Sole trader or LLC in Armenia: which to choose in 2026
The legal form decides which tax regimes you can use, how much you pay and how money leaves the business. We set out the difference under the current Tax Code — without a ready verdict, because that depends on what you do.
"Sole trader or LLC" sounds like one choice, but it is three: who answers for the debts, how the income is taxed, and how the money reaches the owner. Below is each of them under Armenia's current Tax Code, with the articles.
Liability and the owner's money
A sole trader is liable with everything they own; an LLC limits liability. On money the difference is more practical: a sole trader's income already belongs to the owner, while an LLC's profit reaches the founder as a dividend, from which 5 per cent income tax is withheld (article 150(8)).
The micro regime is not for everyone
Both a sole trader and an LLC can be micro if last year's turnover across all activities did not exceed 24 million AMD (article 267(3)). A micro business is exempt from all state taxes on the micro business except import taxes, income tax on pay to employees, and excise, environmental and road taxes (article 269).
But the list of who cannot be micro is long (article 267(5), points 1 and 2): trade, consulting, legal, accounting, design and marketing services, software development, processing and transmitting information, construction and "similar" work. For an IT specialist, that means the micro regime is practically out of reach. Once turnover passes 24 million, micro ends from that moment to the end of the year (article 268(1)(2)).
Turnover tax: where the sole trader wins
Turnover tax is available if last year's turnover did not exceed 115 million AMD (article 254(2)). The rate depends on the activity — see our turnover tax calculator. One rule applies to sole traders only: a sole trader on turnover tax pays profit tax as a flat 5,000 AMD a month, and that is their final liability for that activity (article 125(3)).
The general regime: where the LLC wins
On the general regime, profit tax is 18 per cent for an LLC (article 125(1)) and 23 per cent for a sole trader (article 125(3.1)). Even if the LLC pays out all of its profit as dividends, 18 per cent profit tax plus 5 per cent on the rest comes to 22.1 per cent, against 23 for the sole trader. You become a VAT payer when turnover passes 115 million AMD during the year, and in that year VAT is charged only on the part above the threshold (article 59(1)(5)).
The deadline you cannot miss
A newly registered business files its regime application within 20 days of registration (article 254(1)(2) and article 267(1)(2)). Miss it and you stay on the general regime until 20 February of the following year (article 254(1)(1)). So we choose the form and the regime together, before registering.
How we usually reason
There is no ready answer, but a few questions narrow the choice quickly. Working alone, without partners, on a small turnover — a sole trader is simpler and cheaper to service. Partners, investors, large clients or a real liability risk — an LLC. Your activity is closed to micro — compare turnover tax with the general regime. For a first estimate, try our "Which tax regime fits you" calculator; the final decision comes after a conversation, once we know your business.
Answers — up front
Can a software developer use the micro regime?
No: article 267(5)(2) of the Tax Code excludes software development and the processing and transmission of information from micro. That leaves turnover tax (with last year's turnover up to 115 million AMD) and the general regime.
How does an LLC's founder take money out of the company?
As dividends, from which 5 per cent income tax is withheld (article 150(8)). On the general regime the profit is first taxed at 18 per cent, so distributing all of it comes to 22.1 per cent in total.
What happens if turnover passes the threshold during the year?
Once turnover passes 24 million AMD, micro ends from that moment to the end of the year (article 268(1)(2)). Once it passes 115 million, turnover tax ends (article 255(1)(2)), and in that year VAT is charged only on the part above the threshold (article 59(1)(5)).
On the general regime, which costs less — a sole trader or an LLC?
On profit tax, the LLC: 18 per cent against 23 for a sole trader (article 125(1) and (3.1)). Even paying out all of the profit as dividends at 5 per cent, the LLC's burden is 22.1 per cent. But the general regime also brings VAT and a different volume of bookkeeping, so we compare on your figures.
Do I have to choose the regime at registration?
The application is filed within 20 days of registration (article 254(1)(2) and article 267(1)(2)). Miss it and the business stays on the general regime until 20 February of the following year, so we settle the regime before registering.