How to Legally Transition Your IE to an LLC After Exceeding the 500,000 GEL Threshold
- Tinatin Tolordava
- 5 days ago
- 12 min read
Table of contents
Why the 500,000 GEL Limit Matters
Georgia’s Individual Entrepreneur (IE) system has become a magnet for global freelancers and small business owners. It is simple, transparent, and incredibly tax-friendly. You register as a self-employed person, and if your turnover stays below 500,000 GEL per year, you qualify for Small Business Status: meaning you pay just 1% tax on your total income.
No complicated deductions. No corporate structures. Just one of the easiest tax systems in the world.
But what happens when you succeed?
Once your business starts growing and your income exceeds 500,000 GEL, the rules change. The Revenue Service Georgia automatically flags your account, and your Small Business Status can be revoked. Your tax rate jumps from 1% to 20%, and your compliance obligations increase overnight.
For many entrepreneurs, this is the point where it makes sense to transition from an IE to an LLC. It is not just a legal requirement: it is a smart business move that protects your income and sets you up for growth.
Understanding the 500,000 GEL Rule
Georgia’s 1% IE regime is generous, but it has strict boundaries. The 500,000 GEL threshold refers to your total annual turnover. This includes all payments received for services, whether from local or foreign clients. The Revenue Service monitors these transactions through your declared invoices, bank transfers, and tax reports.
If your turnover exceeds the limit even by a small margin, you risk losing your Small Business Status immediately. Once that happens, your income is reclassified under the standard 20% personal income tax system, and the tax authority can backdate the new rate for several months.
This is why successful freelancers, digital entrepreneurs, and IT consultants often plan their transition before they hit the threshold.
Common indicators that it is time to switch include:
Consistent monthly income approaching 40,000–45,000 GEL.
Long-term contracts with international clients.
Hiring or subcontracting other professionals.
Expanding operations into product development, SaaS, or crypto services.
At this point, the benefits of an LLC outweigh the simplicity of the IE model.
Why Transitioning to an LLC Is the Smart Move
Switching to a Limited Liability Company (LLC) in Georgia is not just a compliance step, it’s a strategic business upgrade.
An LLC opens new opportunities that the IE structure can’t support.
1. You can apply for Virtual Zone Status.
Virtual Zone companies in Georgia enjoy 0% corporate income tax on revenue from IT, software, or digital exports. This includes web development, SaaS, consulting, and other online services.
2. You gain limited liability protection.
Unlike IEs, which are tied to personal assets, an LLC separates your business finances from your personal ones. This protects you in case of legal disputes or unpaid invoices.
3. You can hire employees legally.
LLCs can register payroll, pay social contributions, and employ staff under Georgian labor law. If your business is expanding, this is essential.
4. You gain international credibility.
Foreign clients often prefer working with registered companies. An LLC allows you to open business bank accounts, sign contracts, and access payment gateways easily.
5. You retain tax advantages.
Even as an LLC, you only pay 15% corporate tax on distributed profits. Profits that remain reinvested in the company are tax-free under Georgia’s Estonian-style tax system.
6. You can combine with Georgian tax residency.
Founders who become Georgian tax residents (by spending 183 days in the country) pay just 5% dividend tax instead of higher rates abroad.
Together, these advantages make transitioning to an LLC the natural next step for anyone earning beyond 500,000 GEL annually.
Step-by-Step: How to Transition from IE to LLC in Georgia
Moving from IE to LLC can be completed in just a few days, but each step matters. Here is how to do it legally and efficiently.
Step 1: Deregister as an Individual Entrepreneur
Before you register a new company, you must close your existing IE account with the Revenue Service Georgia.
Submit a written request to cancel your registration.
File your final monthly and annual tax declarations.
Pay any outstanding taxes or late fees.
Once your status is deactivated, you will receive a confirmation notice. Keep this for your records.
If you are close to your turnover limit, you can time your deregistration strategically to avoid overlapping tax periods.
Step 2: Register Your New LLC
The next step is to create your new legal entity. Company registration in Georgia is fast and straightforward.
File your application with the National Agency of Public Registry (NAPR).
Submit your passport, company charter, and proof of legal address.
For foreign founders, documents must include certified English to Georgian translations.
Pay the registration fee (around 100 GEL for standard processing or 200 GEL for same-day service).
Within one business day, your LLC will be officially registered and assigned a unique identification code.
Many entrepreneurs use their accountant or service provider as their legal address. This is fully acceptable under Georgian law.
Step 3: Register the Company for Tax Purposes
After registration, your next step is to get your company recognised by the Revenue Service Georgia.
Register online using your new company ID.
Obtain a Tax Identification Number (TIN).
Activate your Revenue Service e-cabinet for monthly filings.
From this point, your LLC is officially active and must submit monthly tax declarations, even if no income is generated.
You can also register for VAT if your turnover exceeds 100,000 GEL from local sales. Most IT and international service companies are exempt because exports are VAT-free.
Step 4: Choose the Right Tax Regime
Not all LLCs pay the same taxes in Georgia. You can choose the structure that best fits your business model.
1. Standard LLC
15% corporate income tax on distributed profits.
No tax on retained earnings.
5% dividend tax when profits are distributed to shareholders.
2. Virtual Zone Company
Designed for IT, SaaS, or software development companies.
0% corporate income tax on revenue from foreign clients.
0% VAT on digital exports.
5% dividend tax when distributing profits.
3. International Company Georgia
Created for larger IT and BPO operations with offices and employees.
5% corporate tax and reduced social contributions.
Minimum office and staffing requirements.
Choosing the right regime can make a huge difference in your effective tax rate. For most service-based entrepreneurs who were previously IEs, the Virtual Zone is the best next step.
Step 5: Open a Business Bank Account
Once your LLC is registered, open a bank account to separate your business income from personal funds.
You can open accounts at Bank of Georgia, TBC Bank, or Liberty Bank. Each offers:
Multi-currency accounts (GEL, USD, EUR).
Online banking in English.
Debit and credit cards for business use.
IBAN and SWIFT access for international transfers.
Banks may request notarised documents and certified Georgian translations. Gegidze provides professional translation and document preparation so that your application is approved quickly.
Step 6: Transfer Operations from IE to LLC
With your LLC active, you can now move your business operations over.
Inform your clients of the new entity and update your invoices.
Sign new contracts under the LLC name.
Move your accounting system and expense records to the new structure.
Update your VAT or tax reporting preferences.
If you had ongoing projects or pending invoices under your IE, close them formally before switching. This prevents confusion during tax audits.
Tax Considerations During the Transition
Transitioning from an IE to an LLC is not just administrative, it has important tax implications.
Exceeding the Threshold Mid-Year
If you cross the 500,000 GEL limit mid-year, only income beyond that amount is subject to 20% tax, unless you fail to inform the Revenue Service Georgia in time. To avoid penalties, it’s best to transition as soon as you see your turnover approaching the cap.
Closing the IE Properly
All outstanding income, invoices, and assets under your IE must be settled before closing. Otherwise, the Revenue Service may treat them as unreported income under your new LLC, leading to double taxation.
Moving Assets
If you used personal assets for your business (like a laptop or equipment), you can transfer them to the LLC as capital contributions. This does not trigger additional taxes.
Avoiding Overlap
Make sure you do not issue invoices from both your IE and LLC in the same period for the same project. This confuses reporting and could lead to audits.
Proper timing and documentation keep your transition smooth and fully compliant.
Common Mistakes When Switching from IE to LLC
Transitioning from an Individual Entrepreneur (IE) to a Limited Liability Company (LLC) sounds simple on paper, but many entrepreneurs get caught in small administrative or compliance errors that create big problems later.
Let’s look at the most common mistakes and how to avoid them.
1. Forgetting to Officially Close the IE Account
Many people stop operating under their IE and assume that the system will automatically close their registration. It doesn’t. You must officially notify the Revenue Service Georgia and submit a final declaration. Until you do, the system continues to generate tax obligations.
2. Issuing Invoices From Both Entities
You cannot issue invoices as an IE and as an LLC simultaneously for the same activity. Doing so confuses your reporting and can trigger an audit. Once your LLC is active, all invoices must be issued under that entity only.
3. Skipping Proper Document Translation
Foreign founders often forget that company documents must be submitted in Georgian. Banks and the National Agency of Public Registry will reject applications if translations are not certified. Use a professional English to Georgian translation service to ensure documents meet legal standards.
4. Missing Deadlines for Monthly Filings
After transitioning to an LLC, you must file monthly declarations, even if you have no income. Missing filings can result in fines. Many entrepreneurs delegate this to local accountants or hire compliance partners like Gegidze.
5. Not Updating Client Contracts
Invoices are only part of the picture. If your clients continue paying your IE account, those transfers could be misclassified. Always sign new contracts under the LLC name and update your banking details immediately.
6. Not Choosing the Right Tax Regime
Some business owners forget to apply for Virtual Zone or International Company status after registering their LLC. This means they pay more tax than necessary. A simple application to the Ministry of Finance could save you thousands each year.
Cost Breakdown of Transitioning from IE to LLC
The good news is that setting up an LLC in Georgia is fast and inexpensive. Below is a general cost overview to help you plan.
The total cost of transitioning is usually under 1,000 GEL, excluding ongoing accounting fees. That’s far cheaper than most European countries, where company formation alone can cost €1,000–€3,000.
Why LLCs Are the Growth Engine of Georgia’s Business Ecosystem
Georgia’s system is built to support entrepreneurs who scale. Once you become an LLC, you access new advantages that extend far beyond tax savings.
1. Access to Virtual Zone and IT Incentives
If your company provides software, consulting, or IT services to clients abroad, you can apply for Virtual Zone status. It offers:
0% corporate income tax on foreign-sourced revenue.
0% VAT on exported digital services.
5% tax only when you distribute dividends.
This is one of the most efficient legal setups in Europe for tech founders and remote agencies.
2. International Company Status for Larger Teams
If you employ staff locally, you can apply for International Company status. It reduces corporate tax to 5% and lowers payroll taxes for Georgian employees. For companies building permanent offices or development teams in Tbilisi or Batumi, this is the logical next step.
3. Smooth Banking and Payment Systems
LLCs can open full business accounts at Bank of Georgia, TBC Bank, or Liberty Bank Georgia. These accounts include IBAN access, SWIFT transfers, and multi-currency functionality. For businesses invoicing global clients, this is a huge improvement over personal accounts.
4. Easier International Partnerships
Operating as an LLC makes your business more credible. International clients and investors prefer contracts with registered companies, not individual freelancers. For those planning to raise funding or form partnerships, this credibility is essential.
Timing Your Transition to Avoid Tax Problems
When you cross the 500,000 GEL threshold, timing becomes critical. Transition too late, and you could face penalties. Transition too early, and you may overcomplicate your setup.
Here’s how to time it correctly:
1. Monitor Monthly Turnover
Use your accounting dashboard to monitor your income closely. Once you hit around 400,000 GEL, start preparing your transition.
2. Register the LLC Before the Year Ends
If you expect to pass 500,000 GEL in the current year, registering before December prevents recalculation of your annual income at 20%.
3. Close IE in the Same Month You Open LLC
This keeps your tax filings clean and prevents overlapping declarations.
4. Notify the Revenue Service Early
Transparency is key. Inform the Revenue Service Georgia when you plan to close your IE and launch your LLC. This ensures they process the change correctly.
Gegidze helps clients time this perfectly so the transition is seamless and penalty-free.
The Role of Tax Residency in Maximising Savings
Many business owners moving to Georgia overlook the personal side of taxation. Once your LLC is running, consider becoming a Georgian tax resident.
You can qualify by:
Spending at least 183 days per year in Georgia, or
Applying under the High Net Worth Individual program.
As a tax resident, dividends you receive from your Georgian company are taxed at only 5%, compared to 20–30% in most other countries.
If you are a resident of Germany, France, or the UK, and still pay taxes there, shifting residency to Georgia can save a significant portion of your personal income.
Example Scenario: The Smart Transition
Let’s take an example.
Luka runs a small design business as an IE in Georgia. In 2023, his turnover reached 480,000 GEL. By mid-2024, he projects over 600,000 GEL.
Here’s what he does:
He registers a new LLC in July 2024.
He closes his IE after submitting his final June declaration.
He applies for Virtual Zone status since his clients are abroad.
He opens a business account at Bank of Georgia.
He becomes a Georgian tax resident to benefit from the 5% dividend rate.
By planning early, Luka avoids the 20% penalty, gains limited liability, and operates under a 0% corporate tax model.
This example reflects the real advantage of managing your growth proactively instead of waiting for penalties.
How Gegidze Simplifies the Whole Process
At Gegidze, we make transitioning from an IE to an LLC effortless. Whether you are a freelancer scaling up or a small business expanding internationally, we manage every step.
Our services include:
Deregistration of your Individual Entrepreneur account.
Full LLC registration at the National Agency of Public Registry.
Certified English to Georgian translations for all legal and bank documents.
Virtual Zone and International Company applications.
Business bank account setup with Bank of Georgia, TBC Bank, or Liberty Bank.
Monthly accounting, declarations, and payroll management.
Georgian tax residency planning and compliance support.
Instead of spending hours researching paperwork and tax codes, you can focus on what matters, growing your business.
Gegidze ensures every step of the process is legal, documented, and compliant with the Revenue Service Georgia requirements.
Reaching the 500,000 GEL mark is a milestone worth celebrating. It means your business is growing, your services are in demand, and your hard work is paying off.
But with growth comes responsibility. Transitioning to an LLC is not just a legal obligation; it’s a strategic decision that ensures you continue to operate efficiently while protecting your finances.
Georgia’s tax system rewards structure and compliance. Whether you register under the Virtual Zone, International Company, or standard LLC regime, you’ll still enjoy lower taxes than almost anywhere else in Europe.
The key is to act early, plan properly, and get professional help.
If your turnover is approaching 500,000 GEL, now is the time to prepare. Book a free consultation with Gegidze and let us guide you through your transition from IE to LLC.
We’ll review your income, identify the best tax regime, prepare all English to Georgian translations, and register your new company quickly and legally.
With Gegidze, your transition is smooth, compliant, and ready for long-term growth.
Frequently asked questions (FAQs)
What happens if my Individual Entrepreneur income exceeds 500,000 GEL in Georgia?
Once your annual turnover exceeds 500,000 GEL, you lose your Small Business Status and the 1% turnover tax. Your income is reclassified under the 20% personal income tax system. To avoid penalties, it’s best to transition to an LLC in Georgia before passing the threshold.
Can I continue working as an Individual Entrepreneur after exceeding 500,000 GEL?
No. The Revenue Service Georgia can revoke your status if your income surpasses 500,000 GEL. You must deregister your IE and either register as a standard taxpayer or open an LLC to continue operations legally.
How long does it take to register an LLC in Georgia?
Registering an LLC in Georgia usually takes one business day with the National Agency of Public Registry (NAPR). You’ll need identification, a company charter, and certified English to Georgian translations for foreign founders.
What are the tax advantages of switching from IE to LLC?
An LLC lets you access Georgia’s most favorable tax regimes, such as Virtual Zone status (0% corporate tax on foreign IT income) and International Company status (5% corporate tax for larger teams). Profits retained in the company are untaxed until distributed.
How can Gegidze help with my transition from IE to LLC?
Gegidze handles every step: deregistration of your IE, LLC registration, tax setup with the Revenue Service Georgia, bank account opening at Bank of Georgia or TBC Bank, and certified translations. We also manage accounting, payroll, and ongoing compliance.
