Legal Insights with Klein Law: The Ease of Setting Up a Company in Georgia

Setting up a company is an exciting endeavor that requires careful consideration of various factors, including the business environment and ease of incorporation. Georgia has emerged as an attractive destination for entrepreneurs and investors due to its favorable business climate and streamlined processes. Georgia’s economy grew at a record rate in the past 12 months, making it one of the fastest growth rates in the world. Especially as concerns the IT sector, growth figures in this sector have spiked in recent years, coupled with an explosion of IT education programs. In addition to these two factors, there are several types of government incentive program to assist both foreign IT and non-IT companies invest in Georgia (more on this in our next column). In this article, we will explore the ease of setting up a company in Georgia, elaborate on different types of legal entities, and highlight the key advantages it offers to aspiring entrepreneurs, as well as for companies looking to establish a presence abroad.

Simple and Efficient Registration Process
Georgia has implemented a simplified and efficient company registration process. Entrepreneurs and foreign corporations can establish a company in as little as one day, allowing for swift business initiation.

One-Stop-Shop Service
Georgia’s National Agency of Public Registry provides a convenient one-stop-shop service for company registration and opening a bank account, as three of the biggest banks have large branches on site. Entrepreneurs can save time and effort by accessing these services under one roof, streamlining the administrative tasks associated with starting a business.

Transparent Business Environment
Georgia has made significant strides in fostering a transparent and business-friendly environment. The country has implemented comprehensive reforms to combat corruption and promote accountability. The World Bank’s Ease of Doing Business Index consistently ranks Georgia among the top countries in terms of ease of doing business, highlighting its commitment to providing a transparent and reliable regulatory framework.

Low Bureaucratic Hurdles and Minimum Capital Requirements
Georgia has minimized bureaucratic hurdles and abolished minimum capital requirements for company formation; hence, zero capital is required for setting up an LLC. Entrepreneurs and companies can start their businesses with minimal financial resources, allowing for greater flexibility and reduced financial barriers to entry. This approach encourages innovation and entrepreneurship, attracting both local and foreign investors. Moreover, winding down a company is also streamlined and easy compared to most countries.

Favorable Taxation System
Georgia boasts a favorable taxation system, which further enhances its attractiveness as a business destination. The country has a low corporate income tax rate of 15%, and a simplified tax code that minimizes complexities for businesses. Additionally, Georgia has signed numerous double taxation avoidance treaties, providing further incentives for international business ventures. Georgia’s 18% VAT applies for invoicing only once revenues reach $40K. This is a way to give very young companies an advantage over their competitors.

Different Types of Legal Entities
When setting up a company in Georgia, entrepreneurs have several options in terms of legal entities. The most common types include:
• Limited Liability Company (LLC): Offering limited liability protection and operational simplicity, an LLC requires a minimum of one shareholder and can engage in various industries.
• Joint Stock Company (JSC): Suitable for larger businesses, JSCs raise capital through public offerings or private placements. They require a minimum of two shareholders and have a complex organizational structure with supervisory and management boards.

Branch Office
Foreign companies can establish a branch office in Georgia, serving as an extension of the parent company and subject to local laws and regulations.

Representative Office
Similar to a branch office, a representative office focuses on non-commercial activities, such as market research and promotion, without engaging in profit-generating activities or entering commercial contracts.

Sole Proprietorship
Operating as a sole proprietorship offers simplicity, but the business owner has unlimited liability for the company’s debts and obligations.

Georgia has established itself as a very attractive destination for entrepreneurs and foreign companies establishing a local presence. With its simple and efficient registration process, one-stop-shop service, transparent business environment, low bureaucratic hurdles, favorable taxation system, and access to regional markets, Georgia provides a conducive ecosystem for business growth and innovation. Foreign corporations and aspiring entrepreneurs can take advantage of these benefits and choose from different legal entity options to boost their business.