Sole Proprietorships, Taxes, and Raids: Why “Marketopt” Is Restructuring Its Business
22 May 14:40
The “Marketopt” and “Optovychok” grocery store chains announced changes to their organizational and legal structure following searches by the Economic Security Bureau. The company reported that it plans to transform its operational model, conduct an audit of business processes, and transition to a more transparent network management structure, according to "Komersant Ukrainian"
Earlier, the Economic Security Bureau announced that it had uncovered a tax evasion scheme at a large local grocery store chain in the Poltava region. According to Poltava media reports, the chain in question was “Marketopt.”
What “Marketopt” said
The company emphasized that the “Marketopt” and “Optovychok” grocery store chains have been operating in the Ukrainian retail market for a long time and understand the importance of complying with the law.
“We have always recognized the importance of strict compliance with Ukrainian law, as well as the principles of transparent business conduct, fair competition, and proper interaction with government agencies,” the company stated.
“Marketopt” also commented on the practice of processing payments using two separate fiscal receipts during a single purchase.
The company believes that this situation “is more indicative of gaps in Ukrainian legislation” than of an attempt to evade taxes.
What the company will change
Following the BEB’s investigative actions, the company acknowledged that its previous model for organizing operational activities requires a significant transformation.
“Marketopt” announced its intention to implement a series of measures to bring its business processes into compliance with current legislation.
This includes:
- a complete reorganization of the accounting system;
- a change in the reporting system;
- a review of the network’s operational activities;
- transition to a more transparent organizational and legal structure;
- managing the network through a single legal entity or the minimum necessary number of legal entities;
- internal audit of all business processes;
- engagement of independent consultants and audit firms.
Will the network abandon the sole proprietorship model?
In fact, the company has announced its rejection of a model that could be interpreted as the artificial fragmentation of business activities.
In its statement, “Marketopt” noted that the company supports the position of the state and the Economic Security Bureau regarding the prevention of any forms of artificial fragmentation of business.
“The company fully shares and supports the position of the state and the Economic Security Bureau of Ukraine regarding the need for strict compliance with Ukrainian tax legislation, ensuring transparency in business operations, and preventing any forms of artificial fragmentation of economic activity,” the statement reads.
Why the BEB Conducted Searches
Earlier, BEB detectives conducted large-scale searches at a major grocery store chain in the Poltava region.
According to the Bureau, the company allegedly used more than 3,500 sole proprietorships to evade taxes.
According to investigators, this model could have allowed for the distribution of revenue among a large number of sole proprietors to reduce the tax burden.
What is the fragmentation of a business into sole proprietorships?
Splitting a business into sole proprietorships is a model in which a single network or company formally conducts its activities through a large number of sole proprietors.
In some cases, such a structure may be legal if each sole proprietor actually conducts independent business activities.
But if sole proprietorships are used merely as a formality to reduce a large company’s taxes, this may lead to scrutiny from regulatory authorities.
Watch us on YouTube: important topics – without censorship
What risks does this model pose for businesses
For large chains, the use of an excessive number of sole proprietorships can create tax and reputational risks.
These include:
- claims from the State Financial Inspection or tax authorities;
- searches and seizure of documents;
- additional tax assessments;
- fines;
- blocking of certain business processes;
- reputational damage;
- the need for urgent business reorganization.
When will “Marketopt” complete its reorganization?
The company stated that it plans to complete the main stages of the reorganization as soon as possible.
At the same time, they emphasized that a complete overhaul of the business model takes time and cannot be carried out instantly.
That said, “Marketopt” promises to ensure the continuity of the chain’s operations and the preservation of jobs.
What will happen to the stores
The company’s statement does not mention closing the stores. On the contrary, “Marketopt” emphasizes that the network’s stable operation must be maintained during the reorganization.
This means that for shoppers, “Marketopt” and “Optovychok” stores will continue to operate as usual, and the changes will primarily affect the business’s legal, tax, and management structure.
Read us on Telegram: important topics – without censorship
