HOW TO START BUSINESS IN UKRAINE?

You have decided to create a business in Ukraine, have found like-minded people and completed your business idea. It`s great, but now you need to do something essential – it’s time for business registration. And it won`t be easy because Ukrainian legislation is quite complicated. So here is some advice to start with.

First of all, answer the following questions:

• What I’m going to do?
• Whom do I plan to work with (who will be clients and partners)?

The choice of business form and type of taxation will depend on answers to these questions.

Choose the abbreviation (form of business in Ukraine)

The most common forms of business in Ukraine are the IE (individual entrepreneur, or “FOP” in Ukrainian), LLC (Limited Liability Company, or “TOV” in Ukrainian) and PE (private enterprise, or “PP” in Ukrainian). In fact, LLC and PE are almost identical legal entities. The only difference is that the relationship between founders of LLC is regulated by a separate law, but between founders of PE – only by the statute. So let’s compare the IE and LLC.

Individual entrepreneur is a simple form of entrepreneurship as:

• It`s easy to register;
• It`s quite simple to keep accounts;
• BUT you’ll be liable for obligations to the extent of your entire assets (if get into debt, you may lose your apartment, car or even personal belongings).

Limited Liability Company is the most common form of legal entity as:

• It is more trustworthy than IE;
• It`s the simplest among legal entities;
• Company founders are liable for its obligations to the extent of parts made to the statutory fund of company and property owned by the company, not personally assets.

What about taxes?

Types of taxation depend on the company’s turnover and the volume of annual income. The most simple is a single tax, the most difficult is the general tax system plus VAT (value-added tax). Furthermore under Ukrainian laws you must pay VAT doing certain businesses, for example, selling excise goods (alcohol, tobacco) or jewellery.

Also, type of taxation depends on your clients. If your counterparties (business partners, customers) are VAT registered and you work with large turnover (goods / works / services to thousands hryvnas), it is unprofitable for them to work with non-VAT registered as they`ll pay more taxes. And individual entrepreneurs that are single tax payers on second group can provide services only to individuals and single tax payers. That is, it`s forbidden for them to work with legal entities that are VAT registered.

If you still can not accurately calculate your future annual income and plan to do something “simple” (for example, sale of stationery or lawn care), you should choose “the individual entrepreneur that is a single tax payer”. If you already have mess in your head, it’s time to call your lawyer. If not – let`s continue.

Business registration in state agencies

So, when you have decided with the form of business and type of taxation, it’s time to “legalize”. On January 1, 2016 the business registration procedure was simplified. Now it is possible to register for 24 hours from the moment of filing documents to registrar or notary. But better just expect for 2-3 working days. And do not forget that the very document preparation will also take time. It`s one more good news for you – you just needn`t to pay for registration.

In any case you will need to fill an application (in Ukrainian), which must specify:

• Chosen business activities (“KVED”s). You can choose them on Derzhkomstat`s site (Classification of economic activities DK 009:2010). Type of taxation will also depend on chosen activities. The amount of activities isn`t measured by law – write as much as you want. However it is better to choose only needed ones. If it is necessary you can add them in future, but for a fee.
• Legal address: for IE it`s a place of residence, for legal entities it`s the address of apartment or office. Better if it is your real office. It`s important that somebody always should be there and receive mails. Otherwise if inspection visit your company`s address and find there no one, you`ll meet extra problems and heightened attention of controlling authorities.
• Passport data and Individual Taxpayer Number of the founder (founders and directors for legal entities). Do not forget to take the passport itself.

As a result information about your business in Ukraine will be put on the Unified State Register. Are you here now? Hold on, because there are many other nuances.

What else is needed and when will it end?

Business registration in state agencies and registration of VAT/single tax-payer status – isn`t the end. You will also need:

• to order a stamp;
• to notarize a signature card and open a bank account.

You`ll spend some days or even weeks for it, as the process of opening an account is rather long in some banks. As a result, you just will not succeed to start a business in Ukraine in 24 hours. Expect for at least 4 days, or even more. In general, be patient!

Believe in your business idea and do not sit on plans. Even if everyone says that it`s not the best idea to start a business in Ukraine. But keep in mind that Ukrainian laws are complicated. So call Artius lawyers, who will take care of all the paperwork and protect your business!