How to start business in Georgia Administrative simplifications

Maka Ghaniashvili

Following the attempts to draw up a business plan and develop first steps of start-up procedures, the first obstacle that faces an entrepreneur are the procedures related to company establishment and duly registration, necessary for legal functioning of a company.

Start up registration rule – procedures, official terms and expenditures that a new enterprise should cover before beginning legal functioning – significantly vary in different countries. In majority of countries registration official expenditures are particularly high. As a result those countries that have highly regulated registration procedures face higher level of corruption as well as unofficial economic indicators.
Entrepreneurs often entail corrupting officials to speed up the process. Others, in order to avoid oppressive regulations, conduct their businesses unofficially. Regulation that imposes costs beyond the expected social benefits is usually regarded as red tape.
Complex, non-transparent and time consuming procedures are related to higher level of corruption, especially in developing countries, where each step of procedures refers to private contacts, one of the means of bribing. Practice shows that difficult and inflexible registration procedures do not raise the quality level of production as well as the safety of working conditions. They limit private investment and push more and more people to shadow economy, increase consumption prices and feed corruption. Business start-up procedures within highly developed market economy and democracy are simpler. For instance, in Mozambique an entrepreneur has to pass 19 procedures requiring minimum 149 working days and USD 256 to set up a business enterprise while Italian entrepreneur passes 16 procedures, pays USD 3946 and requires minimum 62 working days for getting corresponding permissions. Unlike Mozambican and Italian entrepreneurs, Canadian businessman can complete 2 procedures and pay USD 280 in two days. Modernized and simplified registration procedures positively influence establishes a more favorable business environment. Quick and easy registration processes may contribute to the reduction of corruption related to the procedures. This is a particularly significant matter in post soviet union republics, including Georgia. Its worth noting that Georgia has implemented important reforms in this regard. According to World Bank ‘Doing Business 2006’ ranking, for establishing a business enterprise in Georgia it was required to pass 8 procedures, 21 days and 13.7% of total GDP per capita. In 2008 ranking number of procedures decreased to five, term – 11 days and fee- 9.5%. (Table1). The results were supported by reforms that covered the unification of entrepreneurship and tax registration. As a result Georgia occupies 10th position in Starting a Business category of Doing Business 2008 ranking.
Starting a business in Georgia requires 5 procedures, 11 days and 9.54% of GDP per capita. Start-up procedures include:
1. Legalization of establisher’s documentation and notary confirmation;
2. Paying registration fee;
3. registration in entrepreneur register and taxation department;
4. confirmation of official/company stamp;
5. opening corporate account in a bank;
As we have already mentioned, Georgia led the global top 10 reformer rankings on the ease of doing business. Australia is number one, followed by Canada, New Zeeland and United States. As for our neighboring countries – Turkey occupies 43rd place, Armenia – 47th, Russia 50th, Azerbaijan – 64th.
There are two-stage procedures for registering an enterprise in Australia, Canada and New Zeeland: the first stage includes presenting an electronic application and the second implies registering in taxation department.