Setting up a Georgian LLC (შპს): when it beats the sole trader

Alongside the 1% sole trader, the Georgian LLC (შპს) is the second common structure. It's quick to set up and taxed on the same principle as the Estonian OÜ: profits are taxed only when distributed. This article explains how it works and when it fits better than the sole trader.

What the Georgian LLC offers

• Formation in a day at the Public Service Hall, with no minimum capital and no local partner or director.
• Corporate tax on the Estonian model: 15%, but due only on distribution. Retained and reinvested profit stays untaxed. Distributions between Georgian companies are not taxed.
• That makes the LLC suited to a business that keeps profit in the company and reinvests, much like the Estonian OÜ.

LLC or sole trader?

The decision depends on your activity and whether you take profit out or reinvest it:

• Sole trader with the 1% status: ideal for small, qualifying activities under GEL 500,000 turnover where you take the money out anyway. Very low burden, but tied to the Small Business Status conditions (consulting often falls outside).
• LLC: makes sense when your activity doesn't qualify for the 1% status, when you're over the turnover cap, when you need employees or liability protection, or when you want to keep profit in the company.

The catch: place of management

As with any foreign company: if you effectively manage the Georgian LLC from a high-tax home country, it can become taxable there (a place-of-management permanent establishment), and the Georgian advantage is gone. A Georgian company only makes sense tax-wise with real residency and substance on the ground.

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Sources

• PwC Worldwide Tax Summaries: Georgia (Corporate)
• Revenue Service of Georgia

This article is a general overview, not tax or legal advice. The rules change and depend on your case. Have a specific structure checked by a professional before incorporating.