Do you want to start a business in Georgia as a foreigner? If YES, here is a complete guide plus legal requirements for starting a profitable business with no money in Georgia.
Okay, having provided an in-depth analysis of the 50 best small business opportunities in Georgia and a series of industry-specific sample business plan templates; we will now analyze in detail the legal requirements, market feasibility and every other thing it takes to start a business in Georgia. So put on your entrepreneurial hat and let’s proceed.
Why Start a Business in Georgia?
Georgia is an emerging free market. Its gross domestic product fell sharply following the collapse of the Soviet Union but recovered in the mid-2000s, growing in double digits thanks to the economic and democratic reforms brought by the peaceful Rose Revolution.
Georgia continued its economic progress since, “moving from a near-failed state in 2003 to a relatively well-functioning market economy in 2014”. In 2007, the World Bank named Georgia the World’s number one economic reformer, and has consistently ranked the country at the top of its ease of doing business index.
A recent report released by World Bank shows that Georgia’s economy is supported by a relatively free and transparent atmosphere in the country. Transparency International’s report of 2018 shows that Georgia is the least corrupt nation in the Black Sea region, outperforming all of its immediate neighbors, as well as nearby European Union states.
According to the latest World Bank annual ratings when it comes to the ease of doing business, Georgia is ranked 6 among 190 economies in the world. The report shows that the rank of Georgia improved to 6 in 2018 from 9 in 2017. Ease of Doing Business in Georgia averaged 14.09 from 2008 until 2018, reaching an all – time high of 24 in 2014 and a record low of 6 in 2018.
If you are interested in starting a business in Georgia especially as a foreign investor, you would have to take the following steps:
Starting a Profitable Business in Georgia as a Foreigner – A Complete Guide
Step One: Apply for The Appropriate Visa
If you are coming as a foreigner to start a business in Georgia, then you should ensure that you apply for the most suitable visa; a visa that can grant you access to live and run your business in Georgia.
This is because the law stipulates that any foreign investor who wants to register a company in Georgia can apply for a business visa, provided that they will be able to invest a minimum amount of GEL 300,000. If this condition is satisfied, the investor will receive a permanent residence permit.
So also, the regulation stipulates that an immigrant who wants to work as a freelancer, that is a sole trader, would have to provide a bank statement, confirming that they have sufficient financial funds to work and live in Georgia. Freelancers can apply for C2 category visa, included in the Ordinary Visa type.
The other types of visas that can be used by foreign businessmen and businesswomen are the Diplomatic Visa – A1 category visa and A5 visa, that can be used by investors when arriving in the country for a specific business purpose. Businessmen may also request an Ordinary Visa (C3 category visa, which is employed when arriving in Georgia for business negotiations, workshops and other similar short-term corporate events).
Step Two: Choose a Business Niche and Name
If you have confirmed your eligibility of starting a business in Georgia, then the next step to take is to choose a business niche and a name for your business.
The main industries in Georgia are the steel industry, machine tools, electrical appliances, mining (manganese, copper, gold), chemicals, wood products, wine industry. The goods that are mainly exported from the country are vehicles, ferro-alloys, fertilizers, nuts, scrap metal, gold, and copper ores; and the goods that are imported to the country are fuels, vehicles, machinery and parts, grain and other foods, including pharmaceuticals. With this, you can be well – guided when making a choice for a business niche.
Before choosing a name for your business, it won’t cost you anything to go online and check out the names of leading brands in the industry you intend starting a business in so as to be properly guided when choosing your own name.
Please note that after choosing a suitable company name, you are required to register it with the National Public Registry of Georgia.
Step Three: Write a Workable Business Plan
Part of the requirements of registering a business in Georgia is to produce a comprehensive business plan document. Aside from the fact that you would have to tender your business plan as part of the documents required during the registration, in order to successfully run a business, you would need to have a good and workable business plan. A Business plan is the blue print that is needed to successfully run a business.
So if you want to start your own business in Georgia, you are required to write a detailed business plan that can pass reality test when subjected to it; you should work with the facts, figures and other indices in the industry as it applies to the location you intend establishing your business.
Step Four: Choose a Company Structure (Business Legal Form) for your Business
The industry you want to operate in and the size of the business you want to start are key components that should guide you in making a choice for the business structure you want to build your business on. Here are some of the company types that is most suitable for various business activities in Georgia;
- Joint Stock Company
- Limited Liability Company
- General Partnership
- Sole Proprietorship (although registration is required, but not a legal entity)
- Joint Venture (registration is not required)
- Branch Office
- Limited Partnership
Please note that the capital of the Limited Liability Company (LLC) opened in Georgia is divided into shares and the responsibility of each member is limited to the value of his/her shares. The shares of the company can be transferred and the members have the right to leave them as inheritance.
If a member of the company owns a single share, that share can’t be sold. At the same time, it is important to know that the entity registered as a limited liability company must add in its trading name the particle “LLC”, the abbreviation available for this legal entity.
One more very vital aspect you need to know about the Limited Liability Company (LLC) in Georgia is that this business entity can be set up by an individual or by a legal entity (a registered company). This is the most common business form registered in Georgia due the liability of the shareholders, which is limited to the number of shares they own in the company. Every Limited Liability Company (LLC) is founded on a charter, which prescribes the internal regulations of the company.
Step Five: Notarize All Your Documents
The next step to take after you have settled for a business structure is to notarized all your documents. In Georgia, your business documents are meaningless if the document is not notarized. In order to register with any government institution, the company’s representatives have to prepare the statutory documents and the company’s statutory documents have to be notarized by a public notary in Georgia.
All foreign investors who are interested in setting up a company in Georgia have to notarize the company’s documents at a public notary. The documents have to be legalized in the country in which the foreign shareholders are resident, in accordance with the provisions set up by the Hague Convention.
The registration of company in Georgia is performed following the rules and regulations imposed by the Civil Code 1997, the Law on Entrepreneurs 1994 and the Law on Assistance and Guarantees for foreign investments. These rules of law prescribe the manner in which new businesses are set up here. For example, the documents which are necessary for the registration procedure have to be translated into the local language.
Step Six: Register Your Business with the Entrepreneurial Register
If you have settled for a business structure/legal business form, then the next step to take is to register your business with the Entrepreneurial Register in Georgia.
For instance, if the investor wants to set up a limited liability company in Georgia, he or she can start the procedure by registering it with the Entrepreneurial Register and they will issue you an identification number. The institution will require a set of company documents, which are compulsory during the registration procedure.
In order to successfully complete the registration of your business, you will be required to also provide the following documents:
- The company charter – which is the formal document that establishes the legal entity that will operate in Georgia
- The document which stipulates the value of the contributions of each member of the board
- An application which contains information regarding the name of the company, the legal entity of the company, the amount of share capital, documents for naming each member of the supervisory board and management board
- The application should also contain the address, the business plan, date of starting the business and details providing information on the founder of the company (name, address, place of birth and his or her profession)
- Pay the new business registration fee of 100 Georgian Laris (about $40 at the current exchange rate).
Those who want to register a Limited Liability Company (LLC) must be aware that they have to be present in the country during the incorporation procedure, for legal matters concerning the notarial aspects or to submit the requested documents to relevant authorities. Another important aspect refers to the duration of the incorporation process. Foreign investors should be aware that the procedure can be performed in maximum one week.
Step Seven: Open a Corporate Bank Account at Any Local Commercial Bank in Georgia
If you have succeeded in notarizing all your documents and registering the business with the Entrepreneurial Register in Georgia, the representatives of the Limited Liability Company (LLC) have to open a bank account. The corporate bank account can be set up at any commercial bank in Georgia, after providing certain documents requested by the institution.
The successful completion of this process is what gives the limited liability company the legal backing to go ahead to start its commercial activities.
Step Eight: Sort Out Tax Issues
After you have successfully registered your business with Entrepreneurial Register in Georgia, the institution will also issue you with a certificate of state and will also help you with the tax registration procedure for the new company.
Interestingly, In Georgia, only 6 taxes exist and they are the Income Tax (personal income tax) 20 percent; Profit Tax (corporate tax) – 15 percent; Value Added Tax – 18 percent; Excise – varies; Property Tax up to 1 percent of the self-assessed value of property; Customs Tax – 0 percent; 5 percent; 12 percent.
Please note that in Georgia, the standard value added tax (VAT) rate is 18 percent. There are no reduced rates, but a 0 percent VAT rate applies to exports, services of tour operators, electrical power, international shipping activities or transfers of gold to the National Bank of Georgia.
The corporate income tax rate for a company in Georgia is 15 percent. As a general rule, Georgia does not apply excise tax, but certain categories of products can be subjected to this tax. It is important to know that a company has to register for VAT purposes in Georgia as long as the company’s annual revenue is of minimum GEL 100,000.
So also, in Georgia, dividends distributed by a company are subject to a 5 percent dividend tax rate, no matter if the dividends are paid to a non-resident entity or an individual. However, in the case of the dividends distributed from a Georgian company to another local company, there is no tax base.
Plus, there is a corporate tax rate of 15 percent, a flat income tax rate of 20 percent, a 5 percent tax on dividends and interest and a 1 percent tax on property.
Step Nine: Purchase the Needed Business Insurance
The rule of business engagement in Georgia is that you can’t operate a business without having some of the basic insurance policy covers that are required by the industry you want to operate from. So, it is important to create a budget for insurance and perhaps consult an insurance broker to guide you in choosing the best and most appropriate insurance policies for your business.
You might want to consider buying some or all of these insurance policy covers for your business; General insurance, Health/Medical insurance, Liability insurance, Workers compensation, Overhead expense disability insurance, Business owner’s policy group insurance and Payment protection insurance.
If you are done with most of the administrative stuffs, then you are set to start your business, but you cannot operate without choosing a location to open your office or factory. Depending on the nature of business you want to run, Tbilisi or other cities in Georgia have a enough options when it comes to office space, from modern co-working spaces in startup hubs through centrally located retail spaces, to fully equipped corporate facilities.
If you are new to Tbilisi or other cities in Georgia you can contact a realtor to help you with choosing a location for your office or you can go online to check commercial property listings for businesses. Whatever you do as regards choosing a location for your business, it is compulsory that you consult the zoning plan in the city. This is so because the choice of your business location must be in line with the municipal zoning plan.
Step Eleven: Open Your Doors and Start Welcoming Customers
If you have been able to successfully carry out step one to ten, then you have indeed come a long way and it shows that you are truly ready for business. You cannot generate sales from your products or services if you do not open your door for business. In essence, the last step to take on your quest to starting a business in Georgia is to ensure that you open your door for business.
In conclusion, it is important to state that this article only covers basic steps of starting a business in Georgia. There are other legal and financial cum accounting requirements that are not covered here, but are also important procedures when it comes to starting a business in Georgia. We will advise that you contact professionals such as a business lawyers or business consultants to guide you through the processes of starting a business in Georgia.