[ESTABLISHING A BUSINESS ENTITY IN UKRAINE] 481
ESTABLISHING A BUSINESS ENTITY IN UKRAINE
1. Types of business entities In order to start business activities involving Ukraine, foreign investors must choose one of the business forms proposed by Ukrainian legislation. The most popular form of legal presence in Ukraine is the limited liability company (“ LLC ”). Sometimes, foreign investors may also choose to open a separate subdivision (“ Subdivision ”) in Ukraine. Other business forms that are less popular both among foreign investors and local entrepreneurs, include (the list below is not exhaustive):
• an LLC may conduct any business activities in Ukraine (except for some directly forbidden by law) • an LLC may be incorporated by either local or foreign individuals/legal entities • in contrast to a subdivision (where a foreign company is fully liable for the actions of a subdivision), an LLC is solely liable for its obligations with its own property • participants in the LLC are not liable for the LLC’s obligations, and the LLC is not liable for the participant’s obligations; participants in the LLC are liable for the LLC’s obligations only in the amount of their contributions to the statutory capital • an LLC enjoys a comparatively (regarding, e.g., joint-stock companies) simple regulatory environment Subdivision In accordance with Ukrainian legislation, foreign legal entities have the right to open separate subdivisions in Ukraine in the form of a permanent establishment or a representative office. Basically, a permanent establishment is established for performance of all or part of the legal entity’s functions, while a representative office is mostly established for representing and protecting the interests of the legal entity. Both permanent establishments and representative offices are not legal entities. They are endowed with the property of the legal entity that established them and carry out activities in the name and on behalf of its headquarters (foreign company).
Joint-stock company
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Additional liability company
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General partnership
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• Limited partnership, etc. In rare cases, Ukrainian legislation requires a business to be performed under specific types of business entities, e.g., banks or certain financial institutions can be established according to the law only in limited business forms, in particular, in the form of a joint-stock company. Below, we provide a short overview of the limited liability company and the subdivision, and in the subsequent sections, we will focus on details related to the limited liability company as the most popular type of legal presence in Ukraine. Limited Liability Company A limited liability company is the most popular form of set-up among both local and foreign investors, in particular, due to its numerous advantages for business: • first and foremost, an LLC acts as an independent legal entity (on its own behalf) with full business capacity in relations with third parties
ILN Corporate Group – Establishing a Business Entity Series
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