Forms of business in Ukraine
The choice of legal forms of business in Ukraine is a very important issue before starting business. Short description of possible ways of conducting economic activity in Ukraine is below, including most popular and widespread in Ukraine – individual entrepreneur and legal entity.
A legal entity may conduct business in the form of private enterprise, limited liability company or additional liability company, general partnership, limited partnership, joint-stock company etc.
An individual person – entrepreneur (private entrepreneur)
The right to establish individual person – entrepreneur (private entrepreneur) has only a person with full legal capacity. The law sets limits on the number of people who can conduct business in the form of individual entrepreneurs. In particular, such activities are not allowed to engage officers prosecutors, internal affairs, courts, public safety, military, judges, notaries (government) officials of public authorities that are designed to monitor the activities of enterprises. And this prohibition applies to persons for which barred the court, or who have not withdrawn or not canceled for acquisitive crimes.
Business activity of individual person – entrepreneur is covered also by legislation which govern economic activity of legal entities.
The advantages of this form of business is that individual person – entrepreneur may transact business directly as an entrepreneur with or without the involvement of hired labor, alone or jointly with others. Individual registration is simple and cheap (in comparison with legal entity).
However, main minuses are: It should be noted that the individual person – entrepreneur is responsible for his/her obligations by all assets (full responsibility). Also, foreigner to register as individual person – entrepreneur shall be registered at official address in Ukraine. And according to the Tax code of Ukraine, foreigner individual person – entrepreneur cannot be the payer of unified (simplified) tax. So, now it’s not cheap as it was till 2012.
Private enterprise is form of legal entity. The main advantage of private enterprise as a legal form of business in Ukraine is absence of obligatory statutory fund (authorized capital) and that responsibility for the obligations of the founders of the private enterprise is only within the statutory fund. The founder of private enterprise in accordance with current legislation of Ukraine may be one or more citizens of Ukraine, foreigners, stateless persons and legal entity. A private enterprise needs official address (office) before registration and founders shall appoint director.
Private enterprise may be payer of general tax system (profit tax – 21%), VAT or simplified tax system (5% from income or 3% form income plus VAT). However, if the founder of private enterprise is another legal entity which possess more than 25% of shares and this legal entity is not simplified tax payer, so private enterprise cannot be a simplified tax payer. This rule concerns only founders – legal entities (not individuals).
Limited Liability Company
According to the legislation of Ukraine to establish limited liability company (LLC) likewise private enterprise may be incorporated by one or more individuals and one or more entities (but all together not more than 100 founders). However, there is a limitation that the limited liability company in Ukraine may not be established by a sole founder – legal entity, which was founded by a sole person.
The main advantage of LLC (same as for private enterprise) as a legal form of business in Ukraine is absence of obligatory statutory fund (authorized capital) and that responsibility for the obligations of the founders of LLC is only within the statutory fund. Limited liability company requires official address (office) before registration and founders must appoint director (who will got salary and pays taxes from the salary).
General Meeting of Shareholders is the highest management body of the Limited Liability Company. A Shareholders Meeting is considered competent if attended by the Shareholder or the Shareholders (representatives of Shareholders) who have more than 60 (sixty) percent of votes in total. Shareholders Meeting shall have the right to decide on all matters of the Limited Liability Company including the ones Shareholders Meeting transfers to competence of other bodies of the Limited Liability Company. Decisions on all issues of limited liability company activity (excluding changes and amendments to the Statute etc.) shall be taken by simple majority of the Company Shareholders who are present at the Shareholders Meeting.
Limited Liability Company in Ukraine may be payer of general tax system (profit tax – 21%), VAT or simplified tax system (5% from income or 3% form income plus VAT). However, if the founder of limited liability company is another legal entity which possess more than 25% of shares and this legal entity is not simplified tax payer, so limited liability company cannot be a simplified tax payer. This rule concerns only founders – legal entities (not individuals).
As we can see, almost there is no difference between limited liability company and private enterprise. But limited liability company is more popular in Ukraine due to the more detailed law regulation and thus this form is better protected against raider attacks than others forms of business in Ukraine; also better regulates relations between founders.
Other forms of business in Ukraine
Additional liability company. Founders of this company are responsible by their contribution to authorized capital and additionally by their own property. Full partnership company – a partnership, all founder are responsible for everything jointly. Special partnership company – a company in which additionally to one founder who bear full responsibility by his/her own property there is another funder who is responsible within contribute to authorized capital.
Joint-stock company (private or public) is a commercial company that has share capital divided by certain number of shares with equal nominal value, and is responsible for its obligations only by property of the joint-stock company, and shareholders bear the risk of losses associated with the company’s activities within the value of their shares .
There are also forms of business in Ukraine which are based on contractual relations. Association – contract union, established to coordinate permanent business activity of few enterprises united by one or more centralized production and administrative functions of specialization and cooperation of production, organization of joint production through the association of members of the financial and material resources mainly to meet the economic needs of association members. Corporation is a contractual association, created through a combination of industrial, scientific and commercial interests of enterprises. Consortium – a temporary agreement between several banks and industrial enterprises to share accommodation loans and financial transactions of a large industrial building. There are also other forms of business but they both as contractual associations are not widespread and well legally regulated.
Best option for foreigners in Ukraine when choose the form of business is limited liability company.
Concerning registration one of forms of business in Ukraine, please, contact: