Company formation in Georgia: What the law says about it

Georgia follows the "one contact" principle regarding paperwork and state registration for new business entities and company formation. Any business entity, including but not limited to those in the fields of health, safety, environmental protection, gaming, communications, and energy, is open to incorporation. The following business endeavors will require licenses. The Law of Georgia company formation on Licenses and Permits contains a comprehensive list of all licensed activities for company formation in Georgia.

You can create a corporation by signing and submitting articles of incorporation to the Secretary of State. The incorporation articles should specify the company's purpose and the first directors' names and addresses.

The exact corporate name, the number of shares and a class of shares authorized to be issued, a brief description of the type of business the corporation conducts, the names and addresses of the directors until successors are elected, the names and addresses of the incorporators, the principal office address, and the mailing address should all be included in the articles of incorporation.

By submitting Articles of Amendment to the Secretary of State, a corporation's articles may be amended.

Types of companies can be registered in Georgia

1. Sole Proprietorship: This business is owned and operated by a single individual.
2. Partnership: It is a business owned by two or more individuals.
3. Limited Liability Company (LLC): An Limited Liability Company is a hybrid business structure that combines a corporation's liability protection with a partnership's tax benefits.
4. Corporation: This is a separate legal entity from its owners, which limits the owners' liability.
5. S Corporation: An S Corporation has to be taxed under Subchapter S of the IRC (Internal Revenue Code).
6. Nonprofit Corporation: A nonprofit corporation is formed for charitable, educational, religious, or other exempt purposes.

It is recommended to consult with a business attorney or professional to determine the best type of business structure for your specific needs and goals.

What are the prevalent business models in Georgia?

Georgian company formation law recognizes several business structures, including sole proprietorships, joint stock companies, limited liability companies, and cooperatives.

All of these are regarded as legal entities. Still, it should be noted that a sole proprietorship is not considered a distinct business structure because there is no separation between the owner and the company in Georgia.

Steps for a Georgia LLC formation

The requirements and steps for forming a Limited Liability Company (LLC) in Georgia may change. Consult with a business attorney or professional for up-to-date and accurate information.

1. Choose a unique name for your Georgia Limited Liability Company that complies with state requirements. Try to choose a suitable company name.
2. File the Georgia Articles of Organization with the Georgia Secretary of State.
3. You need to create an operating agreement. Although this is not required by Georgia company formation law, it is a recommended best practice to outline your Limited Liability Company's ownership and management structure.
4. Obtain any necessary business licenses and permits for your Georgia Limited Liability Company.
5. Register for Georgia state taxes by obtaining an Employer Identification Number (EIN) from the IRS and registering for Georgia sales tax if applicable.
6. Maintained accurate records of all business transactions and activities.

The Limited Liability Company registration Law on Entrepreneurs also regulates partnership activities. Partnerships can be general or limited in scope.

New Entrepreneurs' Company Formation Law of Georgia

The Georgian Law on Entrepreneurs, passed in 1994, was replaced by the new Law of Georgia on Entrepreneurs, which went into effect on January 1, 2022. The law aims to establish a consistent and open legal entity framework for corporations, their shareholders, directors, creditors, and other stakeholders. Notably, the law is based on the corresponding directives of the European Union. The law establishes new rules from a business perspective, among other novelties.

For instance, a digital portal has been created that enables businesses to publish necessary information, like information on reorganization. Notably, updated rules also apply to business names.

A firm/business name currently being used by at least one other company in Georgia cannot be used by a new legal entity. Regarding the management of businesses, the law makes it abundantly clear that any contracts between a director and the company in Georgia do not constitute employment contracts.

This likely means that the directors should negotiate specific contractual terms with the business and its shareholders because they are not covered by any social guarantees envisioned by the Georgian Labor Code.

The principal novel regulations under the law regarding the company formation and its capital requirements for joint-stock companies (JSCs) and limited liability companies (LLCs) are listed below for this article.

A notable provision of the law is that it grants legal entities under Georgian law a 2-year grace period during which they may change their corporate structure and legal documentation to comply with the novel legal requirements the law establishes fully.

What are the regulations related to company formation in Georgia?

1. Types of Business Entities: The main business entities in Georgia are limited liability companies (LLCs), joint-stock companies (JSCs), and individual enterprises.
2. Registration: All companies must be registered with the national agency of Public Registry (NAPR) to operate in Georgia legally. Get in contact with a national agency. The registration process in a national agency requires submitting various forms and documents, including articles of incorporation, a list of shareholders and directors, and proof of payment of the required fees.
3. Corporate Governance: Companies in Georgia are subject to corporate governance regulations, including requirements for holding annual general meetings, maintaining accurate record-keeping, and filing annual financial reports with the NAPR.
4. Taxation: Companies must pay various taxes in Georgia, including corporate bank accounts, income tax, value-added tax (VAT), property tax, and excise tax.
5. Labor Law: Companies are subject to labor laws in Georgia, which regulate minimum wage, working hours, and employee benefits.
6. Environmental Regulations: Companies must comply with environmental regulations in Georgia, which aim to protect the environment and ensure sustainable development.

These are some of the regulations related to company formation in Georgia. It's important to note that rules can change, so it's a good idea to consult with a business lawyer or accountant to ensure compliance with all applicable laws and regulations.

Types of business licenses in Georgia

In Georgia, business licenses companies may be required to obtain, depending on the nature of their business activities. Some of the most common types of business licenses include:

1. Trade License: This license is required for companies engaged in commercial activities, such as retail sales or wholesale trade.
2. Service License: This license is required for companies providing consulting, accounting, or legal services.
3. Manufacturing License: This license is required for companies producing clothing, electronics, or food products.
4. Food Service License: This license is required for companies in the food and beverage industry, such as restaurants, cafes, or catering services.
5. Construction License: This license is required for companies engaged in construction activities, such as building or renovating homes or commercial buildings.
6. Import/Export License: This license is required for companies engaged in international trade, such as importing or exporting goods.

It's important to note that the specific requirements for obtaining a license can vary depending on the type of business and the location, so it's a good idea to consult with the relevant government agencies or a business lawyer to determine the specific requirements of your company in Georgia.

How can a business name be registered in Georgia?

The National Public Registry of Georgia's requirements for business names must be followed. Get advice from a qualified expert on registering a business name in Georgia by contacting Law and Trust International.

What are the taxes for companies in Georgia?

Most states impose taxes on some forms of business income earned within their borders. In general, the specifics of how a particular business's income is taxed depend in part on the company's legal structure in Georgia.

Most states have a corporate income tax that applies to businesses. In contrast, a state's income tax applies to pass-through entities like S corporations, limited liability companies (LLCs), partnerships, and sole proprietorships.

States have a wide range of tax rates on personal and corporate income. The typical range of corporate rates, which are typically flat regardless of income, is between 4% and 10%.

In some states, personal rates, typically based on income, can range from 0% (for low amounts of taxable income) to 9% or higher.

In Georgia, the taxes that companies are required to pay are:

1. Corporate Income Tax: This is a tax on the profits earned by companies, and the standard rate is 15%.
2. Value Added Tax (VAT): This is a tax at each stage of production and distribution of goods and services. The standard VAT rate in Georgia is 18%.
3. Property Tax: This is a tax on the value of the real property (land and buildings). The tax rate varies depending on the location and type of property.
4. Excise Tax: This is a tax on specific goods, such as tobacco, alcohol, and gasoline. The tax rate varies depending on the type of product.
5. Withholding Tax: This is a tax on the income paid to non-resident individuals and companies. The tax rate varies depending on the type of income and the recipient's country of residence.

It's important to note that tax laws and regulations can change, so it's a good idea to consult with a tax professional to determine the specific taxes that apply to your company in Georgia.

How can someone from outside Georgia register a business?

Our attorneys provide free legal advice and an expert evaluation of the company formation as the first step in the registration process, ensuring it complies with Georgia's regulations for forming a new corporation. Following that, our experts compile and prepare the required paperwork before applying for company registration. The registration certificate may be sent to you via courier service after the registration process is complete. Registering a company in Georgia usually takes one week to complete. Georgia charges $1750 for company registration. Comprehensive review, company registration, service, and certificate are all included in the registration fee.

How does one live in Georgia as a foreign investor?

Georgia is a business-friendly nation that has improved its ties with other countries over time. Foreign entrepreneurs who want to establish a business in Georgia can apply for a business visa if they can invest at least GEL 300,000. The businessman will be granted a permanent residence permit if this stipulation is met, but only after an auditor must certify the investment's value.

However, it's crucial to understand that the above-mentioned value does not restrict how a foreign investor can form a company in Georgia.

Lower investments are also permitted, but the foreign applicant is only eligible for a valid permit for a year in this scenario. In this specific scenario, the foreigner must be a company in Georgia employee and actively participate in business operations.

The Diplomatic Visa and A5 visa, which investors can use when entering the country for a specific business purpose, are additional visa types that foreign business people can use. Businesspeople can also apply for a regular visa.

Conclusion

Even though Georgia's company formation process is among the easiest in the world, it is strongly advised to seek legal counsel, especially when considering potential language barriers.

Even though most Georgians are fluent in other languages, language barriers can still quickly arise because Georgians use a different writing system. A corporation is the best Georgian company type to choose when starting a business in Georgia.

This step needs to be finished depending on the kind of liability you want as an investor, the amount of capital available, the size of the business, and many other factors. Investors who want to establish a new company in Georgia in this nation may also profit from the provisions of the double taxation treaties that this nation has signed.

Investors looking to expand their businesses abroad should remember that Georgia has emerged as one of the most alluring business hubs in the European and Central Asian region. The World Bank Group (WBG) recently released the "Measuring Regulatory Quality and Efficiency" report. Georgia is the fourth-easiest economy to conduct business in the European and Central Asian region.