Consulting on running a sole proprietorship (FOP): choosing KVED codes, tax group, and the optimal taxation system

Many entrepreneurs open a sole proprietorship (FOP) simply because “everyone does it this way”: a familiar registrar quickly files something, a number appears in the receipt, a few KVED codes are added to the extract “just in case”, and taxes are left for “later”. In practice, this approach leads to extra payments, blocked tax invoices, loss of eligibility for the single tax, or fines for exceeding limits. The FOP taxation system is not a formality, but a tool that either works for your business or quietly eats away your margin.

The choice of KVED codes, tax group, and taxation system must be based on your real revenue and cost model and growth plans, not on random advice from chats. At WINNER, we see the consequences of “do‑it‑yourself” decisions every day: an IT specialist chooses an unfortunate KVED, an online store ignores the group limits, and a marketing consultant gets stuck between operating as an FOP or a company (LLC). Instead of chaotic decisions, we offer entrepreneurs a structured consultation that makes it clear which FOP format is right for you.

Why choosing the right KVED matters

Your economic activity code is not just a box to tick in a register. Your KVEDs determine whether you qualify for the simplified single tax regime, which taxes you pay, and whether you fall under special scrutiny from tax authorities and banks. A poor or “dead” KVED can result in denial of single‑tax status, suspended transactions, or questions from financial monitoring.

A common mistake is adding dozens of KVEDs “just in case” without understanding which ones you actually use. The opposite extreme is conducting only one real type of activity while leaving a generic code in the register that the tax office can interpret to its advantage. During the consultation, we at WINNER first clarify what you actually do, which services or goods you sell, where your clients are (Ukraine, non‑residents, marketplaces), and only then form a correct set of KVED codes.

Choosing the FOP group and taxation system

Your FOP group determines not only the single‑tax rate, but also turnover limits, whether you may work with legal entities, how many employees you can have, and your obligations regarding cash registers (RRO/PRRO). A mistake at this stage often costs more than it seems: once you exceed the limit or breach the conditions, you automatically lose the right to use the single tax and face additional tax assessments under the general system.

Another key issue is choosing between the simplified and general tax systems. Sometimes it is more beneficial to pay the single tax without deducting expenses; in other cases, it is more reasonable to move to the general regime to legitimately recognize significant costs and reduce taxable income. During the consultation, we model several scenarios: current turnover, the forecast for the year, and different cooperation formats (B2C, B2B, non‑residents) and show you the real tax burden for each option. This way, the decision is based on numbers, not intuition.

What issues we address during a WINNER consultation

When an entrepreneur comes to us with the question “what is the best way to run my FOP?”, there are always specific doubts and concerns behind it. In the consultation, we help you to:

• Choose the optimal group and taxation system for your income and expense model so that you do not overpay or breach limits.
• Form a correct set of KVED codes: remove unnecessary ones, add the right ones, and minimise tax and banking risks.
• Decide between FOP and LLC: when a sole proprietorship is enough and when it is time to register a company (scale of operations, partners, investments, liability).
• Understand how to work with non‑residents, marketplaces, and foreign platforms without getting lost in currency and tax controls.
• Set up basic document flow: contracts, acts, primary documents, so that during an audit you can show more than just bank statements.

The result of the consultation is not abstract advice, but a clear action plan: which steps to take now, which changes to make in the registers, how to organise accounting, and what to monitor every month.

Why choose WINNER

When it comes to FOPs, we look much wider than simply “which group to choose”. The lawyers and attorneys of WINNER Law Firm support businesses daily in tax disputes, audits, and cases related to blocked tax invoices, so we know very well what the tax authorities actually focus on. This allows us to build an FOP model for you that is not only convenient in terms of tax payments, but also resilient to regulatory scrutiny.

We work with entrepreneurs all over Ukraine, helping both those who are just planning to open an FOP and those who want to clean up existing chaos in their KVEDs, reporting, and contracts. The consultation is held in a convenient format – online or offline – and ends with written recommendations and, if needed, hands‑on support with filing applications and registration documents and making changes to the registers. If you need a partner who will not just “explain taxes” but will select a solution tailored to your specific business, contact WINNER – we will analyse your situation and help configure your FOP so that it works for you, not against you.

Author: Ihor Yasko, Managing Partner of the Law Firm “WINNER”, PhD in Law.