Knowledge base / LLC
Sole proprietor or LLC in Armenia: how to choose your business form
The key difference: who is liable for debts
An IE is simply you, registered as a business. There is no separate legal person, so you are liable for business debts with everything you own.
An LLC is a separate legal entity. Members normally risk only what they put into the charter capital.
For a freelancer with steady clients, this rarely matters. It does once you take prepayments, rent premises, buy stock or sign contracts with penalty clauses.
Side by side
- Registration. IE: a 3,000 AMD state fee and very little paperwork. LLC: no state fee, but you need a charter and an Armenian address.
- Turnover tax. Open to both if last year's turnover was up to 115 million AMD.
- Micro-business regime. Also open to both, up to 24 million AMD a year. Some activities are excluded.
- Paying yourself. IE: no extra tax. LLC: dividends taxed at 5%.
- Partners. An IE is always one person. An LLC can have up to 49 members with defined shares.
- Selling or closing. You cannot sell an IE, but closing it is simpler. LLC shares can be sold; liquidation takes longer.
Taxes: where the real difference is
- Turnover tax. Usually 10% for services and trade (traders get a deduction for documented purchases) and 7% for manufacturing. Existing businesses apply by 20 February; a new business should apply right at registration. More in Turnover tax in Armenia.
- General regime. An LLC pays 18% profit tax and 20% VAT.
- Taking profits out. An IE pays nothing extra. An LLC member receives dividends taxed at 5%.
Compare what actually lands in your account. For a solo freelancer on turnover tax, an IE usually comes out ahead by roughly that 5%. For a team with partners, 5% is a small price for limited liability and clear ownership.
Reporting, banks and clients
On turnover tax, reporting is similar for both: a quarterly return, with tax due within 20 days after the quarter ends.
An LLC has more corporate housekeeping: members' decisions, paperwork for dividends and beneficial owner details. On the general regime, add a monthly VAT return due by the 20th and full bookkeeping.
Both an IE and an LLC can open an Armenian bank account. For an LLC, the bank will ask for the charter and details of the director and owners. Foreign clients often prefer a contract with a company.
Quick test: which one fits you
Choose an IE if you work alone, provide low-risk services, stay within the turnover tax limit and want minimal paperwork. See How to register as a sole proprietor in Armenia.
Choose an LLC if you have partners, plan to hire, raise investment or sign big contracts, a client insists on a legal entity, or you want to ring-fence personal assets. See How to register an LLC in Armenia.
A common path is to start as an IE, test demand, and open an LLC as you grow. Just note that an IE cannot be converted into an LLC. It is a fresh registration.
Common mistakes
- Choosing on tax rate alone. On the same regime, rates are almost identical.
- Sharing one IE between two partners. The partner whose name is not on it has no rights at all.
- Taking money out of an LLC without formal dividends. The tax office may reclassify those payments.
- Ignoring the 115 million AMD limit and landing on the general regime with VAT.
- Abandoning an unused IE or LLC instead of closing it. Filing duties and penalties keep piling up.
Frequently asked questions
Is a sole proprietor in Armenia liable for business debts with personal assets?
Yes. An IE is simply you registered as a business, so you are liable for its debts with everything you own. An LLC is a separate legal entity, and members normally risk only what they put into the charter capital.
What tax do LLC owners in Armenia pay on dividends?
LLC members receive dividends taxed at 5%. An IE owner pays no extra tax when taking money out, so for a solo freelancer on turnover tax an IE usually comes out ahead by roughly that 5%.
Can two partners share one sole proprietor registration in Armenia?
No. An IE is always one person, and the partner whose name is not on it has no rights at all. An LLC can have up to 49 members with defined shares.
Can I convert my Armenian sole proprietorship into an LLC later?
No, an IE cannot be converted into an LLC; opening an LLC is a fresh registration. A common path is to start as an IE, test demand and open an LLC as you grow.
We'll compare both options using your numbers
We calculate taxes for an IE and an LLC, handle the registration and take over your reporting.
Sources: Tax Code of Armenia — arlis.am; PwC Worldwide Tax Summaries — corporate income tax and micro-business, turnover tax and VAT, dividend tax; Ministry of Justice — registration of legal entities and IEs; State Revenue Committee — src.am.