What are the legal forms of business in Ukraine?

Before starting a business in Ukraine, it is important for an entrepreneur to choose the right legal form. This will affect not only tax reporting and legal liability, but also the company’s development opportunities.

In this article, we will consider the main organizational and legal forms of a company, as well as their advantages and limitations.

Types of entrepreneurial activities

Entrepreneurial activity — is the independent, proactive work of individuals or legal entities aimed at generating profit or personal income. It is carried out at one’s own risk and implies full responsibility for the decisions made and the results of activities.

Entrepreneurship is permitted in all sectors of the economy, as long as such activities do not contradict the current legislation. These may include:

• industry;
• agriculture;
• trade;
• services;
• banking;
• law;
• publishing;
• information and consulting services, etc.

The most common areas are the production of goods or services, trade activities, and financial and commercial intermediation.

However, the law stipulates that the following cannot engage in entrepreneurial activities:

• military personnel;
• officials of the prosecutor’s office, courts, state security, internal affairs, arbitration, and state notaries;
• representatives of the authorities exercising control over business;
• as well as persons with an outstanding conviction for crimes related to theft, bribery, or other criminal offenses.

Non-entrepreneurial activity —- is a form of activity whose main purpose is not to make a profit. Legal entities can conduct such activities, but all proceeds must be used exclusively for the implementation of the tasks specified in the charter and not distributed among the founders or participants.

For example, such non-profit organizations may have different goals depending on the area of their activities:

• Trade unions, as well as creative associations of writers, artists, and musicians, protect the interests of certain social or professional groups.
• Educational institutions, such as schools, colleges, universities, and educational clubs, focus on education, knowledge development, and outreach.
• Organizations such as the Red Cross, charities, or associations supporting people with disabilities work in the field of social assistance and charity.
• Commodity and stock exchanges, created to streamline trading processes and promote transparent and civilized market mechanisms.

The most popular forms of business in Ukraine

Choosing an organizational and legal form of business is one of the most important steps in starting a business. This decision determines what legal and financial obligations the entrepreneur will have, as well as how easily he or she will be able to scale the business in the future.

For state registration of a company, it is necessary to determine the Code of Organizational and Legal Form of Business (COLF) — it is this code that records the chosen form of business in the official registers. It is at this stage that the legal registration of a company or sole proprietorship begins.

In Ukraine, there are several basic organizational and legal forms of business, each of which has its own characteristics, advantages and limitations.

Individual entrepreneur (IE)

Individual entrepreneur is the most popular form of business in Ukraine. According to Opendatabot, as of May 2025, there were 2.1 million active sole proprietors registered in Ukraine.

Individual entrepreneur is an individual who, in accordance with Ukrainian law, carries out business activities independently, assumes risks and responsibility for the result, and aims to receive income from such activities.

As an organizational and legal form of business, a sole proprietorship has its own key features:

1. No start-up capital requirements. No down payment is required for registration.
2. Simplified taxation. The ability to work under a single tax with a fixed rate, regardless of the amount of income.
3. Simple reporting. Tax reporting is required only once a quarter. With the Vchasno.Zvit service, a sole proprietor can send reports to the tax office, sign documents, manage bank accounts and HR documents in a single account.
4. Registration at the place of residence. Registration of a sole proprietorship and subsequent reporting are carried out at the state authorities at the address of registration.

Sole proprietorships have a wide range of taxation options depending on the type of activity, amount of income, and business needs. You can operate under the general taxation system, where taxes are calculated on net income, or choose one of the four groups of the simplified taxation system. Each group has its own conditions: income limits, the ability to hire employees, tax rates, and permitted activities. This flexibility allows entrepreneurs to choose the most profitable and convenient business format.

Limited Liability Company (LLC)

A limited liability company (LLC) is a form of business organization in which the capital is formed by contributions from the participants and divided among them into shares in the amounts specified in the company’s charter.

LLCs are also one of the most common forms of doing business. According to the State Statistics Service, more than 804 000 such companies are registered in Ukraine.

Additional Liability Company (ALC)

An additional liability company (ALC) is a form of business entity in which the authorized capital is divided into shares among the participants. Each shareholder is liable for the company’s debt obligations to the extent of its contribution.

However, if this is not enough to cover the debts, the shareholders must also be liable with their own property in a fixed amount that is a multiple of their contribution. The specific limit of additional liability is determined in the company’s charter.

Private enterprise

A private enterprise (PE) is a form of business that operates on the basis of private ownership of one or more persons. The founders may be Ukrainian citizens, foreign citizens, stateless persons, and legal entities.

The activities of such an enterprise may be carried out both by the owner personally and by hired employees. A private enterprise is based exclusively on private ownership – individuals or legal entities.

Joint Stock Company (JSC)

A joint stock company (JSC) is an enterprise that has a charter capital divided into shares of equal nominal value. Such a company is liable to its creditors only with its property, and shareholders are liable only to the extent of the value of the shares they own.

The authorized capital is formed from the total nominal value of all issued shares and may not be less than the amount equivalent to 1,250 minimum wages calculated at the rate in effect at the time of the company’s establishment.

Cooperative

Cooperatives are one of the organizational and legal forms of business that involve joint activities of participants to achieve an economic or social goal. Ukrainian legislation provides for three main types of cooperatives: production, service and consumer cooperatives.

In the past, this form of association was quite common in the form of dacha or garage cooperatives. Dacha cooperatives (similar in principle to condominiums, but for suburban areas) brought together owners of dachas to jointly manage the territory, infrastructure, and utility issues.

Production cooperatives are more complex entities that involve joint business or production. For example, a group of people could organize a small production facility in a garage cooperative, and then the association would acquire the status of a production cooperative.

Today, cooperatives are losing popularity as a form of doing business. Legally, this form remains available, but its practical use is the exception rather than the rule.

How to choose an organizational and legal form of business?

To make an informed choice, there are several key factors to consider:

✔︎ Scope of activities and development ambitions

For a small business with no plans for rapid scaling, it is advisable to start with a sole proprietorship. If you plan to expand your staff, increase profits, or attract partners, you should consider a legal entity, such as an LLC or joint-stock company.

✔︎ Finance and Taxation

It is important to assess the start-up capital, tax burden, and the need for investment. A sole proprietorship is suitable for businesses with a small budget and simple tax accounting. Instead, LLCs or JSCs are better suited for businesses with a complex financial structure or a need for external financing.

✔︎ Degree of liability

The choice of the form directly affects the personal liability of the entrepreneur. A sole proprietorship is fully liable with all of its assets, while an LLC or a JSC provides limited liability – only within the limits of the contributed capital.

✔︎ The management model

of a sole proprietorship allows you to fully control all business processes on your own. If you intend to manage the business together with partners or a team, you need a structure that clearly defines powers and responsibilities. In this case, LLCs or JSCs are better suited.

✔︎ Growth Prospects

A strategic vision of the business is of great importance. If you plan to enter new markets, cooperate with large companies, or attract investors, you should immediately choose a form that will not limit such opportunities in the future.