IE or LLC in Georgia in 2026: the Comparison, With Numbers

Most "IE or LLC" comparisons for Georgia end on the same formula: the sole proprietorship is simpler, the company looks more serious. Run the numbers and a different picture appears. Across almost the whole range where an IE is allowed at all, it is cheaper, and people who move to an LLC usually do it for reasons that have nothing to do with tax. Here is the updated comparison, with official state fees, a calculation at three turnover levels, and what each form demands from you after registration.

Quick answer

A solo freelancer under 500,000 GEL of annual turnover is almost always better off as an IE on Small Business status: 1% of turnover, a 26 GEL state fee, registration in one working day. An LLC costs more to start (a 200 GEL fee) and files monthly, but it has no turnover cap, answers with its charter capital instead of your personal assets, can take investors, and is the only form eligible for Virtual Zone status. For a foreigner, both routes raise the work permit question, which is softer after the April 2026 amendment than spring guides suggest.

Comparison table

These fees are not estimates. They come from the official tariff list of the National Agency of Public Registry, which also prices the extracts you will need: 20 GEL for a standard one, 75 same day, 13 GEL electronic, and an English version adds another 26 GEL. A detail that surfaces exactly when you open a bank account or file for residency.

Two different ways the tax is calculated

An IE on Small Business status is taxed on turnover, not on profit: 1% of everything that comes in, with no deduction for costs. Expenses do not reduce the base, and you do not have to document them either. According to the PwC tax summary as of January 2026, the rate is 1% below 500,000 GEL of turnover and 3% above it.

An LLC runs on the Estonian model: while profit stays inside the company, there is no profit tax at all. It appears at the moment of distribution, 15% profit tax plus 5% on dividends, roughly a fifth of whatever you take out. Reinvest and you pay nothing; pay yourself and you pay.

That gives a simple rule. The IE wins where the money needs to reach you personally and soon. The LLC wins where profit stays and works inside the business.

The numbers at three turnover levels

Take a service business with modest costs, the typical profile of a freelancer or a small studio, and assume the owner takes all the profit out.

The LLC column is rough: it assumes costs of around 20% and a full distribution. The order of magnitude holds anyway, and the conclusion is inconvenient for anyone who sells company registrations. Across the whole range where an IE is allowed, it is cheaper by a wide margin. Even at 900,000 GEL, where the rate has already risen to 3%, the IE beats an LLC that distributes everything.

None of that makes the LLC pointless. It just means the decision is not made on the tax rate.

Who the IE suits

Freelancers and remote workers with foreign clients, designers, developers, marketers, marketplace sellers, photographers, tutors: anything one person does that fits under the threshold. The form gives exactly what is needed at that stage, the ability to issue invoices, receive payment into a business account, and pay a percentage of turnover instead of twenty percent of profit.

The form has one hard limit. Some activities do not qualify for Small Business status at all. The list sits in Annex 4 to Government Decree No. 415 of 29 December 2010 and covers licensed activities, medical, legal, notarial and audit work, and any kind of consulting, tax advisers included. Check your activity before you apply for the status, not after your first return.

So why an LLC

Four reasons, each of which outweighs the difference in tax.

Liability. An IE is you, in the status of an entrepreneur. Business debts reach your personal assets: accounts, car, apartment. An LLC answers with its charter capital, which can be as little as 1 GEL. While you freelance remotely the risk stays theoretical. It stops being theoretical as soon as there are subcontractors, prepayments, a lease and obligations to clients.

Investors and shares. An IE cannot be split into shares, sold, opened to a partner, or used to grant an employee an option. Any story where a second person acquires rights to the business needs an LLC.

Virtual Zone. The status that zeroes profit tax on exported IT services is granted to legal entities only. For a developer with foreign clients that is often the whole reason to convert, subject to the caveats covered in our Virtual Zone guide: the Revenue Service now looks at whether the company is genuinely present in Georgia, not only at the paperwork.

The turnover cap. That one is below, because it works less bluntly than most guides claim.

What actually happens above 500,000 GEL

Here most guides, and honestly the previous version of this article, printed something untrue: "go one lari over and the whole turnover is recalculated at 20%."

The real mechanism is gentler and runs in steps, set out in articles 88 to 95 of the Tax Code:

• you cross the threshold: from the month of the excess until the end of the year the rate becomes 3% instead of 1%, and the status itself survives;
• you cross it two years running: Small Business status is annulled from 1 January of the third year;
• after annulment: you can apply again only from the following tax year.

The mechanism is described by Andersen in Georgia and in the IBCCS guide to the 1% regime. In practice: a one-off overshoot is not a catastrophe, while two years in a row means a year on general terms ahead of you.

What each form demands after registration

The IE files a monthly return by the 15th and pays the tax. The return is due even for months with no revenue: a zero filing is mandatory, and skipping an "empty" month is the most common source of accumulated fines. The filing mechanics are covered in our declaration guide.

The LLC files monthly on profit as well, zero returns included, plus VAT once turnover passes the threshold, plus obligations attached to the form itself. That last part is what almost nobody writes about.

Under the Law on Entrepreneurs, legal entities registered before 1 January 2022 had to bring their charter and registry data into line with the law. The deadline was already extended once, and it expired on 1 April 2026. Miss it and the registration is suspended: no updated extract is issued and access to banking products closes.

This requirement does not apply to IEs. If you are buying a ready company, or returning to one you registered years ago, check its status in the registry before you count on its bank account.

VAT works the same for both

The rate is 18%, and registration becomes mandatory once taxable turnover passes 100,000 GEL over any continuous twelve months, not over a calendar year. The difference matters: turnover can cross the threshold mid-year, and the count runs on a rolling window. Legalese covers the threshold in detail.

For an IE on Small Business status this is a particularly unwelcome surprise, because 1% of turnover and the duty to administer VAT sit together badly.

Employees: the honest section

We cannot give a single answer here, and saying so plainly beats inventing a number.

Practice on hiring under Small Business status diverges. Some advisers hold that the status does not contemplate employees at all; others allow hiring with payroll tax withheld at source. We could not find one rule to cite. The previous version of this article named a limit of "up to 5 employees" whose source we were unable to confirm, so the figure has been removed.

What is certain: Micro Business status (0% below 30,000 GEL of turnover) unambiguously allows no employees. And hiring brings payroll obligations, 20% income tax at source and the funded pension. The pension scheme covers Georgian citizens and permanently resident individuals, while non-resident foreigners fall outside it.

If a team is appearing, that is a conversation about an LLC in any case, and a specific conversation rather than an article on the internet.

Can you switch later

Yes, and it is the most common route: start as an IE on 1%, grow to the point where you need partners, the Virtual Zone or protection from liability, then open an LLC.

One detail that rarely gets said out loud: an IE does not "turn into" an LLC. These are two independent registrations, and they can exist in parallel. Plenty of people work exactly that way, an IE for some contracts and a company for others. Closing the IE when you open a company is not compulsory, though keeping it "just in case" while filing zero returns every month makes little sense.

The closing procedure is covered in a separate guide.

What we are not claiming

Three things we are not confident enough about to present as fact.

The first is hiring under an IE, above. The second is the exact cost of converting to an LLC: it combines the state fee, the charter, the bank account and the support work, and the spread between a plain company and a structure with several members is too wide for one number. The third is bank timelines: opening a corporate account as a non-resident takes anywhere from a day to several weeks depending on the profile, and promising a specific figure here would be dishonest. What drives it is covered in our guide to a bank account for non-residents.

Frequently asked

I work alone but turnover will exceed 500,000 GEL. Still an IE? Do the arithmetic. Above the threshold the rate becomes 3%, which is still noticeably cheaper than an LLC distributing profit. Convert if the excess becomes permanent: two years running and the status is annulled.

Which is cheaper to open? The IE: 26 GEL against 200 for an LLC on the official tariff, plus the difference in support work. Same-day registration costs 75 and 400 respectively.

Can an IE get Virtual Zone status? No, it is granted to legal entities only. For a developer with foreign clients that is the usual reason to open a company.

Which is easier for a foreigner to legalize? After the April 2026 amendment the bar is low on both: a remote worker with foreign clients and a company owner need no work permit for the work itself. It returns for Georgian-source income and in the work residence permit application. The sequence is in our work permit breakdown.

I already have an LLC registered long ago. What should I check? Whether its charter and registry data have been brought into line with the Law on Entrepreneurs. The deadline expired on 1 April 2026, and non-compliance suspends the registration along with bank access.

Do I have to close the IE if I open an LLC? No. But as long as the IE exists, monthly returns are filed for it, zero ones included.

A free 15-minute consultation: we will price both scenarios against your turnover, costs and hiring plans, and tell you honestly if it is too early to convert. Telegram @GeoExpertsSaqartvelo or +995 551 278 585.