Sole Proprietors in Ukraine in 2025: What Closures Really Say About Small Business
Over 11 months of 2025, more than 250 thousand sole proprietors ceased operations in Ukraine. This figure looks alarming, but without context it is misleading. During the same period, the number of new registrations exceeded the number of closures, with a net increase of about 7–8 thousand entrepreneurs. Toward the end of the year, the dynamics even strengthened: in October–December, 58.2 thousand new sole proprietors were registered. This means that 2025 did not become a year of a systemic collapse of small business, but it clearly exposed its vulnerable points.
Data from the Unified State Register show that the average life cycle of a sole proprietor in Ukraine is only 2 years and 4 months. Entrepreneurs in retail trade, courier services, and administrative and auxiliary services operate for the shortest time. In retail, businesses rarely survive for three years; in wholesale trade, slightly more than a year; and courier sole proprietors often shut down after just six months. In administrative and auxiliary services, the average life cycle is about nine months. These figures say less about the weakness of entrepreneurs and more about a low entry threshold and high turnover in these sectors. This is where a sole proprietorship is often used as a temporary form of employment or a short-term tool for handling turnover. At the same time, there are sectors that demonstrate a completely different logic. Sole proprietors in warehousing operate for more than six years, entrepreneurs in real estate operations for almost six years, and those in equipment repair for more than five years. These are segments where business is built not on quick turnover, but on stable demand, skills, and long-term relationships with clients.
Economists agree that there was no wave of mass closures in 2025. The largest spike occurred in January, when some sole proprietors ceased operations immediately after the return of mandatory unified social contribution payments and the introduction of the military levy. These were mainly entrepreneurs who were not confident in their ability to withstand the additional fiscal burden throughout the year. After that, the market gradually adapted, and the number of new registrations began to steadily exceed closures.
Experts consider the average duration of a sole proprietor’s activity to be understated. It is significantly distorted by short-term sole proprietors and “one-day” entities created for splitting schemes or technical accounting of turnover. In reality, a substantial share of entrepreneurs operate for 5–10 years or more, but they are lost in aggregate statistics. The tax burden in 2024–2025 did indeed become a pressure factor, but not a decisive or universal one. The return of the unified social contribution and the military levy hit sole proprietors with low or unstable incomes the hardest, especially in small communities. For the second group under the simplified system, the combination of a fixed tax and the unified social contribution amounts to about 2% of turnover, which, with low margins, can consume the entire remaining profit. For third-group sole proprietors, additional pressure came from the 5% tax on turnover, which in cases of high costs can turn out to be less advantageous than the general tax system.
However, in real business practice, other factors are often decisive. In the restaurant sector, traditionally considered an indicator of consumer demand, most small establishments in 2024–2025 operated profitably, but with low margins of 5–15%. Even profitable businesses had several loss-making months due to power outages, seasonal downturns, and falling demand. The greatest pressure here comes from wages and labor shortages, not taxes. The share of labor costs has increased from about 20% of turnover in 2019 to 30–35%, and in some cases up to 40%. The ability to pass these costs on to consumers is almost exhausted: people are economizing, ordering less, refusing alcohol and expensive items.
Therefore, closures of sole proprietors in this sector are usually the result of a combination of several economic factors, rather than a direct reaction to tax changes.
Expectations for 2026 vary by sector, but the overall mood is restrained. Small businesses are preparing more for optimization than for growth. Some entrepreneurs will reconsider the scale of their operations; weaker players will exit the market or sell their businesses, while stronger ones with a clear model and their own audience will try to consolidate and secure advantageous positions for the future.
The biggest systemic risk identified by entrepreneurs and experts is the possible introduction of mandatory VAT for sole proprietors in 2027 with a turnover threshold of 1 million hryvnias. Such a move would mean a sharp increase in costs for accounting, inventory tracking, and administration, which could become critical precisely for microbusinesses. An alternative proposed is setting the threshold at the level of European standards around 85 thousand euros which would help preserve the viability of small entrepreneurship. The picture of 2025 shows not decline, but painful adaptation. Sole proprietors remain flexible and capable of recovery, but the margin of safety for many is minimal. Further dynamics will depend not on closure statistics, but on whether the state creates conditions in which small businesses can plan at least several years ahead, rather than survive month to month.
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