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Startup HR Legal Advisory

What is the difference between an employee and a contractor?

Employees have set hours, tools provided by the employer, and benefits, taxed at 20%. Contractors have independence, use their own tools, and pay their own taxes.

Is an ESOP taxable for the employee?

Generally, granting the option is not taxable. Taxation usually occurs upon exercising the option or selling the shares, treated as capital gains or income depending on the structure.

Can I hire foreign employees in my Georgia startup?

Yes, but you may need to register them with the Revenue Service and ensure they have the legal right to reside/work in Georgia.

Are non-compete clauses enforceable in Georgia?

They are enforceable but subject to strict limitations regarding geography, duration (max 6 months to 3 years depending on context), and scope of activity.

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Human resources are the most valuable asset of any startup, but also the area with the highest legal risk. Unlike traditional companies, startups often utilize flexible work schedules, remote work, freelancers, and innovative employee incentive methods such as stock options (ESOP). The tightening of the Labor Code in Georgia and the increased activity of the Labor Inspection have made it essential for startups to strictly comply with the law. Startup HR Legal Advisory helps founders balance speed and flexibility with legal requirements, protect their intellectual property from employees, and create effective motivation systems.

What Does Startup HR Legal Advisory Service Cover?

Specialists on Legal.ge offer a full spectrum of HR legal issues tailored to the needs of fast-growing companies. This service includes:

  • Distinguishing Employment vs Service Contracts: Assisting in determining who should be hired as an employee (Labor Contract) and who as an independent contractor (Service Agreement) to avoid tax penalties.
  • Developing Employee Stock Option Plans (ESOP): Creating a scheme for transferring company shares to team members, outlining vesting conditions and implementation mechanisms.
  • Intellectual Property (IP) Protection: Including clauses in contracts guaranteeing that all products created by the employee belong to the company.
  • Confidentiality and Non-Compete Agreements: Correctly formulating NDA and Non-Compete terms so that an employee does not take the client base or move directly to a competitor upon leaving (within legally permitted limits).
  • Remote Work Policy: Adapting internal regulations and contracts to remote and hybrid work models.

Real-World Scenarios When You Need This Service

Startups need an HR lawyer in situations such as:

  • Hiring Developers: Most programmers prefer to work as individual entrepreneurs (1% tax). A lawyer will help structure this relationship so it is not considered a hidden employment relationship.
  • Expanding the Team Abroad: If you hire employees in other countries, you need to consider that country's tax and labor regulations or use an EOR (Employer of Record) model.
  • Firing an Employee: Cultural mismatch is common in startups. Violating the legal dismissal procedure can turn into an expensive lawsuit.
  • Distributing Options: Offering equity to key early employees is a major source of motivation. legally formalizing this process is complex, and mistakes are costly.

Georgian Legal Framework and Regulations

The main regulatory document is the Organic Law of Georgia "Labor Code of Georgia", which establishes employee rights. The Tax Code of Georgia is important, especially regarding the differences in taxation between employment and service provision. The issue of options (ESOP) is regulated by the Law of Georgia on Entrepreneurs (which allows for the issuance of options) and the Civil Code. Regarding labor safety, the Law of Georgia on Labor Safety applies. A qualified lawyer will help you comply with these regulations without hindering the dynamic development of the startup.

Service Process

The HR legal advisory process on Legal.ge includes:

  1. HR Audit: Reviewing existing contracts and practices to identify risks.
  2. Creating Documentation Package: Preparing templates for employment contracts, service agreements, internal regulations, and NDAs.
  3. ESOP Scheme Design: Developing an option plan and preparing corporate documents for its approval.
  4. Training and Implementation: Counseling management on proper hiring and dismissal procedures.

Why Choose Legal.ge?

Legal.ge specialists have experience working with fast-growing tech companies. They know how to meet legal requirements without increasing bureaucracy excessively. By collaborating with us, you will create an HR system that attracts talent and protects the company.

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