Common Mistakes to Avoid When Registering as an Individual Entrepreneur in Georgia
- Tinatin Tolordava
- Apr 30
- 10 min read
Table of contents
Introduction: Why Getting It Right Matters from the Start
Georgia has become a magnet for freelancers, digital nomads, and remote entrepreneurs thanks to its simple tax system, fast registration processes, and incredibly low tax rates for small businesses. It is no surprise that more and more people are exploring starting a business in Georgia as Individual Entrepreneurs (IEs).
But while the process is easier than in many other countries, it is not without its traps. I.E., registration mistakes in Georgia are surprisingly common, and they can cost you time, money, and even your eligibility for Georgia’s famous 1% Small Business Status tax regime.
Unlike setting up a full corporation in other countries, registering as an IE in Georgia seems simple at first glance. However, a wrong business activity description, missing paperwork, or simple timing mistakes can lead to heavy taxes, penalties, or re-registration costs.
This guide will walk you through the most common mistakes people make when registering as an IE in Georgia and how to avoid them. If you want to get it right the first time and enjoy the benefits Georgia offers, read carefully.
Mistake 1: Incorrect Business Activity Description
One of the most overlooked yet serious mistakes during company formation in Georgia is incorrectly describing your business activity during registration.
When you register your Entrepreneur at the Public Service Hall, you must declare the type of business activity you will conduct. This description directly affects your eligibility for Small Business Status, which allows you to pay just 1% tax instead of the regular 20%.
Why This Matters:
Certain activities are excluded from Small Business Status eligibility.
For example:
Financial services
Legal consulting
Gambling and betting activities
Some medical services
If your declared business activity falls into these excluded categories, you will automatically lose your chance to benefit from the 1% tax regime, even if your real business activity qualifies.
Real Example:
A freelancer offering online financial planning services registers their activity as "financial consulting" rather than "educational consulting."
Later, when applying for Small Business Status, the Revenue Service rejects the application because financial services are not eligible.
How to Avoid This Mistake:
Carefully review Georgia’s official business activity codes when completing your application.
If you offer a mix of services, choose the main activity that qualifies for Small Business Status.
Consult professional advisors specializing in Georgia business formation before submitting your application. If you are unsure, use broader but still accurate terms like "IT consulting," "marketing services," or "educational services" rather than restricted industries.
Pro Tip:
Use the Georgia corporation search or Georgia business entity search to check how other successful IEs in your field have registered their activities.
Choosing the right business activity description from the start is essential. Fixing it later is complicated, and sometimes impossible without fully re-registering your business.
Mistake 2: Registering Without a Proper Legal Address
Another frequent mistake during the open company in Georgia process is failing to provide a valid and acceptable Georgian legal address.
When you register your Individual Entrepreneur, you must provide an official address located in Georgia.
This address becomes your official business location for tax registration, document service, and official communication.
Why This Matters:
If you register with an invalid, temporary, or incorrect address:
Your registration could be rejected.
Your Small Business Status application may be delayed.
Future official notifications might not reach you properly, causing missed deadlines and fines.
Common Address Mistakes:
Using a hotel or temporary apartment address that is not intended for business registration.
Relying on an unverified service provider who disappears after registration.
Forgetting to update your address after moving to a new location.
Georgia’s authorities do not require a full physical office for IE registration, but they do expect a verifiable and legal address.
How to Avoid This Mistake:
Use a trusted, reliable local service that provides a proper legal address.
Ensure that the address you register is active and authorized for business registration purposes.
If you move after registering, officially update your address immediately through the Revenue Service portal.
Pro Tip:
Even if you are registering remotely, make sure the legal address you use is linked to a trustworthy provider that can forward official mail if needed.
Having a solid address from day one helps you stay compliant with the Georgia tax system and ensures your I.E. registration mistakes in Georgia stay minimal.
Mistake 3: Not Applying for Small Business Status (SBS) Immediately
One of the most damaging mistakes new Individual Entrepreneurs make is assuming that once they complete their registration, the tax benefits automatically apply.
They do not.
After you register as an IE, you must apply separately for Small Business Status (SBS) through the Revenue Service.
Failing to do this means you will be taxed at the standard Georgia income tax rate of 20% instead of the 1% turnover tax.
Why This Matters:
The Small Business Status is not automatic.
You must apply for it, and it must be officially granted before the start of the next month to activate the 1% rate.
If you start invoicing clients after registering but before receiving SBS approval, your earnings during that period are taxed at the higher 20% rate, with no exceptions.
How to Avoid This Mistake:
Immediately after registering as an IE, log into your Revenue Service account and apply for Small Business Status.
Do not invoice clients or receive payments until your SBS approval is confirmed.
Double-check your SBS start date before operating commercially.
Pro Tip:
Processing times can vary from 2 to 10 business days, depending on the Revenue Service’s workload.
Plan ahead to avoid missing early invoicing windows.
Mistake 4: Invoicing Before SBS Activation
Many entrepreneurs make the mistake of rushing to start work immediately after registering as their Individual Entrepreneur without waiting for Small Business Status to be approved. If you invoice clients before SBS activation, your early income will be taxed at the full 20 percent personal income tax rate instead of the 1 percent turnover tax.
This happens because the Georgian Revenue Service calculates your applicable tax rate based on your official SBS start date, not the date you submitted your application. Any payments received before the SBS status is confirmed will be subject to the standard Georgia income tax.
For example, if you register as an IE on April 10th but your SBS becomes active only on May 1st, all invoices issued in April are taxed at 20 percent, even if your clients are foreign.
How to avoid this mistake
Wait until you receive confirmation that your Small Business Status is approved and active.
Set your invoicing system to start from the SBS effective date. If you need to work immediately, consider agreeing with clients on deferred invoicing until after SBS approval.
Being patient saves you a significant amount in taxes and keeps your Georgia tax return clean and easy to manage.
Mistake 5: Ignoring Monthly Filing Obligations
Georgia’s tax system is simple compared to most countries, but it is strict about monthly reporting. After completing your Individual Entrepreneur registration and gaining Small Business Status, you are required to submit a turnover declaration every single month, even if your revenue is zero.
Failure to file your monthly turnover can lead to automatic fines, suspension of your account, and future difficulties during audits. Many newcomers mistakenly believe they only need to file once a year. In reality, the Georgian Revenue Service expects regular activity updates.
Each declaration must state your monthly income. If there is no income, you submit a zero declaration. Filing is done through the online portal and usually takes less than five minutes per month.
Consequences of ignoring monthly filings:
Late declaration fees are usually around 50 GEL per month.
Compounded penalties if multiple months are missed.
Possible downgrade or review of your Small Business Status.
Higher audit risk if your profile is flagged for non-compliance.
To stay compliant with the Georgia tax percentage rules under SBS, mark your calendar to file turnover by the 15th of every month. Submitting on time protects your business reputation and keeps you enjoying the 1 percent tax rate without trouble.
Mistake 6: Overestimating the 500,000 GEL Cap
One of the best features of Small Business Status is that it allows you to pay 1 percent tax on turnover up to 500,000 GEL per year. However, many entrepreneurs either ignore this cap or assume it will not affect them. When your turnover exceeds the limit, the excess is taxed at a higher rate, and repeated violations cause you to lose Small Business Status permanently.
If your turnover exceeds 500,000 GEL in a single year, you will pay 3 percent tax on the excess amount instead of 1 percent. More importantly, if you exceed the cap two years in a row, you are automatically disqualified from Small Business Status.
For fast-growing freelancers or entrepreneurs expanding their services, this cap becomes a critical planning point. Without proper financial forecasting, you could accidentally fall into a much higher tax bracket and face new obligations under the standard Georgia income tax brackets.
How to manage this properly
Monitor your turnover monthly to track your progress toward the cap.If you expect to exceed it, prepare to transition into an LLC, where the corporate tax in Georgia is 15 percent on distributed profits, which may offer better benefits.Speak with a tax advisor before reaching 450,000 GEL annually to evaluate your best options.
Understanding your growth in advance keeps your I.E. registration mistakes in Georgia to a minimum and your taxes predictable.
Mistake 7: Assuming I.E. Status Grants Residency or Citizenship
Another misconception is thinking that registering as an Individual Entrepreneur grants automatic rights to live in Georgia indefinitely or that it leads to Georgia citizenship.
This is not true. The IE status is a business registration, not a visa or residency permit. It does not permit you to stay beyond the standard visa-free period or visa conditions.
If you stay in Georgia for more than 183 days in 12 months, you automatically become a tax resident of Georgia. This affects your global tax obligations, but it does not give you permanent residency or citizenship rights.
If you want to stay longer, you must comply with Georgia’s immigration rules. This includes applying for appropriate visas, such as the Georgia digital nomad visa, or using the visa-free allowances smartly if you qualify.
Misunderstanding this point can lead to overstaying, fines, or future visa problems. It is critical to treat business registration and immigration status as two separate processes, even though they often work together.
Quick reminders:
Owning a business does not equal residency.
Be aware of the visa-free duration and extensions.
Track your days in Georgia carefully to avoid accidental residency issues.
Bonus: Other Practical Pitfalls
Even if you avoid the major mistakes listed above, several smaller but still important issues can cause problems during your IE journey.
Using an incorrect Power of Attorney for remote registration
If you are registering remotely, your Power of Attorney must be notarized correctly and sometimes apostilled. Errors in this document can delay your registration or cause rejection. Always double-check with your service provider before submitting.
Skipping official translations and notarizations
All non-Georgian documents submitted during registration must be officially translated into Georgian and notarized. Many new entrepreneurs skip this step, resulting in rejections or administrative fines. Working with a reliable local agent can help streamline this.
Not updating your contact details when moving.
If you change your residential address, phone number, or email, you must update this information with the Revenue Service. Failure to do so could cause you to miss critical notifications about filings, fines, or audits.
Trusting unverified service providers
The growing popularity of open companies in Georgia has also attracted unreliable or amateur service providers. Always verify the experience and reputation of any agency you hire to assist with your registration. A poor-quality registration service can cause long-term problems that are difficult and expensive to fix later.
Other quick pitfalls to watch out for
Applying for the wrong type of visa.
Assuming the Georgia e visa covers long-term business stays without checking conditions.
Assuming Georgia's digital systems will remind you automatically about taxes (they will not).
Attention to these details can save you from unnecessary complications that many foreigners face when handling Georgia business formation remotely.
Conclusion: Set It Up Right to Reap the Rewards
Setting up an Individual Entrepreneur in Georgia is one of the smartest business decisions a freelancer, consultant, or small business owner can make today. The low taxes, simple processes, and territorial income system make Georgia stand out among global business destinations.
However, while the process is relatively easy compared to many countries, making even small errors can lead to missed tax benefits, penalties, and avoidable complications, as we have seen, I.E., registration mistakes in Georgia often stem from small oversights like incorrect business descriptions, missing monthly filings, rushing invoices before Small Business Status activation, or misunderstanding the revenue cap rules.
If you approach your registration carefully, you can enjoy the true benefits Georgia offers. You will pay only 1 percent on your turnover under Small Business Status, you will manage your taxes digitally with minimal paperwork, and you will gain the freedom to operate internationally without the heavy financial burdens common elsewhere.
Quick checklist to avoid common I.E. registration mistakes
Describe your business activity correctly and avoid restricted fields.
Use a verified legal address, not a random apartment or hotel.
Apply for Small Business Status immediately after registration.
Wait for SBS approval before invoicing clients.
Submit monthly turnover declarations without fail.
Track your revenue against the 500,000 GEL cap carefully.
Do not confuse I.E. registration with immigration status or citizenship.
Work with trusted local service providers if registering remotely.
Taking these steps seriously ensures that your company formation in Georgia is clean, compliant, and profitable from the start.
In the end, Georgia offers a unique opportunity, but it rewards entrepreneurs who respect its simple rules. Getting it right from day one saves you money, protects your status, and sets up your business for future growth, whether you stay in Georgia long term or operate remotely.
Suppose you want professional support to avoid common pitfalls and set up your Individual Entrepreneur the right way. In that case, agencies like Gegidze specialize in assisting foreigners through every step of the process. From registering the business to applying for Small Business Status to staying compliant with the Georgia tax system, the right guidance can make a major difference.
Georgia’s doors are open. You just have to step through carefully.
Frequently asked questions (FAQ)
What’s the most common mistake when registering an IE in Georgia?
Choosing the wrong business activity description can disqualify you from the 1% Small Business Status tax, even if your actual services qualify.
