What to choose: individual entrepreneurship (IE) or limited liability company (LLC)? How to start a business in 2025 in Ukraine?

The author of the article: Denis Korablyov

Modified date: 08 November 2025

If you are planning to start your own business in Ukraine, one of the most important steps is choosing its organizational and legal form. The most common options are FOP (individual entrepreneur) and LLC (limited liability company), each of which has its own advantages and disadvantages. This article will help you figure out which form of business will be the most profitable for you by comparing them according to the main criteria: ease of registration, tax features, the possibility of attracting investment and the closure procedure.

Starting a legal business in Ukraine means making the first important choice: register a Sole Proprietorship (FOP) or create a Limited Liability Company (LLC)? This question arises for almost every entrepreneur – from freelancers to startups with partners and investors. Both forms have their own advantages, nuances in taxation, registration, reporting, working with clients, and closing the business. In this article, we will analyze in detail with examples which option to choose for your situation, so you don’t regret it in a few months. Tax aspects and legal details – everything you need to know for a successful start.

FOP or LLC? What to choose?

To start working legally in Ukraine, you need to choose the right form of business and register officially. Today, there are two main and most popular options – FOP (sole proprietorship) or LLC (limited liability company). These are the forms chosen by 99% of modern entrepreneurs, regardless of the field of activity. And if you still have a “PE” – a private enterprise? Please note: starting from 2025 this form is already considered outdated. The law directly requires businesses to be transferred to LLC. Our accountants and lawyers can help with this.

FOP is an almost universal form for many businesses. There are options to choose from: general taxation or simplified in three groups. To register an FOP, you only need: a passport, a taxpayer identification number, and a completed form (it can be submitted online via CNAP). The easiest way is to apply through “Diia” – without visiting a notary. By the way, we already have a video on our channel where you can see how to register an FOP in just 5 minutes without leaving home. But for LLC, you will need much more:

• registration form,
• charter,
• minutes of general meetings,
• document on ownership structure.

Registration takes from 1 to 3 business days. But it is important to note: an LLC is already a legal entity, and it requires more complex reporting.

Which option is better for you? Here is a short guide for choosing:

• If you work on your own, your business is small, and your clients are ordinary people or small businesses – choose a Sole Proprietorship (FOP). It’s fast, cheap, requires minimal paperwork, and is easy to close if needed.
• If you have partners, plan to attract investments, or your clients are large companies, banks, and international contractors, then it’s better to go with an LLC. Here everything is official: shares, corporate agreement, investment protection, and opportunities for business expansion.

Still hesitating? Contact us for a consultation – we will advise on the best option for your situation and help with business registration “turnkey.”

What is easier to manage: FOP or LLC?

FOP means minimum paperwork and maximum simplicity. Reporting – once a year for groups 1-2 of the general system; group 3 FOP – once a quarter. Having an accountant is not mandatory, but if you don’t want to risk mistakes, accountant services for FOP today cost about 400-900 UAH per month. But if you run an LLC, then an accountant is absolutely necessary. Likewise, monthly reporting and HR documents will be required.

Taxation of FOP and LLC.

FOP or LLC on a simplified taxation system means a fixed tax or a percentage of income. No corporate income tax, VAT – only if chosen voluntarily. But for LLCs on the general system, it includes:

• 18% corporate income tax,
• VAT, if registered,
• payroll taxes.

However, if you have a large or complex business, it can be beneficial, since expenses reduce profit and, accordingly, taxes.

In addition, one of the most important criteria that can influence the choice is usually the type of activity. But one unexpected, yet very significant criterion is investments.

An FOP cannot sell a “share” in the business. An FOP is an individual. It has no shares, corporate rights, or statutory capital. Therefore, an investor cannot become a co-owner.

And an LLC is the ideal form for investments.

1. You can transfer a share to an investor.
2. You can sign a corporate agreement.
3. Flexible terms can be set: profit, dividends, business exit.

LLC is most suitable for startups, franchises, and businesses with partners or investors.

What is easier to close: FOP or LLC?

Closing an FOP is like deleting a social media account. A few clicks and it’s done. But don’t forget to check that your case is already “offline” for the tax office. The procedure is as follows: you file an application, and within a few days, you are removed from the register. The only condition – there must be no debts and all reports submitted. Usually, losing FOP status does not mean automatic deregistration from tax accounting, and after termination of activity, an FOP can still be audited by tax authorities.

Be careful and make sure you are officially removed from the register, otherwise taxes may continue to accrue, and you may not even know about it. Fines for late payments will also apply.

The situation with closing a legal entity is significantly different.

Legal entities are closed over months or even years. You need to undergo audits, asset liquidation, and all tax and legal procedures. Often, a lawyer and a notary are required for this process.

Examples of FOP and LLC: practical cases

You want to open a hair salon. This is already a business with premises, equipment, and possibly employees. But it doesn’t necessarily have to be large – it all depends on the format.

As a rule, FOP of group 2 or 3 will work. But! If you are opening together with a partner with whom you will share profits – then it is definitely an LLC. Also, for the largest group 3 FOP, there is an income limit of 9,336,000 UAH per year. If you know your revenue will be higher, then you need to register an LLC.

Next example. You have a company manufacturing plastic windows. Production is an activity allowed only for group 3 FOP. Or LLC. If you work with individuals and do not exceed the same limit – FOP is fine. If you plan to install windows for legal entities under the general taxation system and expect a profit above 9,000,000 UAH per year – then only LLC.

And the last example. You have a farm where you grow vegetables for sale. FOP group 3 – if you work yourself or with your family. You sell directly to people or through stores. But if you have many employees, plan to attract investors, and sell vegetables to wholesale companies through tenders – then your option is LLC.

By the way, in this case, there is another form called “farm enterprise.” But this is a completely different story with its own nuances, so we will leave this topic for a separate article.

Useful video

Play

Conclusion

Summary: FOP or LLC – what to choose? It all depends on the scale, goals, and format of your business. FOP is simpler, cheaper, and faster to register and manage. It is suitable for those who work alone or with a minimal team, serve individuals, and do not plan to attract investments. On the other hand, LLC is already “serious business”: partners, investors, large clients, expansion. It has more legal nuances, but also more opportunities for growth.

If you are still hesitating – don’t guess. It’s better to consult with specialists: we will help you choose the best option for your situation, as well as register an FOP or LLC “turnkey” without unnecessary hassle.