LLC vs Individual Entrepreneur in Georgia: Legal and Tax Differences

A Georgian Individual Entrepreneur (IE) and a limited liability company (LLC) are legally different structures. The decision should not be made only by comparing registration speed or headline tax rates.

The core legal difference

NAPR and the Law on Entrepreneurs state that an Individual Entrepreneur is not a legal person. The individual enters business relationships in their own name.

The IE is personally liable to creditors for obligations arising from the entrepreneurial activity with the person's property, subject to the law and any permissible contractual arrangement.

A Georgian LLC is a company/legal person. Article 123 states that the LLC is liable to creditors with its own assets and that partner liability for company obligations is limited.

That distinction is often more important than the filing mechanics.

IE: when the structure may fit

An IE may be suitable where:

• one natural person carries on the activity;
• the personal-liability position is acceptable;
• no equity structure between multiple partners is needed; and
• the tax and regulatory treatment of the actual activity has been checked.

An IE should not be selected simply because the founder expects to obtain 1% Small Business Status.

Small Business Status is a separate tax status with its own eligibility, activity, income, threshold and compliance rules.

LLC: when the structure may fit

An LLC may be more appropriate where:

• there are or may be multiple owners;
• separation between company and personal obligations is important;
• formal shares and governance are needed;
• the business expects investment or transfer of ownership interests; or
• counterparties require a company contracting party.

An LLC may be established by one person, so multiple founders are not required.

Tax treatment is not interchangeable

For a qualifying entrepreneur natural person, Small Business Status can provide a 1% rate on qualifying taxable income, subject to the current statutory rules.

That regime does not apply to an LLC merely because the LLC is small.

An ordinary Georgian enterprise is instead within the corporate profit-tax framework in Articles 97-98 of the Tax Code. The standard profit-tax rate is 15% on the taxable objects defined by the Code, including distributed profit and other specified payments/expenses.

That is not the same calculation as applying 15% to every item of accounting profit each year.

VAT, payroll, withholding, property and other taxes must be checked separately for either structure where relevant.

Registration and address

Both structures are registered through NAPR, but the documents and governance information differ.

NAPR's current rules also require an entrepreneur's legal address to be an actual address in Georgia, with property-owner consent or another right-to-use document required in the circumstances specified by the registration rules.

Do not use the entity choice to disguise the activity

The Law on Entrepreneurs itself distinguishes entrepreneurial activity from certain activities that the law does not treat as business activity by a natural person.

Tax and regulatory classification therefore needs to begin with what the person actually does, not only with the desired legal form.

A practical comparison

Before choosing:

1. identify the real activity;
2. assess personal-liability exposure;
3. decide whether shares, partners or formal governance are needed;
4. model the actual tax rules for that activity and expected distributions;
5. check VAT/payroll/withholding separately;
6. identify licensing or regulatory issues; and
7. plan bank KYC and beneficial ownership.

For an entity-choice and formation review, see Corporate & Business Law or contact TK Counsel.