Forms of organizing a business are in general similar, but there are some peculiarities that differ from country to country. In order to set up a business or to acquire excising company one should be aware of these differences. Below you may find basic information about the similarities and differences in the modern types of business entities comparing with Ukrainian ones.
Ukraine belongs to the continental law system. It is common practice to mark out two main types of Ukrainian companies: limited liability companies (TOV) and joint stock companies (AT). But, when describing the responsibility of those companies, both can be characterized as companies with limited liability, so one should distinguish “limited liability company” as a name of official organizational form from a general description of a company’s type.
A limited company is a company in which the liability of the members is limited to what they have invested or guaranteed to the company with an absence of the personal liability of the shareholders for the company’s debts. A limited company in the United States is known as corporation and to signify its corporate status Inc. is used.
A company limited by shares may be further divided into public and private companies. In a public limited company – anyone may buy shares, and in a private limited company it is restricted by law and by the company’s rules who may become its member and its shares can not be offered to the general public and be traded on a public stock exchange.
Private limited companies are known as: the German GmbH, Polish Sp. z o.o., the Czech s.r.o., the British Ltd. (often confused with LLC), Russian OOO and Ukrainian TOV. A limited liability company (LLC) is a different entity.
A limited liability company (LLC) is a legal form of enterprise that provides limited liability to its owners in the majority of the United States jurisdictions. An LLC, although a business entity, is a type of unincorporated association. It is often more flexible than a corporation and it is well-suited for companies with a single owner.
Note: LLCs do not need to be organized for profit.
Public limited companies are also called joint-stock companies (JSC) and are known as: the German AG (Aktiengesellschaft – this term is also used in Austria and Switzerland), the Mexican, French, Spanish and Polish S.A., Russian AO and Ukrainian AT (Aktsionerne Tovarystvo). The form is roughly equivalent to the public limited company (PLC) in the United Kingdom and Republic of Ireland, to the publicly-held/open corporation in the United States, and to the Societas Europaea in the European Union.
Note: Some jurisdictions still provide the possibility of registering joint-stock companies without limited liability. In the United Kingdom and other countries which have adopted their model of company law, these are known as unlimited companies. Currently in Ukraine there is no direct equivalent to unlimited companies.
In Ukraine there are two forms of joint stock companies: public joint stock companies – PuAT (former VAT), which in some way resemble the British PLC and other stock corporations, and closed (private) joint stock companies – PrAT (former ZAT), which shares are unavailable on stock exchange. Notwithstanding obvious differences with traditional concept, many shareholders chose to preserve the term “joint stock company” for PrAT, bringing in sequential misunderstanding.
The main difference between PrAT and TOV is that PrAT must have at least two members, and TOV may consist of only one member who at the same time is the founder of the company and ТОV cannot issue shares.