FOP or LLC in Ukraine 2025: How to Choose the Right Business Structure, Understand Taxes and Avoid Risks
War is a period of particular challenges for entrepreneurs, but the statistics convincingly show: the number of businesses in Ukraine continues to grow even during the full-scale invasion. In recent years, the registration of sole proprietors (FOPs) increases by 4–10% annually, while the number of legal entities grows by approximately 2%. This means that, despite all the risks and turbulence, Ukrainians do not lose their entrepreneurial initiative and are actively seeking new opportunities.
Before officially registering a business, it is necessary to decide on the basics. The legal structure, activity codes (KVED), taxation system, and internal rules are the foundation upon which any business will be built. As AIN notes, it is important not to make mistakes at the start, because the right choice of structure determines both the tax burden and the level of protection for the owner.
What Types of Business Structures Exist in Ukraine
The main legal forms are as follows:
- FOP (Sole Proprietor) – the simplest way to run a small business, suitable for freelancers, creative and IT specialists, educational and e-commerce projects. An FOP is not a separate legal entity, the entrepreneur is personally liable for all obligations, administration is minimal, and taxes are the lowest. Example a handmade jewelry master, UX/UI studio, freelance editor.
- LLC (Limited Liability Company) – a legal entity whose co-founders own shares. This is a universal form for medium and large businesses, attracting investment, participating in tenders, and working with large clients. “Co-founders have limited liability only with the authorized capital, not personal assets.” Example “Nova Poshta,” gas network operator.
- JSC (Joint Stock Company) – a company that raises capital through shares. This is a choice for large-scale enterprises and banks (“Ukrnafta,” “PrivatBank”), but companies usually transition to this form from LLC as regulation is most complex here.
- Representative Office – a division of a foreign company in Ukraine, most often as a temporary solution for market testing.
FOP or LLC: Which One Is Right for You
The choice depends on several key questions: whether you are running the business alone or with partners, the expected turnover, the number of employees needed, the industry, and plans to work with large clients or international partners. If you work alone or with a team of up to 10 people and your clients are mainly individuals or other FOPs, it is more reasonable to choose FOP. If the turnover limit is exceeded (UAH 9.3 million per year for Group III), you will need to move to a higher group or general taxation system.
FOP offers the easiest registration and liquidation through “Diia,” minimal restrictions regarding activity codes and accounting, simplified reporting, and easy withdrawal of funds for personal needs after paying taxes.
LLC should be chosen if your business has several co-founders, plans to scale, works with large turnover, operates in licensed industries or export/import, requires investment and credit. Registration and liquidation are more complex, you need an accountant and a lawyer, funds are withdrawn only through salary or dividends, and reporting is full and detailed.
Is It Possible to Combine Forms
If you started as an FOP but your business has grown and needs a new structure you can create an LLC and transfer the activity there. At the same time, it is not necessary to close the FOP, and one person can simultaneously be both an FOP and a co-founder of an LLC. This is a common practice in Ukraine.
Taxation Systems: Simplified or General
Both forms can operate under the simplified or general system. The simplified system means a single tax (fixed or percentage of income), military levy, and social contribution. There are four groups depending on income, number of employees, and activity sphere. All four groups are available for FOPs, but only III and IV for LLCs. The general system is full bookkeeping, higher taxes, and more complex reporting.
How to Handle Reporting
An FOP under the simplified system files a declaration once a year or quarter, and in case of employees monthly consolidated reporting. Under the general system, you must also keep track of expenses and submit an annual declaration of income. LLC must submit financial, tax, and statistical reporting regardless of the chosen taxation system, as well as VAT and consolidated employee reporting.
Post List
Despite the challenging realities of war, Ukrainian business demonstrates extraordinary flexibility and adaptability. “Since the beginning of the full-scale war, the number of FOPs has increased by 4-10% annually depending on the period and region. The number of legal entities consistently grows by ≈2%.” This is a real trend, confirmed by official statistics. It is important that current legislation allows you to choose the optimal business structure for your needs: from micro-business to a large corporation.
The main thing is not to make a mistake at the start: choose the right legal form, consider the peculiarities of the taxation system, cost structure, development plans, and specific industry details.
Thanks to simple state tools (in particular “Diia”), detailed information support, and the ability to change the business structure as you go, starting your own business has become more accessible than ever. But success depends precisely on attention to detail and that is why a detailed analysis of legal nuances, administrative approaches, and taxation is key for those who want to grow even in the most challenging times.
About the Author
Related posts:
Non-Resident Entrepreneurs in Ukraine: How Foreigners Are Starting Businesses in 2025 
Tax Strategy 2030: A New Reality for Ukrainian Business 
Tax Audits and Freelance: How Reality Has Changed for Business and Entrepreneurs 
Nova Poshta and NovaPay Change the Rules: What Ukrainians Need to Know Starting June 1, 2025
