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Starting a business in Ukraine

The most widely used forms of legal entities in Ukraine are the joint stock company (JSC) and the limited liability company (LLC), with Ukrainian and foreign participants. In choosing between a LLC or JSC, it is generally recommended that a LLC be used since it is easier to manage than a JSC. A Joint Stock Company is a company in which the shareholders are only liable for the obligations of the entity to the extent of their capital contributions. There are two types of JSCs: public and closed. A public JSC is established via a public offering and subscription of shares; a closed JSC's shares are distributed privately among the founding shareholders. At least two founding shareholders are necessary to create a JSC. They are free to determine among themselves the share distribution that each will have in the legal entity. Shares issued by both closed and public JSCs must be registered with the State Commission of Securities and Stock Market. There are two levels of taxation: the JSC is taxed on its profits and the shareholders are then taxed when dividends are distributed. In a Limited Liability Company, the stakeholders like with a JSC are only liable to the extent of their capital contributions; ownership interests are expressed in terms of contractual rights that arise out of the foundation documents. A transfer of ownership rights is accomplished through an assignment of contractual rights. Interests in a LLC are not deemed to be "securities" and, therefore, are not subject to registration with the State Commission of Securities and Stock Market. As with a JSC, there are two levels of taxation for a LLC.

It is possible for a foreign company to establish a representative office in Ukraine. A representative office can carry out marketing, promotional, and other auxiliary and preparatory functions on behalf of the company. The establishment of a wholly-owned company in Ukraine would be recommended if the company intends to carry out manufacturing or other significant local commercial activities. There is no prohibition for a foreign legal entity to have both a representative office and to establish a wholly-owned subsidiary at the same time.

Depending on the needs of your company and your long-term plans, any one of these three legal forms for creating a legal entity in Ukraine (a representative office, a 100-percent wholly-owned subsidiary, and a joint venture, either as a stock company or limited liability company) may be suitable. Generally, foreign investors engaged in business activity in Ukraine must register in Ukraine as either a resident company or a permanent representative office within one month of beginning any such activity.

Registration of representative offices of foreign companies is handled by the Ministry for Foreign Economic Relations and Trade (MFERT) of Ukraine, and is done within 60 days of submission of all required documents and upon payment of a $2,500 fee.

For registration of a representative office, a foreign business must submit the following documents (translated into Ukrainian), in particular: A company charter (joint ventures need a foundation agreement);
An application for the registration of a representative office containing:
An extract from the trade or banking register of the country in which a foreign entity of business activity has its office officially registered;
A power of attorney (proxy) demonstrating the individual who will represent the company in Ukraine with references to the opening of bank accounts.

The above-mentioned documents should be notarized in the country in which the company is registered, translated, and duly-certified at a Ukrainian consulate abroad, unless otherwise stipulated in the international agreements of Ukraine.

A representative office must register with the local tax inspectors.

All business entities with legal entity status (resident or foreign) shall be officially registered by the executive committee of city, city district, regional councils [of people's deputies], Kyiv and Sevastopol district state administrations (hereinafter referred to as official registration authorities) at the place of residence of a given business entity, unless otherwise provided by law.

The following documents, in particular, should be produced for registration:
constituent agreement (when two or more owners);
the statue (company charter), if one is required by the form of organization; registration card, serving as an application for official registration;
document attesting to the payments of the official registration fee;
document attesting to the contribution of the entity's statutory (authorized) fund in the amount provided by law-certificate of the statute capital prepayment (50% - for a JSC, and 30% - for a LLC).

In case an owner is a foreign legal entity, an extract form the trade, bank or court register must be produced to certify registration of the investor in the country of origin. These documents must be duly approved according to legislation of the country of issue, translated into Ukrainian and legalized in a consulate of Ukraine.

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