Comparison of LLC and representative office (RO) in Ukraine

One of our first tasks within the services for starting foreign business in Ukraine is to help with the question, “What business structure is more profitable to start a business in Ukraine?”.

In most cases the choice comes down to two options:

What business structure to choose in Ukraine depends only on you and on your situation. There are many nuances that will influence your decision:

  • Do you want to relocate your workers to work in Ukraine? 

Procedurally, it would be easier to employ them at the representative office.

  • Do you need a license to work in Ukraine?

The fact is that there is a specific list of economic activities for which a representative office can hardly obtain a license.

  • Which taxation scheme would be more profitable for you?

The answer will depend on many aspects, in particular on your type of activity, the main contractors and volumes.

The lawyers of our company will analyze your situation and offer you the best option.

In this table you can see a comparison of the lawyer of the two most popular business structures in Ukraine for foreign companies:

 

LLC (subsidiary)




Permanent representative office


Nature

It's a legal entity, an independent participant in all relations

It's not a legal entity, so in all relations it acts on behalf of foreign company (for expamle, in all contracts a foreign company is a party of a contract but not a Ukrainian office)

 

Founder /owner A foreign company is a founder. Ukrainian LLC (corporate rights) can be sold at any moment.

Thus, LLC provides a possibility to sell subsidiary in Ukraine or its part.

A foreign company is a founder but there is no chance to sell Ukrainian office.




Lack of right to sell.



Acts due to Charter



There are powers of a head body and other aspects of work in a charter.
Power of attorney or statute of the representative office (if there is one)

A scope of powers of the head is stipulated in the letter of attorney. A statute can regulate procedures and other aspects of functioning.

Property in Ukraine Ukrainian subsidiary is able to be an owner as well as foreign company.

When Ukrainian LLC is an owner of the property a foreign office loose a possibility of direct control over it.


Foreign company is an owner



It can be often used as a way to protect the property.
Responsibility Is limited to property of a subsidiary

This minimizes risks of parent company.

A foreign company is responsible


This make a company to take serious risks.

License (permits)
obtainment
Can obtain licenses

LLC has a possibility to execute licensed ecomonic activities.

Can't obtain licenses

There is no possibility to perform licensed activities.
Non-resident employees
A work permit should be obtained for each foreigner

It's quite uneasy and pricey procedure (it takes near 1 month,  state fee - close to 600 USD). It lasts only 1 year.

Special cards are issued for every employee


The cards are easy to obtain without any state fees during 3 weeks.

Moreover, the office can invite foreigner with provision of long-term visa.
 

Employment record book Filled up by LLC
Can't be filled up by workers of an office

A contract with state agency should be signed with this aim.
Additional legal entities LLC can establish another LLC

The possibility can be useful with the aim of business structuring, risks minimization, tax optimization and other.
Rep. office can not be a founder of legal entities
Regional structure Has a right to create branches and representative offices in Ukraine

There is a feasibility to spead activity into different regions of Ukraine lawfully.

No branches and representative offices


Presence in another region will demand one more pepresentative office.

Separately, we would like to note that the registration of LLC is much easier and cheaper: it usually takes up to two weeks (together with the preparation of documents, their receipt from you, translation into Ukrainian and registration), the registration fee - none. 

Registration of foreign representative office with the Ministry of Economy of Ukraine takes 20 business days (i.e. 1 month). The registration fee is UAH 2,270 since 01.12.2020.

You may also like: What to Consider When Buying an LLC in Ukraine?

In some cases, we offer our Clients simultaneous registration of a representative office and LLC, which helps, if properly organized, to use the positive qualities of both business structures and minimize the impact of the negative effects. 

Of course, we help with the proper registration of activities and advise on how both business structures can operate simultaneously, within the norms of Ukrainian legislation.

If you doubt which way is better to achieve the goal and which business structure to choose — our specialists offer an introductory consultation, at which we will consider your case and tell you which option is better to choose.

Our lawyers will provide you with the following services:

  • Advising on the best business structure in Ukraine for your case;

  • Consultation of the tax lawyer;

  • Registration of representative offices in Ukraine;

  • Registration of an LLC in Ukraine with a founding foreign company;

  • Assistance with employment of foreign employees in Ukraine, including executives through obtaining service cards or work permits;

  • If necessary, we provide services of a Nominee Director for the registration of an LLC in Ukraine;

  • If necessary, we provide a legal address for business registration in Ukraine.

In addition, we offer comprehensive legal and accounting support of foreign companies in Ukraine.

If you want to start a business in Ukraine through registration of a foreign representative office or a company in Ukraine safely and efficiently, don’t hesitate to contact us. 

Didn’t find an answer to your question?

Everything about Registration of the Representative Office of a Foreign Company in Ukraine here.

Everything about LLC Registration in Ukraine here.

We are ready to help you!

Contact us by mail [email protected], by phone number +38 044 499 47 99or by filling out the form:

Publication date: 12/12/2013

About author

Name: Marina Losenko

Position: Associate

Education: National Aviation University

Knowledge of languages: Russian, Ukrainian

Email: [email protected]

Write to the author

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Marina Losenko
Associate
Maksym Postyka
Head of Client Managers Department
Sofia Korliuk
Junior lawyer
Zakharchishin Olga
Assistant of the Lawyer