Sole Proprietorship Registration: What to Know About the Form
The sole proprietor is the simplest form defined by the law on entrepreneurs, but its legal nature must be understood precisely: an individual entrepreneur is not a legal person. In business relations it exercises its rights and performs its duties as a physical person, and for obligations arising from entrepreneurial activity it answers to the creditor personally, with all its property, unless otherwise agreed.
An entrepreneur is a physical or legal person who has an enterprise — an organized system for carrying on entrepreneurial activity. Entrepreneurial activity is lawful, not one-off, independent and organized activity carried out for profit; it may be conducted in the form of an individual entrepreneur or an enterprise company; the company is a separate legal person — the very mark by which it differs from an individual entrepreneur.
When Activity Does Not Require the Entrepreneur Form
The law also bounds what is not considered entrepreneurial: the artistic, scientific, medical, architectural, advocacy, arbitral, mediation, notarial, audit or consulting activity of physical persons, activity as a patent attorney, and the use of a micro power plant connected to the electricity distribution network do not require the entrepreneur form. Such persons — representatives of liberal professions — may, unless a special law provides otherwise, use the legal forms of the entrepreneur.
A special rule exists for agricultural and forestry activity: it too is not considered entrepreneurial so long as fewer than 5 persons not belonging to the owner’s family are permanently employed for it; once that threshold is crossed, founding a legal form of entrepreneur becomes necessary.
The Registration Procedure and the Application
Registration of an entrepreneur is mandatory and covers both state and tax registration, carried out by the registering body. An entrepreneur is deemed created from the moment of registration in the register, and the decision on registration is effective as soon as it is posted on the registering body’s unified electronic portal. The rules for keeping the register are defined by the law on the public registry and by the instruction. Information on the registration, amendment and cancellation of data kept in the register is sent electronically by the registering body to the Revenue Service. Responsibility is divided as well: the authenticity and accuracy of the submitted data rest with the organ that created them, while the registering body answers only for the consistency and security of the registered data and documents.
For registration as an individual entrepreneur, the physical person submits to the registering body a written application and an identity document; for a foreign case, the document used for identification in notarial acts. The application contains the applicant’s name, legal address, personal number and signature. The right to submit it belongs also to physical persons legitimately residing in the occupied territories — in the Autonomous Republic of Abkhazia and the Tskhinvali region — who are registered as the law prescribes and have a personal number; their procedure is defined by the instruction.
Firm-Name Rules
The firm name of an individual entrepreneur is the name registered as such in the register under which the entrepreneur carries on activity. The name may use the entrepreneur’s first or last name, a word chosen according to the object of activity, or a product of imagination. It must contain the addition “individual entrepreneur” and must be in Georgian; graphic symbols that have no phonetic or verbal equivalent established by language norms are impermissible.
The law restricts the content as well: words misleading third persons about the legal form are impermissible, as are formulations identical or similar to the name of a state organ or a well-known person without consent, and a physical person’s name without written consent; a deceased person’s name may not be used for at least 30 years after death, save with the heir’s written consent. The registering body checks compliance against the relevant databases and, where the information is insufficient, may request additional information or documents. Unlawful use of another person’s firm name does not go unanswered: upon the demand of an authorized person such use must cease and the damage caused must be compensated.
Deregistration
The registration of an individual entrepreneur is cancelled on two grounds: by personal application, or upon the death of the registered person, their declaration as deceased or recognition as missing, or recognition as a recipient of support. Deregistration also terminates any general commercial power of attorney, and the entrepreneur’s successor is the corresponding physical person. In these cases the registration is cancelled at the request of any person or on the initiative of the registering body.
A practical note: an individual entrepreneur answers with all its property, while an enterprise company is a separate legal person — compare the two forms before registering.
Frequently Asked Questions
Below are the most frequent questions about sole proprietorship registration.
Is an individual entrepreneur a legal person?
No. It acts in the status of a physical person and answers for entrepreneurial obligations with all its property.
What does registration cover?
State and tax registration; it is carried out by the registering body, and the entrepreneur is deemed created from the moment of entry in the register.
What must the application contain?
The applicant’s name, legal address, personal number and signature; an identity document is attached.
When can registration be cancelled?
By personal application, or in case of death, declaration as deceased, recognition as missing or as a recipient of support.
What addition is required in the firm name?
The status designation of the individual entrepreneur, and the name must be in Georgian.
How We Help on Legal.ge
The lawyers of Legal.ge help you pass sole-proprietorship registration quickly: we prepare the application, check the firm name against the law’s requirements, and assess whether the entrepreneur form is needed for your activity at all. Contact us — the right choice of form and a flawless registration save time and cost.