Over the last few years, Ukraine has made an effort to simplify its laws on starting and operating a business within its jurisdiction. Its efforts saw it ranked the 52nd easiest country to start a business, out of 190 countries.
Before you set up a business, you need to seek legal advice as well as understand the types of companies in Ukraine.
Limited Liability Company
In case of bankruptcy, the personal assets of the shareholders in a limited liability company are protected. It happens to be one of the most popular types of companies, not only in Ukraine but also across the globe.
Limited Liability Companies vary in size and scope, from a one-person show to multinational business entities such as Google. In Ukraine, both individuals and companies can register an LLC.
Unlike in most countries, the share capital in Ukraine’s LLCs is divided into parts, instead of the usual shares. Thus, each member owns a part of the company and not stocks.
- Best suited for small to mid-size businesses
- Straightforward registration completed within 1 to 2 days
- Minimum of one and a maximum of 100 shareholders
- Corporate directors not permitted
- A company secretary is not mandatory
- The company must have a registered physical address within Ukraine
- No minimum share capital required
- Smooth transfer of shares with a mandatory amendment of the company’s charter
Joint Stock Company
As is the case for LLC, the shareholders’ are not personally liable for the company’s debts. However, unlike an LLC, a Joint Stock Company has to issue shares, registered with the National Securities and Exchange Commission.
The registration, compliance and reporting requirements for a JSC are more complex, hence only suited for large companies. A JSC can either be public (shares are traded to the public at a stock exchange) or a private limited liability company (shares are privately held).
- A more complicated registration process hence takes longer
- Minimum of one shareholder, no upper limit
- Directors appointed by shareholders during a general meeting
- Required by law to have a corporate secretary
- Minimum share capital equivalent to 1,250 salaries
- May have privileged shares, though not more than 25%
- Should have a reserve capital equal to 15% of its paid-up capital
A foreigner has the right to partner with a Ukrainian resident, to get profit or achieve any other goal; it is not a legal business entity, but a joint activity between two individuals with a similar purpose. The involved parties may or may not assign property.
- Not ideal for long term operations or those seeking to do business
- A joint venture can be over a limited or unlimited period
- Profits and risks are to be distributed according to the initial agreement
- All parties involved are entirely liable for the company’s debt
- Profit earned is included in the income of each party for purposes of taxation
- It may or may not have a separate bank account
- In case the activities of the joint venture are reliable to VA, the JV has to register with the tax authorities
For individuals in non-risky business activities, a Private Company is the most ideal for their simple needs. In Ukraine, foreigners can also register as Private Entrepreneurs and enjoy the Simplified Tax Regime. They only require to have a tax number and a registered physical address.
- Popular amongst self-employed individuals, freelancers and IT experts
- Easy and quick registration
- Simple maintenance
- The individual bears the full responsibility of all debts incurred
- Can have a separate bank account
- Has the right to conduct business activities and hire employees
- If the company has an income of less than 5 million UAH/year, one can apply for the Simplified Tax Regime.
- Under this tax plan, the entrepreneur pays only 5% of their income and a much lower social security’s tax
Representative Office and Branch Office
A foreign company can establish a local company in Ukraine. Also, the company may decide to open a representative or a branch office. The sole purpose of a Representative Office is to explore the market and undertake other non-transactional activities on behalf of the parent company. However, it does not engage in any commercial activities in Ukraine.
On the other hand, a Branch Office is a permanent establishment, which has the right to participate in varied economic activities on behalf of the company. Most importantly, it much first register with the Ukrainian tax authorities.
- A representative or branch office is not a legal entity
- The parent company is liable for its risks and debts
- Must be registered with the Ministry of Economic Development and Trade of Ukraine at a $2,500 fee.
- Registration certificate issued within 60 working days
- Can open bank accounts in Ukraine, but under strict Ukrainian regulations
- Their activities are regulated by the power of attorney of the parent company.
The perfect form of company structure ideal for your business depends on the business type, the number of shareholders, expansion plans and level of business risks involved. In Ukraine, the majority of new startups are small to medium-sized, making the LLC type of company the most ideal.