There are many forms a business can take in Georgia, but the most popular one isthelimited liability company. Along with this, an investor may choose to open a joint stock company or can create a partnership (general or limited). Regardless of the company type selected by the investors, our team of consultants in company registration in Georgia can provide legal assistance on the incorporation of any of the Georgian legal entities and can put you in touch with our immigration lawyer if you are interested in moving to this country.
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What are the main legal entities available in Georgia?
The commercial legislation prescribes a wide range of business forms that can be found in countries across the world. The main legal act which prescribes the types of Georgian business forms is the Law of Georgia on Entrepreneurs; this act stipulates the fact that foreign businessmen have the same rights ofestablishing a business form as the local investors. The main types of companies that can be set up here and which can be presented on an extensive basis by our team of specialists in company registration in Georgia are the following:
- • the joint stock company – incorporated by large companies operating in Georgia;
- • the limited liability company – the most suitable business form available for small and medium-sized companies;
- • the general partnership – it is formed by at least two partners, one who has limited liability and the other one who has full liability for the company’s debts;
- • the limited partnership – all the partners bear the same level of responsibility towards the company’s debts;
- • the cooperative – it is set up with the purpose of increasing the members’ profits and to represent their business interests;
- • the individual enterprise – addressed only to natural persons who want to develop an individual business.
Beside these business forms, the legislation in Georgia also prescribes the possibility of opening a branch office or a subsidiary. The branch office does not represent a separatelegal entity, as it is considered a sub-division of the parent company; in the case of a subsidiary, it must be incorporated under one of thebusiness entitiesavailable here (generally, it is set up as a limited liability company).
A business in Georgia may also be set up through a joint venture. The joint venture is generally designed for infrastructure projects or other similar, large investments and it is formed through the association of at least two entities, with the purpose of accomplishing a specific business task. Once the company accomplished its business objective, the joint venture will be closed down.
Incorporation of a limited liability company in Georgia
A Georgian limited liability company can be incorporated with minimum one shareholder and a maximum of 50. The capital is divided into shares and each shareholder has the rights limited by the value of his/her shares. The members are not personally liable for the company’s debts and this is why this company type represents one of the most common ways to start a business here.
The number of directors is not limited; a company of this type can be managed by several directors. All daily decisions are taken by the director or by a board of directors and the major decisions are taken by the general meeting of the shareholders. If a director is causing damages to the shareholders, than he/she is personally liable for the losses.
No minimum share capital is required for this type of company; however, an authorized capital is necessary before starting the business. The members are free to choose an amount for the capital. The procedure for company registration in Georgia for this company type can be completed in a period of two days.
We can also help you start a business in Costa Rica with the help of our local partners.
Formation of a joint stock company in Georgia
Investors who want to open a company in Georgia as a joint stock company must know that they can have the possibility of registering the company’s shares with the Georgian Stock Exchange. It can be registered by one founder and the shareholders are not personally liable for the company’s debts.
It is not necessary to subscribe a minimum share capital, as there aren’t any requirements in this sense, but the company needs an authorized capital, which can be established by the company’s shareholders. It is not necessary to pay the contribution at the time of registration. Also the contributions in kind are possible. If the number of shareholders exceeds 50 members, they have to be registered by an independent register, if not, the evidence is kept by the company itself.
All the major decisions are taken by the general meeting of the shareholders, but every daily decisions are taken by a director or a board of directors. A supervisory board is appointed if the shares are registered on the stock market, if the number of shareholders exceeds 100 members or if it is licensed by the Financial Monitoring Agency. The minimum number of members of the supervisory board is four and the maximum number is 21.
Types of partnerships in Georgia
A general partnership is based on an agreement between two or more partners, performing business under the same name, personally liable for the debts and incomes of the partnership. All the partners may take management decisions; our team of specialists in company formation in Georgia can provide more information on the Georgian partnerships.
A limited partnership is formed by two or more persons with different roles in a company: there is a general partner (who has unlimited liability) and there is the silent partner (his or her liability is limited in the extend of his contribution). The management decisions can be taken only by the general partners. Please note that a partnership can also be liable for VAT registration in Georgia.
Register a branch office in Georgia
Foreign and local businesses can expand on the Georgian market through a branch office. As mentioned earlier in this article, the branch office is not a separate legal entity and it simply represents a sub-unit of the parent company operating int his country or in a foreign jurisdiction.
This business model can be used by companies interested in holding the control of their other business locations, as the branch office is not entitled to take its own management decisions, nor can it develop other business activities than the ones of the parent company.
Investors who are interested in setting up a branch office should also be aware that any debts the branch may have in Georgia will need to be paid by the parent company, as the parent company holds full liability and this can be seen as a disadvantage. For a complete presentation on the benefits and the disadvantages of the branch office, our team of consultants in company registration in Georgia remain at your disposal and can also help you incorporate this company type here.
The registration of the branch office does not necessarily require the presence of the company’s founders in Georgia throughout the incorporation formalities. Through the power of attorney, the investors can be represented by specialists in company formation in Georgia, who can complete the entire procedure.
When opening a company in Georgia as a branch office, the investors should prepare the following documents: personal identity documents, the registration certificate of the parent company issued in the country where the company was incorporated, the decision to establish a branch in this country, signed by the authorized person representing the parent company and other specific documents.
Even though the branch office is not a separate legal entity, the commercial legislation requires this entity to have a separate corporate bank account, which can be set up in the Georgian currency or in a foreign currency. Here, the local banks will require additional documents compared to the ones necessary for those registering a limited liability company or a joint stock company.
We invite you to watch a short video about the types of companies you can open in Georgia:
What should an investor know on the registration process in Georgia?
The procedure for opening a company in Georgia is not too complex and it follows the same steps that can be found in other jurisdictions, such as Finland. For this purpose, the investors should prepare a set of documents that have to be verified by the local authorities. Some of the main aspects involved in the registration of a company in Georgia are the following:
- • notarizing various company documents following the Hague Convention (Georgia is a member state and documents can be authenticated through this option);
- • obtaining specific business licenses and permits, depending on the company’s object of activity;
- • submitting the company documents with the Public Registry of Georgia;
- • foreign investors must also verify the conditions for obtaining a business visa or for residence permits;
- • verify the necessary capital requirements, which can vary depending on the selected company type;
- • provide the power of attorney to our team of consultants in company formation in Georgia, who can represent investors in a set of registration procedures.
Besides the steps mentioned above, investors have to complete additional company formation procedures that are compulsory when opening a company in Georgia. One of the main steps that must be completed during this procedure is to draft and sign the company’s statutory documents (the articles of association and memorandum in the case of corporate entities).
All legal entities need to have a corporate bank account that is set up at any commercial bank the investors prefer. When starting this procedure, the bank representatives will require various company documents and personal identity documents. Once the documents are approved, the bank will open a corporate bank account, in which the investors will deposit the minimum share capital, where required.
After the company is registered with the Public Registry of Georgia, investors must also take the necessary steps for the registration with the local tax authorities – companies need a tax identification code and they must also be registered for value added tax (VAT). In order to be able to register a company here, the company’s founders should also have a registered business address that will be used as the headquarters of the company and which must be a physical place for doing business, where the company can receive official documents.
Why start a business in Tbilisi, Georgia?
Investors can open a company in Georgia in numerous economic sectors. The country is open to foreign investments and it has modified its investment policies in order to attract foreign businesses on the local market. The country relies on several economic activities, such as the heavy industry, pharmaceutics, fashion, food and beverages and others. Besides these, Georgia is an attractive investment destination due to the following:
- • in 2018, it ranked as the 1st economy in Europe and Central Asia for doing business;
- • regarding the same index, Georgia stood as the 9th economy at a global level;
- • it is also the 9th European economy on the economic freedom index (and at a global level, the 16th);
- • it also has some of the cheapest cities (3rd place at the level of Central Asia and the 11th at a global level);
- • in 2016, Tbilisi, the country’s capital city, had a workforce of more than 400,000 persons;
- • the average salary paid by a company in Georgia to a local employee is of $450;
- • in 2016, the city had more than 1 million visitors and out of these, more than 800,000 were represented by foreigners;
- • from all the foreign visitors in Tbilisi, more than 270,000 visits were concluded for business purposes.
What are the benefits of company formation in Georgia?
Georgia has improved its international relations with numerous countries by signing various bilateral treaties and this has had a positive impact on the country’s economy and on the number of foreign businessmen interested in investing here. When opening a company in Georgia, businessmen will benefit from the following:
- • the right of purchasing a property through the company set up here (there is a tax of 1% paid from the value of the property at the moment of the purchase);
- • various tax advantages and other benefits deriving from the General Free Trade Agreements signed by the country’s representatives with other countries;
- • low taxes – the corporate income tax is charged at a rate of 15% on the company’s yearly profits and at a rate of 0% for the reinvested profits;
- • foreigners have the right of opening a personal bank account that provides e-banking solutions as well;
- • foreign companies can repatriate 100% of their profits and company capital.
If you need assistance in choosing the type of company you will open, you may contact our agents in company formation in Georgia. Our representatives can assist businessmen with advice on how to open a company in Georgia and can guide foreign businessmen in choosing a suitable company type, based on their available capital and investment plans. If you want to open a company in another country or even move there, we can put you in touch with our local partners who are immigration lawyers.
Please know that regardless of the company type that is of your interest, our consultants can help you throughout the whole registration process. Thus, when you will start a company in Georgia, you can address to our team for any assistance regarding post-incorporation procedures.
For instance, you can rely on us if you want to learn more on the procedures to hire employees.
When you will start a business in Georgia you might also want to hire foreign workforce. If this is the case, our specialists can provide legal assistance on the procedures that you must conclude in order to lawfully bring in the country foreign workers.
For this, visa formalities will most likely be necessary, while the employees must comply with certain minimum requirements.
After you will register your business, you will also need the services of accountants in Georgia. It is mandatory to hire an accountant to handle all the bookkeeping and accounting formalities.
The accountant also has reporting obligations, and other responsibilities set out by the Law of Georgia on Accounting, Reporting and Audit. The law regulates the obligations of both local and foreign businesses.