Setting Up a Limited Liability Company (LLC) in Ukraine: A 2024 Guide

Introduction

The Limited Liability Company (LLC) remains the most favored business structure in Ukraine due to its adaptability and minimal restrictions. In an LLC, shareholders are only financially responsible for the amount they’ve invested, and both Ukrainian residents and non-residents can establish one under equal conditions. This guide offers an updated, in-depth look at the process, incorporating the latest regulations and opportunities.

Step-by-Step Guide to Establishing an LLC in Ukraine

Step 1: Planning and Documentation

Decision and Company Name: Formalize the decision to create the LLC through minutes of a founders’ meeting or a written decision by a sole founder. Select a unique company name that adheres to Ukrainian legal standards. You can verify the availability of your chosen name through the Unified State Register of Legal Entities, Individual Entrepreneurs and Public Formations of Ukraine.
Registered Address: Secure a legal address, which can be your actual business location or an office for administrative purposes.
Founders and Management: Determine the composition of founders (one or more, including foreigners). If a founder is a non-resident, they will need a Ukrainian tax identification number. Appoint a company president, who must be a Ukrainian citizen initially if the founder is foreign. After registration, a foreign founder can obtain a work permit and assume this role.
Share Capital and Business Activities: Decide on the share capital amount, which can be contributed in the form of money, securities, or other assets. Each shareholder must contribute their full share within six months of the LLC’s state registration. Clearly define the intended business activities of the LLC, ensuring they align with the chosen tax system and obtaining any necessary licenses or permits.
Tax System: By default, LLCs are registered under the general tax system with an 18% corporate income tax rate. However, you can apply for VAT registration or opt for a simplified tax system, depending on your business needs.

Step 2: State Registration

Notarization: Hold a general meeting of the company to adopt the founding documents. These documents, including the decision/minutes and company charter, must then be notarized. If any party involved doesn’t speak Ukrainian, a translator will be required during the notarization process.
Registration Extract: Submit the notarized documents to the State Registration Service to obtain a registration extract, which officially confirms the LLC’s existence.
Company Seal: Create a company seal, which will be used for official documents and transactions.

Step 3: Bank Account and Capital Contribution

Open a Bank Account: Set up a company bank account at a Ukrainian bank. Authorized signatories will need to sign bank cards and documents in person.
Capital Contribution: Obtain a certificate of account opening from the bank and deposit the share capital into the account.
Electronic Reporting: Receive electronic keys to enable you to submit electronic reports to relevant authorities.

Additional Considerations

Foreign Investment Incentives: If you’re a foreign investor contributing at least USD 100,000 as share capital, you may be eligible to obtain a temporary residence permit in Ukraine automatically.
Document Translation: All documents not originally in Ukrainian must be officially translated and certified.
Legal Address Importance: Your legal address serves as the official point of contact for receiving correspondence from government agencies and other entities, making it crucial for compliance and communication.

Advantages of the New LLC Law (2018)

Ukraine’s updated LLC law, introduced in 2018, brings significant advantages:

Simplified Compliance: Streamlined processes reduce administrative burdens and costs.
Tax Flexibility: Choose from the general tax system, VAT, or a simplified tax system.
Deductible Expenses: Deduct various operational costs, salaries, and depreciation.
No Minimum Capital: This lowers the initial financial barrier to entry.
Foreign Investment Incentives: Attract foreign investment with temporary residence permits for significant capital contributions.
Enhanced Legal Clarity: Clearer guidelines reduce legal risks and improve predictability.
Improved Governance: Better corporate governance practices foster transparency and performance.

Conclusion

Establishing an LLC in Ukraine offers numerous benefits, including limited liability, tax options, no minimum capital requirement, and incentives for foreign investment. With the modernized LLC law, the process has become more straightforward and advantageous for businesses. Ukraine’s evolving business landscape makes it an increasingly attractive destination for entrepreneurs and investors.