Registration of an individual enterprise in Georgia

The legal framework governing individual entrepreneurship enrollment in Georgia will be reviewed in this text, along with the essential steps and prerequisites for starting individual entrepreneurial activity. Aspects of finance and levies, the entrepreneur's legitimate protection and obligations, investment options, and company growth potential in this area will all be covered.

The purpose of this material is to provide precise and valuable information required for the effective registration and management of a business in Georgia, offering future entrepreneurs a primary guide for launching and expanding their ventures in this country.

General information about individual entrepreneurship

Establishing a sole proprietorship (individual entrepreneurship) is one of the options for conducting business activities, which can be founded and managed by a single person. This implies that the entrepreneur who established it simultaneously becomes the sole founder and owner of the enterprise.

In Georgia, this particular legal structure is empowered to conduct a broad spectrum of business and entrepreneurial activities within the bounds of existing laws. It enables individuals to quickly initiate operations without having to undergo the registration process required for entities like JSCs and LLCs.

Characteristics and differences between individual entrepreneurship and other business framework in Georgia

Individual entrepreneurs in Georgia have a number of distinctive features in comparison with other types of business, such as LLC or JSC:

1. Sole Founder. Unlike an LLC, which can be established by multiple individuals or legal entities, a sole proprietorship is formed by a single founder.
2. Ease in formalities. Becoming a sole proprietor in Georgia requires a minimal amount of paperwork, greatly speeding up and simplifying the procedure.
3. Personal liability. An identifiable characteristic is that the proprietor of a sole proprietorship bears personal responsibility for debts, in contrast to limited liability entities where liabilities are confined to the extent of the owners' investments.
4. Streamlined accounting practices. In contrast to larger corporate entities, individual entrepreneurs encounter more straightforward requirements for record-keeping and reporting.

Investment attractiveness of Georgia

The Republic of Georgia, with its strategic positioning between Asia and Europe, serves as a pivotal commercial hub owing to its advanced transportation infrastructure, encompassing Black Sea ports and modern transport corridors. This facilitates seamless access to global markets and fosters the country's economic growth.

Georgia is also famous for its efficient business processes and low bureaucratic obstacles. In 2023, the nation was placed 7th in the global Doing Business index, indicating a high evaluation of its business environment and entrepreneur-friendly atmosphere.

Fiscal measures also enhance Georgia's appeal for business ventures. The corporate tax rate is fixed at 15%, among the lowest worldwide. Furthermore, an uncomplicated and consistent fiscal framework for sole proprietors and small enterprises decreases the tax load and streamlines accounting processes.

Important aspects for investing in Georgia include the stability of the economic and political environment. The state actively implements economic reforms aimed at improving conditions for capital investment and supporting business growth.

Advantages of launching an individual entrepreneur in Georgia for foreign investors

Engaging in individual entrepreneurial endeavors in Georgia presents a highly appealing opportunity for both local and international businesspeople. The primary benefits for non-citizens are as follows:

• Accessibility for global capital The country actively expands its economy, stimulates the inflow of foreign investments, and provides businessmen from various countries with equal conditions and government support.
• The investment attractiveness and stabilityThe authorities of Georgia are working on improving the investment environment, ensuring political stability and predictability of legislation.
• Reduced administrative requirements In Georgia, private entrepreneurs benefit from simplified accounting and reporting standards, enhancing business management efficiency and reducing administrative costs.
• Preferential fiscal regime Georgia offers a preferential fiscal regime with favorable tax conditions for private entrepreneurs, including competitive profit tax rates and a straightforward tax policy framework, making this jurisdiction conducive to investment.
• There are no requirements for a minimum charter capital Commencing entrepreneurial activities in Georgia can be initiated without initial capital, reducing startup investments.
• Access to European and regional markets Due to its strategic location, Georgia leverages the benefits of free trade agreements with numerous countries, ensuring access to key markets in Europe and the region.

For registering as a private entrepreneur in Georgia, there is also the possibility to obtain residency permits and resident cards upon reaching a turnover of 50,000 GEL (approximately 16,500 EUR). This rule has been in effect since August 2019.

Legislation regulating the registration and operation of individual entrepreneurs in Georgia

The regulatory acts defining the procedure for enrollment and functioning of individual entrepreneurs in Georgia are based on the "Law of Georgia on Entrepreneurs", which provides the legal framework for registering and conducting activities of individual entrepreneurs in this jurisdiction. This law establishes basic norms concerning registration, functioning, and termination of entrepreneurial activities.

By law, entrepreneurial operations encompass any economic activity undertaken for the purpose of profit generation. This concept encompasses a broad spectrum of commercial and entrepreneurial actions, which may include both commodity operations and service provision.

In addition to the main legislative act, there are a number of administrative regulations and normative documents that detail and specify the processes and criteria that entrepreneurs must comply with when registering and conducting their business operations. These documents include, for example:

1. According to the "Law of Georgia On Accounting, Reporting, and Auditing", rules are established for maintaining accounting records, preparing financial statements, and submitting them to tax authorities. Such rules are critical to ensuring transparency of economic transactions and fulfilling fiscal obligations.
2. The Tax Code of Georgia specifies tax rates, features of taxation for various types of businesses, as well as exemptions and exclusions from tax payments for individual entrepreneurs based on their activities and status.

These legislative documents together establish a robust legal framework, fostering a conducive business environment in Georgia and safeguarding the interests of both businesses and state interests.

Legal and administrative conditions for registering an individual entrepreneur in Georgia

Registration of a private entrepreneur in Georgia constitutes a significant milestone in launching one's own business. Coordination with the National Agency of Public Registry, which is under the direction of Georgia's Ministry of Justice, is a requirement of this procedure.

According to Georgia's normative legislation on individual entrepreneurship registration, a natural person may only be considered an individual entrepreneur if their business has been officially registered. Before this point, the founders are personally liable for any activities they do on behalf of the future business.

To effectively enroll a sole proprietor in Georgia, the subsequent requirements must be satisfied:

1. The legal address. An entrepreneur must specify a legal address in Georgia for official correspondence purposes. It must be officially registered and acknowledged as appropriate for conducting business. Additionally, registering as a sole proprietor in Georgia requires submitting a notarized duplicate of the lease contract for the premises.
2. Phone number and email address. Often required for official notifications and communication with governmental entities.

There are no requirements in Georgia for the minimum amount of capital required to register a single proprietorship. A sole proprietor does business as an individual and is not required to set up an authorized capital, unlike corporate organizations such as limited liability corporations or joint stock companies.

One advantage of registering an individual as an entrepreneur in Georgia is the ability to launch a company with minimal initial funding and without the requirement to demonstrate capital before beginning operations. Although there are no prerequisites for a minimum share capital, individual entrepreneurs bear personal liability for their debts. This means that in case of financial difficulties, their private property may be used to settle the enterprise's financial obligations.

It should be understood that under the registration of an individual entrepreneur in Georgia, specific types of activities are not permitted, including specialized or licensed services such as gambling, financial, legal, and accounting services.

These conditions are standard for registering the status of an individual entrepreneur and may vary depending on the specifics of the business. Upon successful registration, the entrepreneur is issued permission to engage in commercial activities, confirmed by an official extract from the state register.

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Procedure for registering an individual enterprise in Georgia

Registering an individual as an entrepreneur in Georgia is a pivotal step in commencing legitimate commercial activities. This procedure entails several sequential steps:

A notable aspect of the legal structure allows for the remote registration of a sole proprietorship in Georgia or the opening of an account at a Georgian bank. To initiate the establishment process remotely, you must provide a notarized power of attorney that has been apostilled, granting authorization to perform required actions on your behalf.

After successful entrepreneur registration, automatic tax registration is conducted, assigning the entrepreneur a Tax Identification Number (TIN). This enables all financial operations and accounting to be conducted in accordance with legislation.

The time required to process paperwork and obtain a sole proprietor registration certificate in Georgia varies depending on several factors, including the chosen method of document submission (electronically or in person) and the current workload of the registration authorities.

Registration of an individual as a sole entrepreneur in Georgia through service centers or at the registrar's office can take from one to several business days. Typically, if the documents fully comply with the requirements and there is no need for additional references or clarifications, the registration process takes no more than three business days.

When utilizing electronic means of communication (via the official government services portal), the registration process may take from several hours to one business day. The electronic system is designed to expedite and streamline the submission and review of documents.

This process is relatively straightforward and does not require significant initial investment, making Georgia an attractive country for entrepreneurial activity. However, potential entrepreneurs are advised to seek the support of experienced consultants from YB CASE to ensure full compliance with local legislation and optimal utilization of available tax regimes.

Rights and obligations of a private entrepreneur in Georgia

Since registration, an entrepreneur in Georgia assumes all rights and responsibilities stipulated by the legislation and bears personal liability for obligations arising from their activities. These privileges and obligations aim to ensure the legality of operations, tax transparency, and compliance with consumer and business rights.

Rights of an individual entrepreneur in Georgia:

1. The right to conduct commercial activities. After registering as a private entrepreneur in Georgia, the entrepreneur gains the right to conduct commercial activities in accordance with the country's legislation and registered operational directions. This includes the right to enter into contracts, sell goods or services, participate in auctions, and engage in any other types of commercial activities provided by law.
2. The right to hire employees. An entrepreneur has the right to engage workers for the execution of work within their business, including the authority to enter into employment contracts, establish terms of employment, and ensure compliance with labor legislation in Georgia.
3. The right to issue licenses for commercial activities. Individual entrepreneurs have the right to acquire necessary licenses and permits for conducting specific types of commercial activities as required by Georgian legislation. This may encompass licenses for the sale of specific goods, provision of particular services, or execution of specialized tasks.
4. The right to participate in government business support programs. Individual entrepreneurs in Georgia have the right to participate in various state business support programs provided by governmental or municipal authorities. These programs may encompass financial assistance, tax incentives, advisory services, and other measures aimed at stimulating and developing the business climate in the country.

Responsibilities of an individual entrepreneur in Georgia:

1. Tax liabilities. In Georgia, individual business owners are required to register with tax authorities and submit regular tax payments based on the nature and extent of their operations.
2. Accounting. Entrepreneurs are required to maintain accounting records of revenues and expenses, as well as other documentation mandated by legislation.
3. Responsibility for obligations. Individual entrepreneurs bear personal liability for their obligations, including debts and credits, which may affect their personal assets.
4. Social contributions. Entrepreneurs are required to independently make contributions towards social security, entitling them to benefits such as pension provision and medical insurance.

Anyone intending to become an individual entrepreneur in Georgia must be aware of and comprehend their rights and obligations. This will aid not only in successful business operations but also in avoiding potential legal infractions and financial risks.

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Taxation for Georgian individual entrepreneurs

Georgia's individual entrepreneur tax system is meant to be flexible and accommodating to small and medium-sized businesses. Tax obligations for sole owners include income tax, property tax, VAT, and social security contributions. On the other hand, they can minimize their tax responsibilities based on the particulars of their operations thanks to various tax advantages and the option of standard or simplified tax models.

Main taxes applied to individual entrepreneurs

Georgia's tax system for sole proprietors aims to offer ease and adaptability for small and medium-sized enterprises. Sole proprietors bear various tax responsibilities, including social contributions, property taxes, VAT, and income tax. However, depending on their business specifics, they can also benefit from specific tax incentives and choose between standard and simplified tax regimes, which provide opportunities to reduce tax liabilities.

In Georgia, the tax regime provides significant exemptions for residents whose income does not originate from domestic sources. Such income is completely exempt from taxation, making Georgia attractive for international investors and freelancers working with overseas clients.

In Georgia, there are also tailored tax advantages aimed at supporting small businesses. Those with an annual revenue below 30,000 GEL (approximately $10,000) and no staff members are eligible to enroll as micro enterprises. By doing so, they are fully exempt from income taxes related to their business activities, which aims to foster the development of entrepreneurship and self-employment during initial phases.

For individual business owners making up to 500,000 GEL annually (approximately 165,000 USD), there exists an opportunity to register as a micro enterprise. This provides a reduced income tax rate of just 1% of earnings, thereby lowering the tax burden. However, exceeding this revenue threshold results in a higher tax rate of 3%, intended to foster further business expansion.

In Georgia, entrepreneurs can register as individuals and recruit staff. This leads to new tax requirements, such as an employee income tax of 20%. An extra 2% pension contribution is applied if the worker resides in Georgia; the remaining 2% is paid by the worker. The minimum pay is not specified. The number of staff is unrestricted.

In Georgia, the VAT rate stands at 18%. This tax is applicable to the majority of products and services. Sole proprietors must enroll as VAT taxpayers if their revenue surpasses 100,000 GEL (around $330,000) within the previous year.

In Georgia, individual business owners who possess real estate or other valuable assets used in their activities must remit property taxes. This levy applies to diverse kinds of property and involves particular details depending on the nature of the asset and its geographical position.

Property tax (except land)

Inhabitants of Georgia with yearly household incomes exceeding 40,000 GEL (approximately $13,000) are required to pay property taxes. Taxable assets include:

• People who possess real estate, such as properties acquired through lease agreements from non-residents and leased to others, must pay property taxes ranging from 0.05% to 1% of the property's current value. These tax rates differ based on the property's location and classification, generally being higher in major urban centers than in rural regions.
• Yachts, speedboats, aircraft, and choppers. This levy is assessed according to the vehicle's cost and unique attributes. Fees can vary significantly and are customized, considering the opulence and rarity of these means of travel.
• Passenger cars manufactured after 2018 are subject to taxation. The tax tariff depends on the engine size and can range from 0.5 GEL for each cubic centimeter of engine volume to 1.5 GEL for each cubic centimeter for more powerful cars.

Property tax on land

Individuals are required to pay a tax on land owned or used by them as of April 1 of the tax year. This tax covers:

• Lands owned by individuals.
• State lands that are used or owned by individuals.
• Land plots owned or used by individuals registered as the property of the deceased, except in situations where the land is used under a lease agreement or similar contracts.

Generally, land tax rates are set by local authorities and might change based on the land's classification, location, and planned use. These rates, which vary from 0.01% to 0.3% of the land parcel's cadastral value, are often less than taxes on other kinds of property. Real estate taxes, including those on individual land parcels, must be paid by individuals by November 15 of the current year.

Georgia is a state that has concluded contracts with the European Union, such as the Deep and Comprehensive Free Trade Areas, enabling unhindered commerce in this sector. The country has also entered into double taxation agreements with 55 world states, including European nations, creating unique conditions for foreigners intending to establish a personal business enterprise in Georgia.

Bookkeeping and filing tax returns for individual entrepreneurs in Georgia

In the Republic of Georgia, keeping financial records and submitting tax returns are obligatory processes for sole proprietors. These obligations play a critical role in ensuring business transparency and compliance with tax legislation. Below are the critical factors that solo entrepreneurs must consider when arranging their accounting and tax reporting in this location.

Basics of accounting for individual entrepreneurs

1. The first step for individual entrepreneurs is to develop and apply an accounting policy that corresponds to the specifics and scale of their operations. This includes selecting an accounting method (cash or accrual), as well as defining procedures for revenue and expense recognition.
2. All financial transactions must be systematically recorded. This includes all income, expenses, tax payments, and debts and accounts payable.
3. Each transaction must be supported by relevant documents, such as invoices, cash receipts, contracts, bank statements and other relevant papers.
4. Regular inventory counts help maintain accurate accounting records, especially for physical assets and inventories.

Submission of tax returns

In Georgia, the tax cycle commences on January 1 and concludes on December 31, aligning with the calendar year. Consequently, all tax operations within the year are encompassed within the reporting period specified.

The income tax return should be submitted to tax authorities by the following groups of individuals:

1. Inhabitants of Georgia, along with international individuals possessing tax residency, who earn revenue not liable to withholding tax, must declare and pay taxes independently if the income wasn't automatically taxed when received.
2. Non-residents. Persons who do not reside in the territory of Georgia, but receive income from sources within the state, which are also not subject to withholding tax. Such income may include rental payments, business profits and other types of revenue.

Capital gains tax

Beginning on January 1, 2024, the tax on capital gains from the sale of property or other assets in non-entrepreneurial activities will be reported on a monthly basis. The 15th day of the month after the transaction month is the deadline for remitting the levy. For the purposes of these kinds of transactions, every month is regarded as a distinct tax period.

Payment of tax for individual entrepreneurs

4 times a year, individual entrepreneurs should make projected payments of personal revenue tax. The following is how these payments are allocated:

• Until May 15;
• Until July 15;
• Until September 15;
• Until December 15.

These payments are provisional and must correspond to the expected annual tax liability based on the entrepreneur's revenue.

In addition to reducing financial fines and legal dangers for private business owners in Georgia, correct accounting and tax compliance also yield important data for planning and analysis of the company. Optimizing tax burdens and improving financial performance are made possible by effective financial management.

Opening a bank account for an individual enterprise in Georgia

In the Republic of Georgia, a bank account for an individual entrepreneur plays a crucial role in financial management and compliance with legislative requirements. Opening a bank account for an individual entrepreneur in Georgia allows for clear separation of personal and corporate finances, which is a pivotal aspect in the business environment. It facilitates financial management, enhances control over fund circulation, streamlines accounting and reporting, and ensures adherence to fiscal obligations.

Process for opening a bank account:

1. Selecting a bank. An entrepreneur chooses a bank that offers suitable conditions for opening an account, such as commissions, terms of service, access to online banking and other financial instruments.
2. Filing an application. An entrepreneur files an application to establish an account, providing the necessary documents, including an identity card, a certificate of enrollment of individual entrepreneurs and other papers required by the bank.
3. Getting approval. After checking the provided documents, the bank makes a decision on the possibility of opening an account.
4. Preparation of documents. The businessman signs the necessary agreements and registers papers to create a current account.

Criteria for creating a bank account:

• Entrepreneur ID.
• Certificate of enrollment of an individual entrepreneur.
• Sometimes additional papers may be necessary, based on the strategy of a particular bank.

In Georgia, there are some renowned banks offering a wide range of services and conditions for establishing financial accounts, catering to individuals, enterprises, including sole proprietors. Here are some of them:

• TBC Bank ‒ one of Georgia's largest banks, offers an extensive range of banking services, including various types of accounts, lending, and investment products. TBC Bank actively engages with enterprises and provides convenient tools for internet banking.
• Bank of Georgia: known for its creative banking methods and first-rate client support, Bank of Georgia is a prominent financial organization that provides a wide range of banking amenities, especially corporate accounts.
• Liberty Bank ‒ offers a wide range of services, encompassing current accounts for organizations and private entrepreneurs, credit issuance, and investment propositions. Liberty Bank is also recognized for its accessibility and convenience of online banking.
• VTB Bank Georgia ‒ part of the international financial group VTB, offers a broad range of banking services for businesses and individuals, including accounts, lending, insurance, and investments.

These financial institutions are leaders in the banking market of Georgia, offering diverse terms and tools for establishing and managing business accounts. When choosing a bank to open a current account, it is crucial to consider not only the service conditions but also the bank's reputation, data protection level, and quality of customer service.

Opening a bank account for an individual entrepreneur in Georgia has become a necessary requirement to comply with tax legislation and business administration. This step enables effective financial control and fosters a conducive environment for commercial development and expansion within the state.

Processes for liquidation or reorganization of individual entrepreneurs in Georgia

Businessmen often face situations where they need to make decisions about closing their current operations or restructuring them. In Georgia, the procedures for liquidation or reorganization of individual entrepreneurs represent lawful and structured processes, ensuring not only the closure or reformatting of the business but also the protection of the interests of all stakeholders.

Liquidation of individual entrepreneurs

The procedure for terminating an individual entrepreneur's activities in Georgia entails ceasing its operations and must be conducted in accordance with legislative rules to eliminate all obligations and legal relationships.

1. Resolution on liquidation. The owner of an individual entrepreneur makes a decision to liquidate, which can be caused by various reasons, including economic difficulties, a change in business strategy or personal circumstances.
2. Drawing up a liquidation act. The owner draws up a liquidation act, which should contain data about the reasons for liquidation, a list of assets and liabilities of the enterprise, an estimate of their value and the expected time frame for completing the liquidation.
3. Decision to appoint a liquidator. An individual or a legal entity authorized to carry out liquidation in compliance with the law may be appointed as a liquidator.
4. Notification of interested parties. The owner must notify all interested parties that the liquidation process has begun, including customers, suppliers and government agencies.
5. Sale of assets and repayment of debts. The liquidator sells the assets of the enterprise to pay debts to creditors and fulfill contractual obligations.
6. Removal from the register. Upon completion of liquidation, the sole proprietor is removed from the list of tax and registration authorities.

Conclusion

In conclusion, it should be noted that registering individual commercial activity in Georgia represents a significant legal step for anyone seeking to start their own business in this country. The Georgian economy offers attractive conditions for entrepreneurs due to its light and transparent regulation, minimal bureaucratic procedures, and tax tariffs.

Enrolling an individual entrepreneur in Georgia offers businessmen the advantage of expedited commencement and operational flexibility. Of particular appeal is the minimum time commitment required for registration, which is accessible to foreign investors.

The importance of YB CASE in supporting the registration of individual entrepreneurs in Georgia

YB CASE performs a crucial role in facilitating the process of registering an individual entrepreneur in Georgia. The firm provides comprehensive legal services aimed at supporting clients at every stage of registration, starting from consultations on organizational form selection to the submission of documents and obtaining necessary permits.