One of the first decisions every foreigner faces when setting up in Georgia is the business structure: register as an Individual Entrepreneur (IE) or form a limited liability company (LLC). The choice shapes how much tax you pay, whether your personal assets are exposed, and how easily you can bring on partners or scale. This guide breaks down the LLC vs individual entrepreneur Georgia question for foreigners, including the famous 1% small business status, the Estonian-model corporate tax, liability, and IT incentives, so you can pick the right structure with confidence.

At a glance

Feature	Individual Entrepreneur (IE)	LLC
Legal entity	No — you are the business	Yes — separate legal person
Liability	Personal (unlimited)	Limited to the company
Owners / partners	One person only	One or more shareholders
Headline tax	1% turnover with Small Business Status (up to 500,000 GEL/year)	15% on distributed profit + 5% dividend (≈19–20% effective)
VAT	18% once turnover passes 100,000 GEL	18% once turnover passes 100,000 GEL
Bookkeeping	Simple; monthly declaration	Full corporate accounting
IT regimes (Virtual Zone / International Company)	No	Yes
Best for	Solo freelancers, consultants, small service providers	Partners, liability protection, scaling, IT firms

Individual Entrepreneur + Small Business Status (the 1% route)

The Individual Entrepreneur is the simplest way to operate legally in Georgia. Registration is quick, bookkeeping is light, and opening a bank account is generally easier than for a company. Foreigners do not need to be residents or citizens to register an IE.

Its biggest draw is the Small Business Status, which gives you the small business status 1% regime: you pay just 1% tax on turnover up to 500,000 GEL per year, and 3% on any amount above that within the same year. If you exceed the 500,000 GEL cap in two consecutive years, the status is automatically revoked from 1 January of the third year. Declarations are filed monthly by the 15th. There is also a Micro Business Status offering 0% tax up to 30,000 GEL per year for very small operations.

Not every activity qualifies. Small Business Status excludes consulting (tax, legal, financial), legal, notarial and audit services, medical and architectural services, gambling, currency exchange, and any licensed activities. Since 1 February 2025 it also excludes construction (NACE codes 41.2, 42 and 43). If your work falls into one of these categories, the 1% route is off the table and an LLC often makes more sense.

LLC: limited liability and the Estonian model

An LLC is a separate legal entity, which means your personal assets are shielded — liability is limited to what the company owns. It can have one or several shareholders, making it the natural choice when partners are involved or when you plan to raise capital.

Georgia uses the Estonian model of corporate taxation: the 15% profit tax applies only to distributed profit. Profit that is reinvested or retained in the company is not taxed until you take it out, which is a powerful advantage for businesses that grow by reinvesting. When you do distribute, a 5% dividend tax applies on top, giving a combined effective rate of roughly 19–20%. Standard VAT of 18% kicks in once your rolling 12-month turnover passes 100,000 GEL. Note that an LLC cannot use the 1% Small Business Status — that regime is for individuals only.

Tax compared: 1% turnover vs 15% + 5% on distributed profit

The two regimes are taxed on completely different bases, so the comparison is not as simple as “1% vs 20%”. An IE with Small Business Status pays 1% on turnover — gross revenue — regardless of costs. An LLC pays roughly 15% + 5% on distributed profit — what is left after expenses and only when it leaves the company.

For a service business with high margins and low costs (a freelancer or consultant who qualifies), 1% on turnover is almost always cheaper. For a business with significant expenses, or one that plans to reinvest most of its earnings, the Estonian model can be very efficient because retained profit is deferred indefinitely. The right answer depends on your margins, your reinvestment plans, and whether your activity even qualifies for the 1% status.

Liability, ownership and IT incentives

Because an IE is not a separate legal entity, you are personally liable for business debts and obligations, and you cannot bring in shareholders or partners. An LLC limits liability to the company and lets you split ownership, issue shares to co-founders or investors, and structure governance properly.

For technology businesses, only an LLC can access Georgia’s IT incentives. The Virtual Zone status grants 0% profit tax on IT services exported abroad and 0% VAT on those exports, while International Company Status offers a reduced 5% corporate income tax, 0% dividend tax and a low 5% wage tax. These regimes can dramatically lower the tax burden for software and IT-export companies, but they are simply not available to an Individual Entrepreneur.

When each is the better fit

Choose an Individual Entrepreneur if you are a solo freelancer, consultant or small service provider whose activity qualifies for Small Business Status, you want the lowest possible administration, and the 1% turnover tax fits your high-margin work.

Choose an LLC if you have multiple owners, you want liability protection, you are building an IT or software company that can use the Virtual Zone or International Company regimes, you plan to scale or raise capital, or your activity is excluded from the 1% status.

How to decide

Start with three questions: Does my activity qualify for Small Business Status? Do I need limited liability or partners? Will I reinvest most of my profit or take it out as income? If you are a qualifying solo professional taking money out as you go, the IE with 1% is usually unbeatable. If you need protection, partners, IT incentives or room to grow, the LLC is the structure to build on. When in doubt, a short consultation can map your specific activity and numbers to the regime that costs you the least.