LLC, JSC or Partnership: Georgia's Legal Forms Compared
Georgia's Law on Entrepreneurs offers six ways to carry on a business, and almost every foreign founder ends at one of them, the LLC. The others matter in specific cases: a bank must be a joint-stock company, a company with many shareholders may want to be one, and the partnership forms carry personal liability that surprises founders from other systems. The forms compared on liability, capital, governance and how shares are held, and how to change form later.
The country of Georgia keeps every form of business in one statute. The Law on Entrepreneurs offers six legal forms: the individual entrepreneur, the general partnership, the limited partnership, the limited liability company, the joint-stock company and the cooperative. Almost every foreign founder ends at the LLC, and for most that is the right answer: one founder is enough, there is no statutory minimum capital, liability is limited and the charter can be shaped to the business. The comparison is still worth ten minutes, because the exceptions are specific. A bank or a microbank has to be a joint-stock company. A company that expects many shareholders or a stock exchange listing needs shares that are securities. And a Georgian partnership is not the light, tax-transparent vehicle that the word suggests in some other countries.
6
Legal forms in the Law on Entrepreneurs
Five kinds of company and the individual entrepreneur, who is not a legal person.
GEL 100,000
Minimum subscribed capital of a JSC
At registration, at the time of writing. An LLC has no statutory minimum. Confirm against the Law.
50
Shareholders before a licensed registrar is compulsory
Up to that number a JSC may keep its own share register. Confirm against the Law.
The six legal forms the Law on Entrepreneurs offers
| Form | Who answers for the debts | Needed to start | Where you meet it |
|---|---|---|---|
| Individual entrepreneur | The person, with all their assets | One person; no legal entity is created | Solo freelancers on the 1% regime |
| General partnership | Every partner, personally and jointly | At least two partners | Rarely; family or professional ventures |
| Limited partnership | General partners in full; limited partners up to a registered amount | At least one partner of each kind | Rarely; a passive investor beside a manager |
| Limited liability company | The company, with its own assets | One founder; no minimum capital | Almost every foreign-owned business |
| Joint-stock company | The company, with its own assets | One founder; GEL 100,000 subscribed capital | Banks, widely held companies, planned listings |
| Cooperative | The cooperative, with its own assets | At least five founders | Member-serving ventures, often agricultural |
Business may be carried on by an individual entrepreneur or by a company. General and limited partnerships, limited liability companies, joint-stock companies and cooperatives are companies, and a company is a legal person. An individual entrepreneur is not a legal person and answers to creditors with all their assets. A limited partner of a limited partnership and a partner of a limited liability company, joint-stock company or cooperative is not liable for the company's obligations, save in exceptional cases where the partner abuses the legal form of limited liability and the company cannot satisfy its creditors.
LLC against JSC on capital, governance and how shares are held
| Feature | LLC | JSC |
|---|---|---|
| Capital | No statutory minimum; any amount, stated in lari | GEL 100,000 subscribed at registration; at least a quarter of cash contributions paid by then |
| What a share is | A registered right in the company | A security |
| Where ownership is recorded | The public registry; partners appear on the extract | The share register, kept by the company or a licensed registrar |
| How a transfer takes effect | Written agreement, then registration of the new partner | An entry in the share register, whose records certify title |
| Management | One or more directors, bound by the partners' decisions | A management body that manages under its own responsibility |
| Supervisory board | Only if the charter or a special law calls for one | Compulsory for listed companies and those licensed by the National Bank |
| Freedom in the charter | Wide: most default rules can be varied | Narrow: only where the Law allows |
Two of these lines decide more than they seem to. In an LLC the director must follow the partners' decisions, and the partners' meeting may take a decision on any question; in a JSC the management body is not obliged to follow shareholders' instructions, and a shareholder acts through the general meeting. A founder who wants to own the company and also tell the director what to do is describing an LLC. The second line is the charter. An LLC's charter can depart from most of the Law's default rules, which is what makes tailored voting, transfer restrictions and classes of shares possible; a JSC's charter may depart only where the Law says so.
Contributions differ as well. Work and services can be contributed to an LLC as a contribution in kind. They cannot be contributed to a JSC, and a non-cash contribution to a JSC needs an independent auditor's report before registration.
A JSC is not a privacy device. Its shareholders are recorded in the share register and not in the public registry, but banks and regulators identify beneficial owners under the anti-money-laundering law whatever the form, and where one person holds all the shares the Law makes that fact and the holder's identity public.
When a joint-stock company is required or useful
- A sector law requires it. A commercial bank is established as a joint-stock company, and so is a microbank. A microfinance organisation may be an LLC or a JSC, but must have a supervisory board that follows the JSC rules. A JSC licensed by the National Bank of Georgia must have a supervisory board of 3 to 21 members.
- Many shareholders. When owners are counted in dozens, as with an employee share plan or a wide investor base, recording each transfer in a share register is more practical than a registry filing for every change. Above 50 shareholders the register must be kept by a licensed securities registrar.
- A listing or a public offer. A JSC's shares are securities, the instrument a stock exchange trades, and the Law requires publicly traded shares, as a rule, to be dematerialised. A listed JSC must also have a supervisory board.
- Not an ordinary investment round. An LLC can issue new shares, give existing partners pre-emption rights and create classes of shares with different rights, and the investor's terms sit in the charter and a shareholders' agreement. Our article on shareholders' agreements shows which term goes where.
Partnerships and cooperatives, and why foreign founders rarely use them
In a general partnership every partner is personally liable for the partnership's debts, without limit and jointly with the others; every partner manages and represents it; and the charter is amended by consensus unless it says otherwise. A limited partnership adds partners whose liability to creditors stops at an amount entered in the registry, alongside at least one general partner who is liable in full. Neither form delivers what founders from some other countries expect of a partnership. A Georgian partnership is a company and a legal person, and the Tax Code treats legal entities established under Georgian law as enterprises, so in outline it is taxed under the same profit tax model as an LLC and not in its partners' hands. Confirm the treatment for your own case.
A cooperative is a different instrument. It needs at least five founders and exists to meet its members' needs, with profit as a secondary aim. It suits producers who buy, sell or process together, not a start-up.
Why almost every foreign founder ends at an LLC
- Limited liability with a single founder and no statutory minimum capital.
- Control: the owner appoints the director, can dismiss them at any time and can instruct them.
- A charter that can be written for the business: voting thresholds, transfer restrictions, classes of shares, a supervisory board if the founders want one.
- Ownership that is visible and certain: a share passes when the registry records the new partner, and the extract shows who owns what.
- Familiarity: banks and counterparties deal with LLCs every day. An individual entrepreneur is the better form only for a solo business that qualifies for the 1% regime and can live with personal liability, which our comparison of the two explains.
The software founders who assumed investors meant a JSC
Three founders plan a software company with five angel investors and, later, a share plan for employees. An adviser abroad tells them that a company with outside investors has to be a stock company, so they prepare to register a JSC.
- 1Count the owners: three founders and five investors make eight, far below the 50 at which a licensed registrar becomes compulsory, and no listing is planned.
- 2Price the JSC: GEL 100,000 of subscribed capital at registration, with at least a quarter of the cash contributions, GEL 25,000 if everything is paid in cash, paid by then, and a charter that may depart from the Law only where the Law permits.
- 3Price the LLC: no statutory minimum capital, investor terms carried by a class of shares and a shareholders' agreement, and every transfer recorded in the public registry, which gives each investor a public record of title.
- 4Check for a trigger: software is not an activity that a sector law ties to a legal form. Had the plan been a bank or a microbank, the answer would have been a JSC from the first day.
- 5Decide: an LLC now, and a JSC considered again when the employee share plan would put dozens of names on the register or a listing becomes real.
A JSC would have tied up GEL 100,000 of committed capital and a more rigid charter for no present benefit. The triggers for a JSC are a licence that demands it, a shareholder count that makes registry filings impractical, or a listing. None was on the table.
Illustrative. The capital, registrar and majority thresholds are those of the Law on Entrepreneurs at the time of writing and should be confirmed before any decision.
Changing form later
The Law calls a change of form a conversion and treats it as a kind of reorganisation: the company continues in its new form, and the rules for founding a company of that form apply to it. In outline:
- 1
The partners decide: the new form, the new name, the draft charter, how shares in the new company are allotted and who will manage it. By default the decision needs three quarters of the votes cast; a change that makes partners personally liable, as in a general partnership, needs everyone's consent.
- 2
The decision is certified in the form required for a charter and published on the registry's electronic platform.
- 3
The application for registration may be filed one month after publication, or sooner if every partner waives the right to challenge in writing.
- 4
The conversion takes effect on registration. A company becoming a JSC has to meet the JSC's capital rule at that point, and for three months afterwards creditors whose claims predate the published decision may ask for security if they show that the conversion endangers them.
One change is not a conversion at all. An individual entrepreneur is a person, not a company, so moving from entrepreneur to LLC means founding a new company and transferring the business to it; our article on that move covers the sequence.
Next step
The form decided, the company filed
We register LLCs for foreign founders and draft the charter with the voting, transfer and investor terms the business needs. A joint-stock company, a conversion or a licensed institution starts with a scoping conversation, because there the legal form is one line in a larger file.
See the registration routeWhat this article does not decide
It does not choose a form for a licensed business, where the sector law and the National Bank's rules decide and set capital requirements of their own. It does not model tax: the form does not change the Georgian profit tax model, but your own country may classify a Georgian entity by its own tests, and that is a question for an adviser there. And it does not draft your charter, which is where an LLC's flexibility is either used or wasted. We form LLCs, draft their charters and file registry changes, and we scope a joint-stock company or a conversion with you before any document is prepared. We do not advise on how another country's tax system will treat the form you choose.
General information, not legal advice. Legal forms, capital, governance and conversion are governed by the Law of Georgia on Entrepreneurs, and the form required of a financial institution by its sector law and the rules of the National Bank of Georgia; all of them change, and the official Georgian text governs.