are taxed at 5%, while profits left within the company (reinvested into business assets, software, or expansion) are 0%.
• Corporate Complexity: Running an LLC requires a bit more formal bookkeeping, corporate resolutions, formal payroll handling if you hire employees, and clear separation between personal and corporate finances.

Summary: Which One Should You Choose?

• Choose an IE if: You are a solo operator (developer, designer, consultant, marketer, writer) looking for maximum tax efficiency (1% tax) and simple, low-overhead management.
• Choose an LLC if: You are partnering with co-founders, building an e-commerce store with physical inventory, hiring a large team, or want a strict corporate boundary to shield your personal assets.

Making the right choice from day one prevents costly restructuring later. If you are unsure which structure best matches your planned revenue streams and business model, AG Advisory can help you evaluate your options, register the entity, and set up your tax profile properly.