Business Forms in Ukraine: How to Choose a Sole Proprietorship or Company and What Existing Private Enterprise Owners Should Do

Before opening a store in Ukraine, determine who will own the business, sign contracts, and be liable for debts. An individual entrepreneur (ФОП, Ukrainian abbreviation for a sole proprietor) operates in their own name and is liable for business obligations with their property within the limits established by law. A limited liability company (ТОВ, Ukrainian abbreviation for an LLC) is a separate legal entity in which owners can hold shares. Choose the tax system separately, taking into account the business activity, income, employees, and other legal conditions.

Since 28 August 2025, it has been prohibited to establish new private enterprises (ПП) and a number of other forms. Owners of already registered private enterprises must bring their charters and internal regulations into compliance with the law during the transition period, which ends on 28 August 2028. To do this, determine with a lawyer what changes to the documents are needed. There is no general obligation to liquidate or convert every private enterprise by that date.

What a business form determines

An organizational and legal form establishes how a legal entity is created, who manages it, and what rules apply to its participants. The form of ownership shows who owns the property or business interest. The type of activity describes what the business does, while the single tax group determines the terms for paying that tax. Consider these questions separately before registering.

For example, two people can establish an LLC to sell clothing, define their shares, and appoint a director. They then choose a tax system available to the company. Having two stores or several owners does not by itself determine the single tax group.

The Commercial Code of Ukraine ceased to be in force on 28 August 2025 under Clause 3 of Article 17 of Law No. 4196-IX. To choose a form for a new business, apply the Civil Code of Ukraine and the special laws governing the relevant legal entities.

Sole proprietor or legal entity: who signs contracts and is liable for debts

After registering as a sole proprietor (ФОП), a person obtains business status and operates in their own name. Under Article 50 of the Civil Code of Ukraine, a natural person with full civil capacity—the ability to acquire civil rights independently, perform obligations, and be liable for failing to perform them—may engage in business after state registration. The law may establish restrictions, so check whether the chosen activity is permitted for a sole proprietor before registering.

Under Article 52 of this Code, an entrepreneur is liable for business obligations with all their property, except property that the law prohibits creditors from seizing, meaning using to repay a debt. For an entrepreneur who is married, liability covers personal property and the share in the spouses’ jointly owned property that would belong to the entrepreneur upon division. Before renting premises, purchasing goods with deferred payment, or taking out a loan, assess the potential debt and the property at risk.

A legal entity is a separate organization established and registered under the law. Under Articles 80, 92, and 96 of the Civil Code, it acquires rights and obligations through its authorized governing bodies and, in cases established by law, through its participants. A legal entity is independently liable for its obligations with all property belonging to it. As a general rule, a participant is not liable for its debts, but the law and founding documents may provide exceptions.

Under Part 4 of Article 96, persons establishing a legal entity are jointly and severally liable for obligations that arose before its state registration. This means a creditor may demand performance from them together or from an individual founder. A legal entity is liable for obligations of the founders related to its creation only after its governing body approves their actions. Before signing a contract for a future store, the founders must determine who will be a party to the contract and be responsible for performing it.

Participation in a company grants corporate rights—the rights of an owner of a share, stock, or membership interest. In particular, Article 96-1 of the Civil Code provides for participation in management, access to information, and, for profit-making legal entities, participation in the distribution of profits in accordance with the established procedure. If business partners invest money in a shared store, record in the documents who owns an interest in the business and how each person may exercise these rights.

Business forms to compare before opening a store

Articles 84 and 113 of the Civil Code of Ukraine define the forms of business companies. Before choosing one, compare how the owners participate in the business, manage it, and bear liability for its obligations.

If one person will own the store, first compare operating as a sole proprietor and as an LLC: liability for debts, available tax systems, and management procedures. If there will be several owners, document their arrangements for contributions, shares, the director’s powers, approval of expenses, and a participant’s exit. Then choose a form that can formalize these arrangements.

What the LLC, its participants, and its director are liable for

An LLC is liable for its debts with all its property. This is established by Article 3 of Law No. 2275-VIII “On Limited Liability Companies and Companies with Additional Liability”. Goods, equipment, and funds owned by the company are also part of its property. The amount of authorized capital does not limit the company’s own liability.

Participants must document payment of their contributions. Under Article 2 of this Law, participants who have not paid their contributions in full are jointly and severally liable for the company’s obligations, up to the value of each participant’s unpaid contribution.

Hypothetical example. The sole participant must contribute UAH 100,000 but has paid UAH 60,000. The unpaid amount is UAH 40,000: 100,000 − 60,000. This amount sets the limit of the participant’s liability under Article 2. The participant should keep documents proving full payment of the contribution; if a creditor has already made a claim, provide a lawyer with those documents and the claim to determine the extent of liability. Other legal grounds for liability must be assessed separately.

Being a participant and working as a director create different obligations. Under Article 92 of the Civil Code, persons who breach their duties in representing a legal entity are jointly and severally liable for the losses they cause it. Article 99-1, introduced by Law No. 4196-IX, also provides for liability of officers for culpable acts and omissions. The director should keep decisions approving contracts, payment documents, and explanations of the business purpose of expenses.

Before taking out a loan or making a major purchase, give a lawyer the complete set of documents. Include any proposed personal guarantees—undertakings to answer to a creditor for the company’s debt—or pledges of personal property, which a creditor may use to satisfy claims under the contract and the law. Ask the lawyer to describe separately the obligations of the company, owner, and director, and the conditions under which claims may be made against each. Before signing such contracts, establish the amount, duration, and grounds for personal liability.

What an owner of an already registered private enterprise should do

A private enterprise is a legal entity established on the basis of private ownership and operating under a charter. For its operation, Article 3 and Clause 14 of Article 17 of Law No. 4196-IX establish the following rules:

• During the transition period, which began on 28 August 2025, Law No. 2275-VIII applies to private enterprises on matters not governed by their charters or other laws.
• After the transition period ends, if the owner has not decided to terminate the private enterprise under Law No. 4196-IX during that period, the provisions of Law No. 2275-VIII on LLCs apply to its activities. Charter provisions that conflict with this Law are invalid.

The owner may continue operating the private enterprise without converting it into an LLC. At the same time, Clause 10 of Article 17 requires charters and internal regulations to be brought into compliance with Law No. 4196-IX during the transition period. Until changes are made, these documents apply only to the extent that they do not conflict with this Law.

The owner and director should work with a lawyer to determine which provisions of the documents may be applied and which must be changed by the end of the transition period on 28 August 2028.

1. The owner gathers the documents: the current charter, the decision appointing the director, information from the state register, contribution documents, and principal contracts.
2. The lawyer determines the necessary changes. The lawyer compares the rules for decision-making, signing contracts, approving expenses, obtaining information, and participating in the enterprise with the law.
3. The owner chooses how to proceed: continue operating the private enterprise with properly prepared documents or convert it if that meets the business’s needs.
4. Authorized persons formalize the decision and complete any required registration actions.
5. The director checks the result. The director compares the register information with the enterprise’s documents and informs responsible employees of the new procedure for approving contracts and expenses.

Under Clause 10 of Article 17, enterprises and their legal successors are exempt from the administrative fee for registration actions related to bringing their activities into compliance with Law No. 4196-IX. This exemption covers the administrative fee only; agree separately on fees for engaged specialists.

Which new enterprises may not be established

Part 1 of Article 13 of Law No. 4196-IX prohibits the establishment of state-owned enterprises, including state commercial, non-commercial, and treasury enterprises; municipal enterprises, including commercial and non-commercial enterprises; joint municipal, private, foreign, and subsidiary enterprises; and enterprises of associations of citizens, religious organizations, trade unions, and consumer cooperatives.

Clause 7 of Article 17 provides a special exception to the requirements of Articles 13 and 14 for public railway transport enterprises, institutions, and organizations that are being terminated through a merger into the joint-stock company “Ukrainian Railways” under a special law. This exception does not apply to a new private store.

The presence of a foreign owner does not by itself determine the organizational and legal form “foreign enterprise.” When preparing documents, state the ownership structure and the form being registered separately. If a foreign legal entity is among the founders, observe the document requirements in Article 17 of Law No. 755-IV.

How deadlines differ for state-owned and municipal enterprises

If you work with a state-owned or municipal enterprise, account for the separate rules on its termination and registration changes. Part 1 of Article 14 of Law No. 4196-IX established a six-month period from the date the Law was brought into operation to decide to terminate an enterprise whose sole founder is the state. Exceptions apply to state-owned non-commercial enterprises and enterprises with open bankruptcy proceedings.

For a state-owned enterprise whose bankruptcy proceedings were already open on the date the Law was brought into operation—28 August 2025—the decision to terminate must be made within six months after those proceedings are closed.

For an enterprise whose sole founder is one or more territorial communities, this provision allows the authorized local self-government body to make the decision. State-owned and municipal non-commercial enterprises have a separate procedure for changing their name and form under Clause 11 of Article 17. Apply the rules specifically governing private enterprises to private enterprises.

The restriction on registration changes for specified state-owned and municipal enterprises in Part 2 of Article 13 takes effect on 28 August 2028. It includes a list of permitted exceptions. This provision does not establish a general ban on changing information about a private enterprise.

How to prepare and register an LLC

An LLC may be established by one person; there is no limit on the maximum number of participants. These rules are set out in Article 83 of the Civil Code and Article 4 of Law No. 2275-VIII. For an ordinary trading LLC, this Law does not set a minimum amount of authorized capital. Choose the contributions based on the business’s actual needs.

1. The founders determine the terms of operation. Agree on the name, location, participants, their shares, authorized capital, form of contributions, and management. If a contribution is made in property, its monetary value at formation is determined by a decision of the founders under Article 13 of Law No. 2275-VIII.
2. The founders choose a charter. They may approve their own charter or use the model charter—a state-approved document with available provisions to choose from. Before deciding, read the rules on management, joining, exit, and decision-making. Article 11 of Law No. 2275-VIII governs operation under a model charter.
3. The applicant prepares the document package. For an ordinary LLC formation, this includes an application, the founders’ decision, their own charter if selected, the ownership structure, and documents on the ultimate beneficial owner—the natural person who exercises ultimate control over the legal entity. The ownership structure shows the links between the owners and the legal entity. The package and its format depend on the founders, representation, and submission method.
4. The applicant chooses a submission method. Paper documents may be submitted in person or by mail. For in-person submission, present an identity document. For submission by mail, a notary must certify the authenticity of the applicant’s signature on the application.
5. For electronic submission, the applicant uses the state web portal of electronic services. If the required service is unavailable there, submit the documents through the electronic services portal in accordance with the established procedure. The application must be signed using electronic identification means with a high level of trust that verify the applicant’s identity.
6. A representative includes a document confirming authority to submit. For representation under a power of attorney issued in Ukraine, have it notarized; an ordinary written power of attorney is insufficient to register an LLC. Under Article 14 of Law No. 755-IV, a document confirming the authority of a legal representative or a power of attorney issued in accordance with the law of a foreign state may also be submitted. Submit the original or a notarized copy of the document. A separate document is unnecessary if information about the representative’s authority is already in the state register.
7. If a founder’s representative took part in making the decision, the applicant includes a document confirming that authority. Under Part 26 of Article 17 of Law No. 755-IV, submit the original or a notarized copy of the document confirming the representative’s authority to participate in making the decision.
8. After submitting paper documents, the applicant keeps the «опис» (inventory of submitted documents). Make sure it includes the date the documents were received and an access code.
9. The director checks the result. After registration, compare the name, form, location, and management information with the founders’ decision. Under Article 87 of the Civil Code, a legal entity is considered established on the date of state registration.
10. The participants pay their contributions in full. Under Article 14 of Law No. 2275-VIII, the general deadline is six months from state registration, unless the charter provides otherwise. To add a provision on a different deadline to the charter, amend it, or remove it, a unanimous decision is required at a general meeting attended by all participants.
11. The person responsible for accounting keeps contribution documents. They compare the actual payment with the nominal value of each participant’s share—the monetary amount of that share in the authorized capital.

When preparing the package, check the list of documents against Article 17 and the formatting requirements against Article 15 of Law No. 755-IV “On State Registration of Legal Entities, Individual Entrepreneurs, and Public Formations”.

If the founders choose their own LLC charter, all participants sign its initial version, and a notary certifies the authenticity of their signatures under Article 11 of Law No. 2275-VIII.

The decision to establish an LLC under a model charter is signed by all founders or their representatives. A notary must also certify the authenticity of these signatures. Notarization is not required if the decision is created on the electronic services portal and signed with qualified electronic signatures—electronic signatures of the level established by law.

If a founder is a foreign legal entity, the applicant prepares a document confirming its registration. Under Article 15 of Law No. 755-IV, the document must have been issued no earlier than one month before submission. Documents issued under the law of a foreign state require consular legalization or an apostille—official certification for use in Ukraine—unless an international treaty provides otherwise. A document in a foreign language must be translated into Ukrainian, and the accuracy of the translation or the translator’s signature must be duly certified.

For an ultimate beneficial owner who is a Ukrainian citizen, the applicant submits a certified copy of the identity document if it was issued without using the technical facilities of the Unified State Demographic Register. Clause 19 of Part 1 of Article 17 permits certification by a notary or by the qualified electronic signature of the person authorized to submit documents for establishing a legal entity. If a copy needs certification, it must be certified no earlier than 90 days before submission under Part 22 of Article 17.

Under Article 26 of Law No. 755-IV, the general processing period for documents concerning legal entities and sole proprietors is 24 hours after receipt, excluding weekends and public holidays. When planning a store opening, allow additional time for preparing documents and correcting possible errors.

How to choose a tax system and meet the application deadline

After choosing a business form, determine the tax system. Under Clause 291.3 of the Tax Code of Ukraine, both sole proprietors and legal entities may choose the simplified tax system with payment of the single tax, subject to legal requirements. Groups 1 and 2 are for sole proprietors; Group 3 is also available to legal entities subject to relevant restrictions.

Before submitting the application, give the accountant a list of planned goods and services, information about customers, the number of employees, expected annual income, payment methods, and ownership structure. The accountant should compare these with Article 291’s requirements and determine which tax options are available to your business.

For example, Group 1 covers retail sales from market stalls and specified household services. A Group 2 sole proprietor may provide services to single tax payers and the public. If you plan to provide services to companies or entrepreneurs under the general tax system, ask the accountant to identify another available tax option. This restriction on service customers does not apply to sales of goods. A small store does not by itself make an LLC eligible for the single tax.

For a legal entity, separately assess the composition of its participants: Subclause 291.5.5 prohibits Groups 1–3 if the combined share of legal entities that are not single tax payers is 25% or more. Restrictions also apply based on business activity, tax debt, and other circumstances.

After choosing an available group, determine the application deadline:

• A newly registered sole proprietor choosing Group 1 or 2 must apply by the end of the registration month. Single tax payer status starts on the first day of the following month.
• A newly established business choosing Group 3 at the rate without payment of value added tax must apply within 10 days of state registration to use this status from the registration date.
• An existing business switching from another system must apply no later than 15 calendar days before the start of the next calendar quarter. This switch is allowed once during a calendar year.

For an existing business to switch, the accountant must establish whether the requirements of Clause 291.4 were met during the previous calendar year and include a calculation of that year’s income with the application. If a natural person terminated business activity during the previous year, the calculation must include all of that person’s business income for that year.

These deadlines are established by Article 298 of the Tax Code. An application for the simplified tax system may also be submitted during state registration. Before the first sale, the owner and accountant should determine the start date of the chosen tax status and how transactions before that date will be taxed.

How to check a counterparty’s form and business size

Before signing a contract with a counterparty—a supplier, landlord, or other business partner—check its name, organizational and legal form, location, and information about its governing bodies in the Unified State Register of Legal Entities, Individual Entrepreneurs, and Public Formations (ЄДР). Article 89 of the Civil Code provides for these details to be entered in the register. Also compare the identity of the person signing the contract with the documents confirming their authority.

When a bank, partner, or support program organizer asks you to determine a business category, find out which specific rule must be used to calculate it. “Small business” describes a separate legal category. The organizational and legal form is determined separately.

Under Part 4 of Article 2 of Law No. 4196-IX, the category is determined by the average number of employees during the calendar year and annual income from any activity:

• For microenterprise, both indicators must not exceed 10 employees and EUR 2 million.
• For small enterprise, both indicators must not exceed 50 employees and EUR 10 million.
• Large enterprises include legal entities with an average of more than 250 employees and annual income exceeding EUR 50 million.
• All other entities are medium-sized enterprises.

The euro income thresholds are converted into hryvnias using the National Bank of Ukraine’s average official exchange rate for the relevant calendar year. Give the accountant the requirements for the application and the relevant employee and income data. Ask them to determine the category under the rule used by the bank, partner, or support program.

How to choose Torgsoft for store or chain accounting

After determining ownership and management procedures, allocate the work: who will receive goods, sell them, and monitor stock—the quantity of goods on hand. In Torgsoft, «центр обліку» (accounting center) means a store or warehouse for which records are kept.

Torgsoft licenses are available for a fee. Torgsoft Online runs on a paid subscription, while additional options are charged separately and have their own compatibility and validity terms. Before ordering, check the purchase contents and price against the current commercial terms.

1. List the locations and tasks. The owner identifies the stores, warehouses, computers, and operations needed, as well as the number of employees who will work at the same time.
2. The owner chooses a license based on the required operations. For one accounting center with basic retail operations, consider Start. It supports 16 compatible paid options. Multiple accounting centers, transfers between warehouses, wholesale trade, and a bonus system are unavailable with it. Consider Ultra for these tasks.
3. For an online store, the owner approves a separate configuration. This requires a full-featured license and the relevant paid option, or a separate ready-made solution.
4. The owner determines the number of licenses for a local area network—a network of interconnected computers. Each computer needs a separate license of the appropriate type. Compare the number of computers and required functions with the license comparison to approve the complete purchase.
5. For remote stores to work simultaneously over the internet with a shared database, choose Terminal or Torgsoft Online. The database stores the stores’ shared accounting records.
6. Confirm connection terms. Terminal provides a single database on a server—a computer that enables shared use of the program—and includes three client connections: workstations for a cashier, inventory specialist, or manager using the server. Additional connections are charged separately. With Torgsoft Online, the program and database are hosted on a Torgsoft server, and the subscription covers use of the program and server infrastructure.
7. Approve the configuration with a manager. Provide a list of stores, warehouses, computers, and required operations. Agree on the number of simultaneous connections, employee access settings, and compatibility of required add-ons. Make sure the agreed number of connections is sufficient for the planned simultaneous work.
8. Enter opening stock balances. Before launch, the responsible employee enters the quantities of goods available in stores and warehouses into the program, and the owner checks the records against the physical stock.

What documents to prepare for a final decision

The accountant should determine the available tax options, and the lawyer should identify an appropriate form for owners’ participation, their liability, and the required documents. Ask the specialists to provide the result as a specific list: chosen form, founders’ decision, charter or model charter version, registration package, contribution deadlines, tax application, and responsible persons. For an existing private enterprise, add a list of changes to its charter and internal regulations, with deadlines for completion before the end of the transition period.

Start with a brief written description of the store: who will invest funds, who will own the goods and equipment, who will manage the business, what debt obligations may arise, and how you might bring in a new partner. Give this description to an accountant and a lawyer so they can determine the available tax options and prepare a list of legal steps. If you already own a private enterprise, include the current charter and internal regulations so the lawyer can identify the changes required by 28 August 2028.

Legislation for formalizing a business

When preparing decisions, a charter, registration documents, and a tax application, use the relevant provisions of the laws:

• Law of Ukraine dated 09.01.2025 No. 4196-IX “On the Specifics of Regulating the Activities of Legal Entities of Certain Organizational and Legal Forms During the Transition Period and Associations of Legal Entities”: Articles 1–3, 13–14; Article 17, Clauses 1, 3, 6 regarding the introduction of Article 99-1 of the Civil Code, 7, 10, 11, and 14.
• Civil Code of Ukraine dated 16.01.2003 No. 435-IV: Articles 50, 52, 80–84, 87, 89, 92, 96, 96-1, 99-1, 113, 119, 133.
• Law of Ukraine dated 06.02.2018 No. 2275-VIII “On Limited Liability Companies and Companies with Additional Liability”: Articles 1–4, 10–14.
• Law of Ukraine dated 15.05.2003 No. 755-IV “On State Registration of Legal Entities, Individual Entrepreneurs, and Public Formations”: Articles 14–15, 17–18, 26.
• Tax Code of Ukraine dated 02.12.2010 No. 2755-VI: Article 291, including Clauses 291.3–291.5; Article 298, including Subclauses 298.1.1–298.1.4.