How to Set Up an LLC (Limited Liability Company) in Ukraine

Starting a business in Ukraine can be an exciting venture for entrepreneurs around the globe.

The Ukrainian business landscape offers various opportunities due to its favorable geographical location, relatively low operational costs, and a burgeoning IT sector.

One of the most common business entities foreign investors choose is the Limited Liability Company (LLC) due to its simplicity and limited liability feature.

This is a helpful and comprehensive guide on setting up an LLC in Ukraine.

The Basics of a Ukrainian LLC

Before diving into the process of establishing an LLC in Ukraine, it’s essential to understand what an LLC is and why it’s a popular choice for business.

In Ukraine, an LLC is called a “Товариство з обмеженою відповідальністю” or “TOB,” which translates to “Company with Limited Liability.”

This type of company provides its owners, known as ‘members,’ with protection from personal liability for the debts of the business, limiting their risk to the amount they have invested in the company.

Members of an LLC have the flexibility to structure their company management and can choose whether to be managed by directors or to manage the company themselves.

An LLC can have one or more participants (both individuals and legal entities), and there is no requirement for a minimum share capital upon establishment.

This makes the LLC formation an appealing option for small to medium-sized businesses.

Preliminary Steps

Before you begin the actual formation of your LLC in Ukraine, there are several preliminary steps you must take:

  1. Choose a Company Name: Your LLC’s name must be unique and not already registered in Ukraine. The name should also comply with Ukrainian naming laws and should not contain any restricted words. You can conduct a name check through the Ukrainian Unified State Register of Enterprises and Organizations.
  2. Hire a Local Lawyer: Navigating Ukrainian business laws can be complex, especially for foreigners. It’s highly recommended to hire a Ukrainian lawyer who specializes in corporate law to help with the process from start to finish.
  3. Create a Founding Document: You need to draft and approve the founding documents of the LLC, which include the Charter (Articles of Association) and the Foundation Agreement if there will be more than one participant.
  4. Open a Temporary Bank Account: A temporary bank account must be opened to deposit the share capital of the LLC, although there is no minimum requirement for the share capital.
  5. Choose the Company’s Managing Structure: Decide whether your LLC will be managed by an executive body (director or board of directors) or by the participants themselves.

Registering Your LLC in Ukraine

The actual process of registering your LLC involves a series of steps:

  1. Prepare the Necessary Documents: Alongside the founding documents, several forms and applications must be prepared for submission. Key documents include the Application for State Registration, the Order of the Establishment of the LLC, and documents proving the legal address of the LLC.
  2. Submit Documents to the State Registrar: The required documents must be submitted to the State Registrar. A registration fee is payable, and the process typically takes around one week to be completed.
  3. Receive the Registration Certificate: Upon successful registration, your LLC will be issued a certificate of state registration, confirming the existence of your LLC.
  4. Obtain Necessary Permits or Licenses: Depending on the type of business activity, you may be required to attain specific permits or licenses to operate legally in Ukraine.
  5. Register with Tax Authorities: Your LLC must be registered with the Ukrainian tax authorities, which will include getting a unique taxpayer number.
  6. Open a Permanent Bank Account: After receiving the registration certificate and taxpayer identification number (TIN), you can open a permanent bank account for your LLC. Check out our guide on how to open a corporate bank account in Ukraine, for more information.

Post-Registration Steps

Once your LLC is successfully registered, there is a series of post-registration requirements you need to fulfill:

  1. Customs Registration: If you plan on engaging in international trade, you’ll need to register with Ukrainian customs authorities.
  2. Statutory Book: Prepare and keep a statutory book of the LLC, which records all official meetings and decisions made by the LLC’s members or governing body.
  3. Employment Considerations: If you are hiring staff, you’ll need to comply with Ukrainian employment laws, including contracts, minimum wage requirements, and social security contributions.
  4. Accounting and Auditing: Set up proper accounting and auditing practices. Ukrainian law requires annual financial statements and may require audits, depending on your company size and turnover.
  5. Insurance: Consider what types of business insurance may be necessary. This may include liability insurance, property insurance, and other relevant coverages to protect your business interests.

Challenges You May Run Into

Starting an LLC in Ukraine presents several challenges.

The legal and bureaucratic processes can be complex and time-consuming, often requiring detailed documentation and multiple interactions with government bodies.

There’s a language barrier, as most official procedures are conducted in Ukrainian, necessitating the services of a translator or a local advisor for non-Ukrainian speakers.

Navigating the tax system and understanding local business laws can be daunting due to their complexity and potential differences from other countries’ systems.

Additionally, political and economic instability in the region can pose risks to business operations.

Finally, finding reliable local partners and understanding cultural business norms are crucial for successful market entry in Ukraine and operations, yet they can be challenging for foreigners unfamiliar with the Ukrainian business environment.

Why Start an LLC in Ukraine?

Ukraine offers a fertile ground for businesses, particularly for entrepreneurs and companies looking to establish a Limited Liability Company.

There are several compelling reasons to consider starting an LLC in Ukraine, each contributing to the potential for business growth and success.

Favorable Business Environment

Cost-Effective Operations

  • Affordable Labor: Ukraine boasts a skilled yet cost-effective workforce, especially in areas like IT, engineering, and manufacturing.
  • Lower Operational Costs: Compared to many Western countries, the cost of operations, including office space, utilities, and logistics, is relatively low in Ukraine.

Investment-Friendly Policies

  • Ease of Doing Business: Recent reforms have streamlined business processes, making it easier to start and operate a business in Ukraine.
  • Incentives for Foreign Investment: Ukraine offers various incentives for foreign investors, including tax benefits and potential grants, especially in priority sectors.

Flexible and Simple LLC Structure

  • Limited Liability Protection: As with LLCs globally, Ukrainian LLCs provide owners with limited liability, protecting personal assets from business debts and liabilities.
  • Simplified Tax Regime: LLCs in Ukraine can benefit from a simplified taxation system, which can be more favorable compared to other corporate structures.

Access to a Large Market

  • Domestic Market Potential: With a population of over 40 million, Ukraine offers a substantial domestic market for various products and services.
  • EU Integration and Trade Agreements: Ukraine’s increasing integration with the EU and other international trade agreements open up broader markets for businesses.

Innovation and Technology Hubs

  • Thriving Tech Sector: Ukraine is known for its robust IT and tech industry, with a growing number of startups and tech talents.
  • Support for Innovation: The government and private sector are increasingly supportive of innovation and technology-driven ventures.

Cultural and Language Advantage

  • Multilingual Workforce: Many Ukrainians are multilingual, easing communication for international business operations.
  • Cultural Proximity to Europe: Ukraine’s cultural affinity with both Eastern and Western Europe makes it a comfortable environment for diverse business entities.

Starting an LLC in Ukraine not only offers financial and operational advantages but also provides a strategic foothold in a dynamic and evolving market.

Whether you are looking to tap into local resources, expand your market reach, or leverage the tech-savvy workforce, Ukraine presents a compelling destination for your business venture.

Answering Your Ukraine LLC Questions

Is it necessary to be in Ukraine to register an LLC?

No, it is not necessary to be present in Ukraine to register a Limited Liability Company (LLC).

The registration process can often be completed remotely with appropriate power of attorney granted to a legal representative in Ukraine, or through online services where available.

Additionally, the use of notarized documents and electronic signatures can facilitate the process without requiring the physical presence of the owner.

Who can be an owner of an LLC in Ukraine?

Both residents and non-residents, including foreign individuals and legal entities, can be the owners (shareholders) of an LLC in Ukraine.

There are no significant restrictions on the nationality or residency of LLC owners.

This inclusivity aims to encourage foreign investment and make it easier for international entrepreneurs to do business in Ukraine.

How complicated is the procedure of LLC registration in Ukraine?

The procedure for registering an LLC in Ukraine is relatively straightforward, especially compared to some other jurisdictions.

It typically involves choosing a unique company name, preparing the founding documents (including the Articles of Association), registering with state authorities, and obtaining a tax identification number.

The process has been simplified in recent years to promote business and investment, although having a local legal advisor can help navigate any complexities and the language barrier.

How long does it take to register an LLC in Ukraine?

The time frame for registering an LLC in Ukraine can vary but typically takes about 1 to 2 weeks from the moment all necessary documents are submitted to the state registrar.

However, this period can be shorter if expedited services are used or if there are no complications during the registration process.

The timeline may extend if additional permits or registrations are necessary, depending on the type of business activity.

What are the costs for LLC registration?

The cost of registering an LLC in Ukraine can include state duties, notary fees, fees for registration with the state registrar, and professional fees if hiring a lawyer or registration agent.

The state duty is relatively nominal, but the total cost can vary from a few hundred to a thousand US dollars, depending on the complexity of the registration and the services used.

What is the minimum authorized capital of an LLC?

The minimum authorized capital of an LLC in Ukraine was very low, set at just 1 hryvnia (approximately 0.03 USD).

This nominal requirement is intended to lower the barrier to entry for establishing a business and stimulate entrepreneurial activity.

How are authorities distributed between bodies of an LLC?

In a Ukrainian LLC, the supreme governing body is the General Meeting of Participants (the owners or shareholders), which makes major decisions about the company’s activities.

The executive body, which could be a single director or a board, manages the day-to-day operations of the company.

The supervisory board, if established, oversees the activities of the executive body.

The distribution of authorities and decision-making powers among these bodies is typically outlined in the company’s Articles of Association (Charter).

Should the director of an LLC be a Ukrainian?

No, the director of an LLC in Ukraine does not need to be a Ukrainian citizen.

However, non-resident directors may need to obtain a work permit and a taxpayer identification number.

Also, language proficiency or appointing a local director can be practical considerations for navigating local regulations and business practices.

Is it possible to limit the powers of the company director?

Yes, it is possible to limit the powers of a company director in Ukraine.

These limitations are usually specified in the company’s founding documents, such as the Articles of Association, or through decisions made by the General Meeting of Participants.

The director’s scope of authority can be restricted in terms of monetary limits, types of transactions, or the requirement to seek approval for certain actions from the company’s owners or supervisory board.

How is business activity of an LLC taxed in Ukraine?

Business activity of an LLC in Ukraine is taxed according to the national tax legislation, which typically involves corporate income tax, value-added tax (VAT), and other possible taxes and contributions related to specific business operations.

Te standard corporate income tax rate in Ukraine is 18%.

Some businesses may qualify for a simplified taxation system with reduced tax rates, depending on their size and type of activity.

Let’s Work Together to Start Your LLC

While establishing an LLC in Ukraine comes with its set of challenges, you don’t have to navigate this complex terrain alone.

Our company specializes in helping entrepreneurs and businesses smoothly set up their LLCs in Ukraine.

We offer expert guidance through every step of the process, from handling legal paperwork to overcoming language barriers, and providing insights into the local business climate.

With our expertise and support, you can confidently establish your presence in the Ukrainian market.

Don’t let the complexities hold you back. Contact us today to embark on your business journey in Ukraine with ease and confidence.

Leave a Comment