No other choice: why there will be even more individual entrepreneurs in Ukraine
17 February 2025 18:40
Unexpectedly, many entrepreneurs decided to close their businesses in January. And this is despite the fact that since the beginning of the full-scale invasion in Ukraine, a record number of individual entrepreneurs have been opened, bringing UAH 126 billion to the country’s budget over three years. What is the reason for the business closure and will this trend continue?
According to Opendatabot, since March 2022, more individual entrepreneurs have opened than closed. However, an anti-record was set in January 2025: after a break of almost a month of non-working registers, 61,455 sole proprietorships were closed in a few weeks in January. For comparison, only 21,358 entrepreneurs started their own business. And if we recall that at the end of last year, Opendatabot conducted a survey of Ukrainian entrepreneurs to find out the plans of small and medium-sized businesses for the near future. The survey involved 31,694 individual entrepreneurs. 8621 (27%) of the surveyed entrepreneurs reported that they plan to close their business in the near future. 2297 (7%) planned to close in 2024. Another 20% or 6324 participants indicated that they plan to cease operations in 2025. 62% reported that they made this decision because of tax increases, and 19% – because of business problems.
FOP – a way of survival for Ukrainians
According to Oleg Pendzin, an expert at the Economic Discussion Club, it is not worth saying that FOPs are closing en masse. January was a month in which there were indeed a lot of sole proprietorships closed, but one month is not an indicator of the general trend. Over the course of the year, if you look at the monthly statistics, even more sole proprietorships were opened than closed.
“Let’s just say that the share of individual entrepreneurs in state budget taxes is minimal, as is their share in GDP. A sole proprietorship is not just a simplified taxation system, a sole proprietorship is a way for the state to remove responsibility for the maintenance of an unemployed person who needs to be paid unemployment benefits, retrained, and so on. A sole proprietorship is self-sufficient and does not fall on the shoulders of the state. A sole proprietorship is a way for a person to survive,” he said in a conversation with[Kommersant] Oleg Pendzin said in an interview with "Komersant Ukrainian".
“Yes, there are moments that can provoke the closure of individual entrepreneurs. We have a lot of rich people who optimize their business in terms of paying taxes through individual entrepreneurs. And if today the fight against systemic evaders, such as electronics retailers or large retailers, where every cash register is a sole proprietorship, begins, they will start closing down, the economic expert believes.
“Sole proprietorships are specially created to pay less taxes. After all, those who want to pay more open an LLC,” emphasizes Oleg Pendzin.
There will be no fewer individual entrepreneurs
The closure of sole proprietorships is a normal trend. For example, in the automotive sector, the government changed the rules for car sales, and individual entrepreneurs engaged in car sales saw their taxes rise and began to close. But if you look at the types of sole proprietorships that usually open and close, about 50% of them specialize in wholesale and retail trade. In fact, they are intermediaries and resellers. It’s sad if a sole proprietorship engaged in manufacturing closes. But there will be no fewer sole proprietorships in the near future, on the contrary, there are prerequisites for more of them to open.
“Restrictions have been imposed on banking transactions for transferring more than UAH 150 thousand to cards. These restrictions do not apply to individual entrepreneurs. If an individual is not registered anywhere and carries out trade and intermediary activities, there will be problems – financial monitoring will not let the money through. I think that if the maximum amount of transfers to bank cards is introduced, the number of individual entrepreneurs will increase,” said Oleg Pendzin.
For reference: According to the Unified State Register, more than 763 thousand sole proprietorships have been opened since March 2022. However, during this time, 685 thousand entrepreneurs ceased their activities. In three years, the share of women entrepreneurs has increased from 40% to 61%. Since 2022, the largest number of new sole proprietorships has been registered in Kyiv (108,536), Dnipro (68,377), and Lviv (60,009). At the same time, the number of new entrepreneurs increased in Rivne (25%), Ivano-Frankivsk (10%), and Chernihiv (10%) regions.
Most often, entrepreneurs chose retail as their main field of activity – 28.1% or 214.2 thousand entrepreneurs, IT – 9.1% (69.5 thousand, although twice as many were opening before the invasion) and wholesale trade – 7.2% (54.6 thousand). The number of new cases in the postal and courier services sector increased by 3 times. The number of new sole proprietorships in the education sector increased 2.6 times, and 2.5 times in the finance sector. The number of new businesses in the field of motorcycle/auto equipment trade was less frequent.
Author: Alla Dunina
