Establishing a Limited Liability Company (LLC) in Ukraine: Comprehensive Guide and Key Benefits

Introduction

A Limited Liability Company (LLC) is the most prevalent legal form for conducting business in Ukraine. Unlike other organizational forms, an LLC does not impose restrictions on the types of activities, the number of shareholders, or the amount of share capital. Shareholders are only liable up to the amount of their contributions, and both residents and non-residents (foreigners) can establish an LLC under the same conditions.

Step-by-Step Process for Establishing an LLC in Ukraine

Step 1: Decision and Preparation of Documents

1. Decision to Establish the Company
   • Draft the minutes of the founders’ meeting or a written decision by the sole founder.
   • Determine the company name: The name must comply with Ukrainian legal requirements and be checked for availability to avoid conflicts with existing entities.
   • Legal address: This can be the actual place of business or an office for management purposes.
   • Composition of founders: There can be one or more founders, including foreigners. Foreigners must obtain a tax identification number from the Ukrainian tax authority.
   • Company president: Temporarily, this must be a Ukrainian citizen if the founder is a foreigner. After registration, the foreign founder can obtain a work permit and change the director.
   • Share capital: Contributions can be in the form of money, securities, or other assets. Each shareholder must fully contribute their share within six months of the company’s state registration.
   • Types of activities: Ensure the chosen activity is permissible under the selected tax system and obtain any necessary licenses or permits.
   • Tax system: By default, an LLC is registered under the general tax system (18% corporate income tax). Applications for VAT or a simplified tax system must be submitted separately.

Step 2: State Registration

1. General Meeting of the Company
   • Adoption of founding documents.
   • Notarization of documents (decision/minutes, company charter). A translator is required if any party does not speak Ukrainian.
   • Obtaining a registration extract.
   • Creating the company seal.

Step 3: Opening a Bank Account and Capital Contribution

1. Bank Account Setup
   • Signing bank cards and documents in person by authorized signatories.
   • Obtaining a certificate of account opening and payment of share capital.
   • Receiving electronic keys for submitting electronic reports.

Additional Information

• Foreign Investment Incentives: Foreign investors who contribute at least USD 100,000 as share capital can automatically obtain a temporary residence permit in Ukraine.
• Document Requirements: All documents in foreign languages must be officially translated into Ukrainian and properly certified.
• Legal Address: The legal address can be the actual place of business or a management office. It is essential for receiving official correspondence.

Tax Benefits of the New LLC Law of 2018

The new LLC law adopted in February 2018 brought several tax benefits:

1. Simplified Tax Compliance
   • Streamlined documentation and procedural requirements reduce administrative burdens and costs.
2. Flexible Tax System Options
   • LLCs can choose from the general tax system, VAT, or a simplified tax system, allowing for optimization based on specific business needs.
3. Deductible Expenses
   • Various business expenses, such as operational costs, salaries, and depreciation, can be deducted, lowering taxable income.
4. No Minimum Capital Requirement
   • Reduces the initial financial burden, allowing more resources to be allocated toward operational activities.
5. Incentives for Foreign Investment
   • Foreign investors contributing significant capital can obtain temporary residence permits, encouraging substantial foreign investments.
6. Improved Legal Framework
   • Clearer guidelines and reduced ambiguities help avoid legal disputes and penalties, leading to more predictable tax planning.
7. Enhanced Corporate Governance
   • Better corporate governance practices improve financial transparency and performance, aiding efficient tax planning and compliance.

Conclusion

Establishing an LLC in Ukraine offers numerous benefits, including limited liability, tax flexibility, no minimum capital requirement, and incentives for foreign investment. The new LLC law of 2018 further enhances these benefits by simplifying tax compliance and providing clearer regulatory guidelines. These advantages make Ukraine an attractive destination for setting up a business.

More information at https://ukraine.so/2024/07/24/establishing-a-limited-liability-company-llc-in-ukraine-a-comprehensive-guide/