Ukraine is increasingly considered as a promising platform for opening a business in the field of information technologies. The pace of IT development in Ukraine is increasing every year, and experts in various fields predict both an increase in the number of IT specialists and a rapid spread of Ukrainian IT companies. The Government of Ukraine, in turn, is introducing legislative initiatives to improve the regulation of this sphere and create comfortable conditions for its development.
It would seem that there are no obstacles, but many IT specialists encounter difficulties when trying to create their own IT company. In order to make this procedure more understandable, we suggest that you familiarize yourself with the key questions that may arise during business registration and in the coming year after its registration.
1. Organizational and legal form of business.
If you are just trying your hand and are not sure of the result, you will most likely find it convenient to register as an individual entrepreneur. Among its advantages:
- simpler registration and reporting procedure;
- no need to undergo a tax audit during liquidation;
- convenience in crediting profit from economic activity to own account.
However, if you have a clear business plan, and even potential customers, you should consider registering a limited liability company. Its advantages are as follows:
- the possibility of registering a company with several founders;
- possibility to attract investors;
- in practice, large companies are more willing to cooperate with LLCs than with IEs.
To register an LLC, the following is required:
- preparation of the company’s charter and decision on establishment;
- formation of authorized capital (within six months after registration);
- registration of the tax system chosen by the payer;
- opening a bank account.
2. Involvement of a foreign element in the business structure.
It is often possible to notice foreign elements in the structure of well-known IT companies: these can be directly individuals-founders or legal entities from the ownership structure.
Why are they involved?
The first and most obvious – they could be the company’s investors. Investing in Ukrainian business in this way, they can legally claim part of the company’s profits, depending on the size of the share or the terms of the corporate agreement.
Also, in order to implement the correct taxation system, we recommend involving specialists in international tax planning.
Another no less important reason is the involvement of a foreign company to build the level of trust of foreign clients. Having among the founders of the company, for example, a resident of the USA, in practice you have more chances that clients from the countries of the European Union, the USA, and Canada will cooperate with you.
3. Copyright registration.
There are two types of copyright:
- Property rights
Exclusive property rights include the right to use the work and the right to permit or prohibit the use of the work by others. Such rules apply to the use of the work in any known ways, for commercial or non-commercial purposes.
The author can transfer (sell/gift) them to another person at any time. If desired, they can belong to several persons, while their right to the work will be determined in equal shares.
- Non-property (personal) rights
Non-property rights include:
- the right to demand recognition of one’s authorship by properly indicating the author’s name on the work and its copies and for any public use of the work, if this is practically possible;
- prohibit the mention of his name during the public use of the work, if he, as the author of the work, wishes to remain anonymous;
- to choose a pseudonym, indicate and demand the indication of a pseudonym instead of the real name of the author on the work and its copies and during any public use;
- demand preservation of the integrity of the work and oppose any twisting, distortion or other change of the work or any other encroachment on the work that may harm the honor and reputation of the author.
At the same time, the author of the work cannot transfer non-property rights to another person.
When creating an IT product, customers are interested in the fact that they own the property rights to the product as a result of the IT specialist’s work.
For this, we recommend to stick to the following procedure:
- conclusion of an agreement for the provision of services, which will provide the obligation of the executor to transfer exclusive property rights in full to the customer;
- submission of an application for copyright registration of a work to Ukrpatent (the consideration period is one month);
- conclusion of an agreement on alienation of copyright in favor of the customer. In such an agreement, it is important to reflect all the requirements of the parties in as much detail as possible.
If the owners of property rights wish to receive profit from their use in unequal shares, this can also be settled by signing an appropriate agreement.
4. Agreements in the operation of IT company.
In its IT activities, the company uses a considerable number of agreements. We suggest considering the most popular of them.
- Service agreement
It is used both when working with clients and when involving individual entrepreneurs in the performance of tasks. We recommend having different agreements for clients and contractors.
Its form is not complicated, but important attention should be paid to its essential conditions, in particular the subject, and all features of the procedure for providing services should be taken into account.
- Employment agreement
It is concluded somewhat less often, but it is also important in the operation of the company, as it must include all the requirements of labor legislation and in no case worsen the position of the employee. It is also possible to write down additional conditions, for example, the possibility of remote work, vacation days, etc.
- Agreement on non-disclosure of confidential information
Taking into account the judicial practice, prosecuting under such a contract is quite a difficult task. Therefore, it is extremely important to have a high-quality draft of such an agreement.
Foreign clients are more willing to cooperate with companies that apply non-disclosure agreements in their practice. And the IT company itself is of course also interested in ensuring the security of its commercial secrets, etc.
- Non-competition agreement
According to its provisions, an employee, contractor or any other person undertakes not to cooperate with competitors, not to carry out similar activities as the IT company itself.
In the Ukrainian legal field, their use is not yet sufficiently developed, but developed countries are already actively using them in conducting economic activities.
- Other agreements
Of course, IT companies also use other types of agreements, for example, such as a lease agreement, a financial assistance agreement, investment agreements, a loan agreement, a sales agreement, etc.
5. Cooperation with hired employees and individual entrepreneurs.
It is no secret that IT companies mostly practice involving IEs to work on orders. However, we draw your attention to the fact that the government has developed several legislative initiatives, which in the future will pay special attention to taxes on such types of legal relations. One of such initiatives is the Draft Law “On Amending the Code of Labor Laws of Ukraine on Defining the Concept of Labor Relations and Signs of Their Presence” No. 5054 dated February 9, 2021.
Therefore, we advise you to formalize relations with employees and contractors in accordance with the legislation of Ukraine.
Our experts will gladly give advice and explain how to properly organize the work of an IT company in Ukraine, taking into account your needs and plans. We have the knowledge and skills that will allow us to comprehensively support the IT company’s activities without the need to involve other specialists.
Special offers for startups will be a nice bonus.