The transformation of a Private Enterprise (PE) into a Limited Liability Company (LLC) is one of the most relevant processes for Ukrainian businesses in 2025. Following the enactment of Law No. 4196-IX, private enterprises can no longer be created, and existing businesses are gradually transitioning to new legal forms. Owners of PEs face a choice: undergo a reorganization procedure or consider liquidation of the PE with subsequent creation of a new LLC. Let us examine how to carry out this transition correctly and what to consider.

Why Is It Necessary to Transform a PE?

Private enterprises have long been popular due to their simplicity in registration and operation. However, they carry significant disadvantages: unlimited liability of the founder, limited opportunities for attracting investments, and challenges in corporate governance. The legislative changes aim to unify business structures, making them more transparent and safer for both participants and partners.

From now on, PEs can no longer be registered, and existing enterprises must change their form during a three-year transitional period starting on August 28, 2025. By this date, the Commercial Code will cease to be in force, and enterprises will be required to align their founding documents with the new legislation.

Transition Options: Reorganization or Liquidation

There are two main ways to transition from a PE to an LLC:

• Reorganization of a PE into an LLC — the enterprise retains legal continuity, assets, debts, and all existing contracts.

• Liquidation of a PE and creation of a new LLC — relevant if there are undesirable liabilities, debts, or a need for a fundamental change in corporate structure.

The choice depends on the financial condition of the enterprise, its assets, and future plans.

How the Transformation of a PE into an LLC Takes Place

The transformation procedure involves several stages, each with legal nuances and fixed timelines:

First, the owner of the private enterprise adopts a decision on reorganization. At this stage, a commission is appointed to oversee the process, and a deadline for creditors to submit claims is set — from two to six months, depending on the owner’s decision. After the decision is made, documents must be submitted for state registration within three days. Missing this deadline would require repeating the step.

Next, the company director sends notifications to all creditors about the start of the transformation process. The law requires notifying each creditor so they may submit claims if necessary. Creditors can demand early fulfillment of obligations, and the enterprise must satisfy these claims to complete the process. However, the absence of claims does not stop the procedure, as the newly formed LLC inherits all obligations of the PE.

After the period for creditors (at least two months) has expired, the formation of the new legal entity begins. The LLC’s charter and founding documents are signed at a notary’s office, based on the transformation. The participant’s share in the new LLC usually corresponds to the value of corporate rights in the PE — typically the charter capital.

On the day of signing the founding documents, a transfer act is drawn up, listing all the enterprise’s assets and liabilities. This act is generally interim and prepared by the accountant for the reporting period. These data transfer to the LLC’s initial balance, ensuring continuity of financial and tax history.

The final step is registration of the new legal form in the Unified State Register. After obtaining the extract, charter, and other documents, the enterprise must obtain new electronic keys, seals (if needed), re-register bank accounts, and notify counterparties of the change in organizational and legal form.

Why It Is Unwise to Delay the Transition

Although the law grants three years for the transition, delaying is not recommended. By 2028, a significant influx of enterprises will simultaneously undergo reorganization, leading to queues in government offices and overburdening registrars. Moreover, banks and partners already prefer LLCs as a more transparent and predictable structure.

An early transition helps avoid legal uncertainty and allows businesses to adapt their corporate structure to the new requirements in advance.

Risks of Untimely Transformation

After the transitional period ends, private enterprises will automatically be treated as LLCs but without updated charters. This creates several problems:

• lack of clearly defined corporate rights of participants;

• risk of disputes between owners;

• difficulties in profit distribution and signing new contracts;

• restrictions in opening bank accounts and obtaining licenses.

Why Professional Assistance Is Crucial

The transformation of a PE into an LLC encompasses corporate, tax, and property issues. Preparing correct documents, accounting for all obligations, and adapting the charter to new realities require professional expertise. Qualified legal support helps avoid mistakes that could lead to disputes or financial losses in the future.

Changing a private enterprise into a limited liability company is not only a legal requirement but also an opportunity to make the business more flexible, secure, and attractive to partners. Proper planning of the transformation or liquidation of the PE with subsequent creation of a new LLC helps avoid problems during the transitional period and establishes a stable foundation for business growth under reformed corporate law.