Organizational and legal forms of entrepreneurship in Ukraine have their differences. Learn more about the advantages and disadvantages of these forms and make the right choice for your business

Legal assistance in registering and doing business in Ukraine

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You can start a business in Ukraine by choosing one of several legal forms of entrepreneurship. The most common are the individual entrepreneur (IE) and the limited liability company (LLC). Which form is better to choose? It all depends on your plans, the scale of your business, and the level of risks you are willing to take. Below, we will describe in detail the features, advantages, and disadvantages of these legal forms.

What is a sole proprietorship: simplicity and quick start

An individual entrepreneur (IE) is the simplest form of doing business. It is often chosen for individual entrepreneurial activity, for example, in the field of trade or services. The main advantages of a sole proprietorship are ease of registration and ease of doing business. To register as a sole proprietor, you do not need to form an authorized capital, which allows you to start your business quickly.

How to open a sole proprietorship in Ukraine and everything you need to know before starting your own business can be found in our previous article.

Also, an entrepreneur has the opportunity to quickly withdraw profits from his or her bank account without complicated procedures. It is also quite easy to close a sole proprietorship - you just need to submit an application, and in 24 hours the business activity will be terminated.

By the way, you can also find instructions on how to close a sole proprietorship on our portal.

However, the main disadvantage of a sole proprietorship is full property liability. This means that an entrepreneur is liable for all his or her obligations not only with business property, but also with personal property. Thus, in the event of debts or other financial problems, an entrepreneur may lose personal property.

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What is an LLC: flexibility and risk protection

A limited liability company (LLC) is a legal entity that allows for a more flexible approach to doing business and is suitable for those who are planning a larger business or want to protect personal property from risks. An LLC may have several members, which allows it to attract partners and divide responsibility between several founders. The main advantage of an LLC is that its members are liable only to the extent of their contributions to the authorized capital. The personal property of the participants is not at risk, which makes this form more attractive for those who do not want to risk their own assets.

Another important advantage of an LLC is the possibility of its transformation into another organizational and legal form without ceasing its activities. For example, an LLC can be transformed into a joint-stock company (JSC) or another form, depending on the needs of the business. Also, an LLC can be established even by one person, which makes it quite flexible.

Looking for information on how to register an LLC in Ukraine? Step-by-step instructions and all the important nuances have already been collected in our previous article.

At the same time, LLC management is more complicated compared to a sole proprietorship. The members must hold general meetings, decide on dividend payments, and perform other duties provided for in the charter. Liquidation of an LLC is also a more complicated process than the termination of a sole proprietorship, as it requires liquidation or alienation of a share in the business.

In addition, it should be borne in mind that the creation and maintenance of an LLC authorized capital is mandatory, but its minimum amount is usually not regulated.

What to choose: Sole proprietorship or LLC?

When deciding whether it is enough for you to open a sole proprietorship or to set up a company, keep in mind that it depends on the scale and nature of the business, as well as the level of risks you are willing to take. If you plan to run your business on your own with minimal risks, a sole proprietorship is the easiest and fastest option. However, if you plan to involve partners or want to protect your personal property from possible risks, an LLC is a better choice.

It is also important to remember that in certain cases (for example, to organize gambling or other specific activities), the law may require the establishment of a legal entity. Therefore, before choosing a business form, you should take into account all legal requirements and specifics of your business activity.

To make the right choice, seek legal advice from Visit Ukraine specialists. Our specialists will help you choose the best form of business, taking into account legal requirements and your situation, and can also accompany you at all stages of registering your own business.

We remind you! Ukrainian legislation does not prohibit foreigners from being employed and doing business in Ukraine, but income earned in the country is subject to mandatory taxation. Read our previous article to find out when foreigners are obliged to pay taxes and how the system of double taxation and e-residency works in Ukraine.

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