Georgia is one of the most appealing destinations for foreign entrepreneurs who want to start small- and medium‑sized businesses or operate remotely. The legal setup is simple compared to many Western countries, but that simplicity can be deceptive – especially for those unfamiliar with local law and administrative practice.
Below are the five most common legal mistakes foreign entrepreneurs make in Georgia – each with practical tips on how to avoid them.
Misunderstanding the Legal Nature of an Individual Entrepreneur
Many foreigners assume that registering as an Individual Entrepreneur (IE) creates a separate legal entity like an LLC or corporation. But under Georgian law, an IE is not a separate legal person – it is simply the founder doing business as an individual. This means:
- You are personally liable for all business obligations unless you agree otherwise in a contract
- Creditors can pursue your personal assets in case of business liability
- You cannot protect your personal assets the way you could with a corporation
How to avoid it:
If limited personal liability is important (for example, if you expect legal risk or third‑party claims), consider forming an LLC instead of only registering as an IE.
Registering Without Accurate Business Activity Descriptions
One of the most common early mistakes during registration is incorrectly describing your business activities. This matters because the type of activity influences whether you qualify for streamlined regimes like Small Business Status and can also affect your operational legal obligations.
For example:
- If you register “legal consulting” but your business really offers broader training or digital services, your eligibility for certain business statuses may be affected.
- Some activity codes are excluded from beneficial regimes, and mistakes may force you to re‑register or pay higher obligations later.
How to avoid it:
Research the activity codes carefully and, if necessary, consult a legal advisor before submitting. Broad but accurate activity descriptions are often safer than overly narrow or specialized ones.
Not Preparing Documents Properly
A surprisingly large number of new entrepreneurs make decisions based on informal agreements or templates that were never reviewed by a lawyer. This leads to:
- unenforceable terms
- contradictory obligations
- poor dispute resolution clauses
- incomplete protections for IP, compensations, or confidentiality
Especially with foreign partners, clients, or service providers, written, enforceable contracts are essential.
How to avoid it:
Draft and sign written contracts for all commercial relations. Professional legal review ensures terms are compliant with Georgian law and clearly protect your interests.
Ignoring the Requirement for a Valid Registered Address
Many founders underestimate the importance of using a verifiable legal address when registering in Georgia. Simply using a friend’s apartment, Airbnb, or vague address can lead to:
- non‑compliance notices from the Revenue Service
- problems with bank account opening
- inability to receive official correspondence
- potential rejection of future filings
Using unverified services or merely listing informal addresses has become a known source of risk.
How to avoid it:
Always use a verified legal address and ensure it is properly registered with the Public Service Hall and tax authorities.
Failing to Use Proper Legal Representation and Documentation
Foreign entrepreneurs often try to handle everything remotely – which is fine in principle – but improper documentation can cause big problems. Common pitfalls include:
- Incorrect notarizations
- Incorrect notarizations
- Improper power of attorney (POA) formats for remote filings
- Unofficial translations
These errors can lead to rejected registrations, delays in bank account opening, or administrative fines later on.
How to avoid it:
If you’re not present in Georgia, ensure that:
- All documents are correctly notarized and apostilled if required
- Georgian translations are certified
- Your POA is comprehensive and precise about the acts it authorizes
Personal-Company Account Confusion
One of the most overlooked mistake by foreign entrepreneurs in Georgia is mixing personal and company finances. While it may seem convenient to use your business account for personal expenses (or vice versa), doing so can cause serious legal and practical problems:
- Liability Risks: If your company faces a dispute or debt collection, personal assets could be at risk if finances are not clearly separated
- Accounting and Compliance Issues: Georgian law requires transparent accounting. Mixing funds complicates bookkeeping, auditing, and tax reporting
- Banking Complications: Banks may freeze accounts or refuse services if personal and company funds are intertwined
- Investor or Partner Distrust: Any external partner or investor expects clear separation of funds to ensure accountability
How to avoid it:
- Open a dedicated company bank account
- Keep all personal expenses separate
- Use accounting software or hire a professional accountant to track transactions
- Ensure that contracts, invoices, and payments clearly distinguish between company and personal activities
In Summary
Georgia’s business environment is comparatively friendly and fast, but the legal landscape still requires careful attention. Simple procedural errors can become long‑lasting problems if they are not addressed from the start. Mistakes around registration, documentation, or legal structure can leave you exposed to liability or non‑compliance even before your business begins.
Avoid these legal mistakes by preparing documents carefully, seeking legal support where necessary, and making informed decisions about how you structure and operate your business.
Starting and running a business in Georgia doesn’t have to be stressful. Whether you’re registering your first entity here or expanding operations from abroad, reach out to our team for guidance, document preparation, and proactive legal support.
