Structuring an IT business in Ukraine is a crucial step in establishing your company within the Ukrainian jurisdiction. The right structure will help maintain an optimal tax burden, protect intellectual property rights, and regulate relationships between the company, employees, and externally engaged specialists. The latter is a common practice in Ukraine, though it carries certain tax risks with an incorrect approach to engaging freelancers.
The IT business is a specific sector of economic activity that encompasses various legal areas, including corporate, tax, intellectual property law, labor law, and others. Therefore, structuring an IT business is always a complex task that requires in-depth practical knowledge in the field of jurisprudence, taking into account IT nuances.
Structuring an IT business in Ukraine can conditionally be divided into the following blocks:
- Company registration and selection of a tax system: To make an optimal choice, you need to answer a series of questions: What does the company sell? To whom does it sell it? Who is involved in development, and where? Based on the answers, some taxes may or may not be applied. Small startups can use a simplified tax system with a 5% income tax rate or even become residents of the special legal regime of Diia.City, which is available for both small and large companies.
- Building relationships with employees and freelancers: This is the next but equally important stage. Salaries in the IT sector are quite high, and employers often prefer not to hire specialists as employees but to register and administer them as individual entrepreneurs. This approach allows significant savings on social contributions, but there is a risk that the labor service will recognize such relationships as labor, which threatens fines and a reassessment of taxes. Therefore, it is crucial to properly build relationships with specialists to avoid unpleasant consequences.
- Intellectual property protection: Another important element of structuring an IT business is the protection of intellectual property. The primary asset of an IT company is its product, in the case of product-oriented IT companies. For service-oriented companies, the protection of intellectual property rights is also a relevant issue. Measures to protect intellectual property rights include patent registration, trademark and copyright registration, and the preparation of licensing agreements. All of this will provide a reliable legal foundation for innovative products and services.
- Drafting contracts: Properly drafted contracts will be needed to define the rights and obligations of parties, including employees, externally engaged specialists, and clients of the company. If you are dealing with a startup, it will certainly be beneficial to create a corporate agreement between the founders, foreseeing a wide range of situations the company may face in the future. In contracts with employees and specialists, provisions on non-disclosure, non-competition, and other relevant points can be included. The better prepared you are, the fewer problems you will face in the future.
Structuring an IT business in Ukraine may also include other legal actions and is not limited to the enumerated points. If you are a Ukrainian citizen looking to establish an IT company or a foreigner wanting to register an IT company in Ukraine, you will need professional legal assistance in launching your business, and we will be happy to help!
