A new commerce opportunity can be exciting, but it’s essential to know the legal entities available to start a business in Ukraine. A few different types of companies and organizations one might incorporate are Private Entrepreneur, Limited Liability Company, Joint Stock Company, and Joint Venture. We provide information on these legal entity topics, as general information and not legal advice, when determining the founding of your own company.
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Common Types Of Legal Entities
List of commonly formed Ukrainian legal entities:
Starting a business on the territory of Ukraine has many steps to the process.
Begin with considering the legal entity types available and which one is best for operating.
Acknowledge which entities are available
After acknowledging entity types, review the various formation structures available and how they satisfy the demands of the organization regarding ease of incorporation, the minimum capital investment required, capital investment on-hand, and the liability factors for the company and shareholders.
Currency, taxes, and compliance
The following steps before finalizing structure are tax implications, compliance, and reporting, how the currency will be controlled, deposited, withdrawn, and converted.
Ukraine has talent to hire
About the staff and workers, will the team be in Ukraine or will they be residents and citizens of foreign countries, and are there restrictions to doing business within Ukraine and across international borders?
Ukraine is home to some of the most innovative industries and organizations in Eastern Europe. This is not subjective but rather an objective truth, as evidenced by the exceptional technologically focused degree programs at Ukrainian universities and the number of international students enrolled.
Last consideration before choosing structure
A final thought is how to handle business/company closure and the payout for shareholders.
We work with five types of company formation, LLC, PE, JSC, and JV. Formation of NGO is a separate service and discussed on case-by-case basis only.
Private Entrepreneur (PE)
A Private Entrepreneur (PE) may be the best for low-risk business activity. PE can register their company, maintain it and save taxes by living abroad or on the Ukrainian territory with significant tax savings. Citizens of foreign countries need proper documentation like visas or residence permits, and we can help with temporary residence permits.
Benefits of PE
Private companies registered under this status enjoy many benefits: more straightforward paperwork overall due mainly to its ease of maintenance requirements; it doesn’t require much more than filling out some forms once per year. Ukrainian citizens are also allowed to register as Private Entrepreneurs.
Private Entrepreneurs have the opportunity to operate without strict regulations. They enjoy a simplified tax regime with an annual revenue limit of up 5 million UAH. They can open bank accounts, conduct business activities, hire employees, etc., structurally similar to Sole Proprietors in the United States.
- Best for low-risk business activity
- Simple business registration
- Simple business maintenance
- Significant tax savings and simplified tax code
- Ukrainian citizens can register PE
- Foreign citizens can register PE on territory of Ukraine
- Foreign citizens legally residing within Ukraine’s territorial boundaries can register PE in Ukraine
- Foreign citizens can obtain Ukraine tax identification number
- Foreign citizens can obtain business address within Ukraine’s borders
Limited Liability Company (LLC)
A Limited Liability Companies (LLC) can be a solid organizational form for start-ups because they provide individuals and legal entities with many benefits while not limiting their membership numbers (herewith, one person can establish an LLC).
The owners of an LLC are not personally liable for the company’s debts or obligations. As they only contribute capital, there is no risk to them in these circumstances.
Suppose something happens outside their control (such as a member going bankrupt). In that case, the entire business could also fail because members cannot repay debts from personal assets alone without becoming upside down on loans. Interests would suffer, too, since creditors don’t care how much equity is contributed by individual stakeholders, all may get paid out in a worst-case scenario.
In short: Limited Liability Company protects people who want limited liability when operating certain types of businesses but still allows outsiders access into operations should any problems arise.
Benefits of LLC
LLCs are an excellent choice for people looking to limit their exposure if the company goes belly up. For example, suppose you own 10% of a business with $1 million debt and its assets total at only 80 thousand dollars. In that case, your stake will likely be sufficient enough should anything happen because there’s plenty left over after paying off creditors. You won’t have personal liability beyond what was put into authorized capital by yourself or fellow investors.
- Best for startups, small and mid-size companies
- Can be one person or shareholder
- Can be large organization and many shareholders
- One of the most popular business incorporation structures for Ukraine and the world
- Can be registered by individual
- Can be registered by a company
- Each shareholder member a share or part of company, not number of shares
- LLC charter can be constructed to be very nimble regarding shareholder capital and how company is divided
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FAQs About Starting A Business In Ukraine
How can I register company in Ukraine?
Choose a legal entity and business structure, receive consultation for currency requirements, tax implications, and compliance. Next, consider if employees will be Ukrainian citizens or residents of foreign countries. Lastly, determine mitigation process for company closure and shareholder payout.
How long is company registration process?
The process to complete business registration can be completed in less than 45 days and can take up to 12 months, or more.
What is the cost of company registration?
Depending on factors related to entry into Ukraine, entity type and business structure, type of business, and residence requirements, the cost begins at €800 and up to €5000, and more.
How easy is it to incorporate?
This depends on bureaucratic red tape, documents and applications you are prepared for and information you will need to complete the application process, and the approval process determined by Ukrainian state governing bodies.
The most significant factor is finding an attorney who may not specialize in company formation or hiring the best attorneys for starting companies in Ukraine.
You get what you pay for whenever attorneys are involved.
How much money do I need to start?
You’ll want to start small and work your way up.
It’s essential not only for the business itself but also because it will give you an idea of what kind of resources (time-wise) is required to maintain a healthy startup culture throughout all stages; from initial funding through growth phases into maturity where investors can exit their investments or pull out entirely if they wish, which means less risk involved on both sides.
The amount of capital injected into the business is up to you, provided the minimum capital requirements are met.
What is the liability?
When starting a business, one of the main concerns is liability.
What happens if you run into a problem and your business is at fault?
A lot can depend on location of entity registration, who or how much experience they have similar running businesses like yours.
There aren’t any laws that protect entrepreneurs from lawsuits, so it’s essential to think through every step before taking these risks.
Ukrainian law is much less strict when it comes to company formation, allowing entrepreneurs with all experience levels at their disposal.
The liability you take on as business owner depends on the company formation structure.
What are the tax implications?
It would be best if you considered the overall tax burden, income taxes for employees and self-employed people, and capital gains taxation on investments such as stocks or bonds that you buy with your business’s money.
There will also likely be employment fees associated with hiring someone new who comes into this country, specifically from somewhere else, which is worth thinking about before making any decisions regarding expansion plans.
The overall taxation for companies varies depending on whether they have profits or losses.
For instance, if you’re looking towards investing your money into production assets with hopes that it’ll generate enough returns to pay off what’s owed from previous years’ earnings, you might be better served by seeking out an offshore jurisdiction.
There may not be the worry of paying taxes twice, once when earned, then again upon return of money to home country.
What are compliance and reporting factors for startups?
The compliance and reporting can be complex, depending on the size of your business.
There are many considerations, but some examples include: complexity; where do you do most of your work or services offered (ex., retail or wholesale); is the company only doing business in one country or beyond international borders; what is customer demand?
These things may not seem related at first, that’s why it’s essential to answer questions and concerns about compliance and reporting before moving forward.