A farm enterprise is a form of entrepreneurship of one or more citizens of Ukraine for the production, processing, and sale of agricultural products. The fundamental legal act for it is the Law of Ukraine No. 973-IV “On Farm Enterprise” dated 19.06.2003.
According to information from the Ministry of Agrarian Policy and Food, as of January 1, 2024, the number of registered farm enterprises (FE) in Ukraine is 50,126 units, of which 19,665 units are statistically active (excluding temporarily occupied territories). The average area of land cultivated by one FE in Ukraine ranges from 50 to 100 hectares, which is quite large compared to the EU, where the average farm size is less than 18 hectares. In neighboring Poland, where there are almost 1.5 million farmers, each farm typically has 1 to 10 hectares. However, although Ukrainian farmers cultivate larger plots, their significance in the country’s agricultural production structure does not reach that of agroholdings and large farms.
The need to create new FEs remains relevant from the moment Ukraine declared independence until today. Moreover, as you will see from the article, creating an FE in Ukraine is not difficult. You only need a few hectares of agricultural land and a strong desire. If you’re one step away from farming but hesitating, read this material and set off towards your goal!
Types of Farm Enterprises
By specialization, FEs can be classified into crop farming, crop-livestock farming, enterprises with narrow specialization (for example, those engaged solely in vegetable growing, beekeeping, horticulture, poultry farming, etc.), and multi-sector farms. However, when understanding what a farm enterprise is, it’s worth clarifying the peculiarities of FE division depending on legal status. After all, such business entities can be legal entities or not.
From a legal perspective, the following types of farm enterprises can be distinguished:
- without legal entity status: based on a declaration (for a sole farmer) or agreement (for a family FE), an individual entrepreneur is registered, the person on whom the entrepreneurship is registered is the head of the FE, and all others are its members;
- with legal entity status: registered based on a charter, the head becomes the person (one of the founders) specified in the charter, the enterprise may or may not be family-owned.
Important! A family FE is a business entity whose members can only be representatives of one family as defined in Article 3 of the Family Code of Ukraine. Others can be involved under an employment contract only for seasonal/specific work requiring special skills.
Note! The Verkhovna Rada is currently considering draft law No. 6013 dated 09.09.2021, according to which the activities of a farm enterprise should be registered as an LLC. However, this legislative initiative has many opponents, and the question of its adoption has been put on hold for now.
How to Open a Farm Enterprise
According to Part 2 of Article 1 of Law No. 973-IV, an FE is created by a citizen/citizens of Ukraine who are relatives/family members. Legal entities, foreigners, stateless persons, and non-relatives cannot be among the founders. Among the requirements for FE members is an age of 14 years or older. Among the requirements for the head (founders) of an FE is an age of 18 years or older and legal capacity.
Let’s consider how to create a farm enterprise step by step:
- Resolve the issue of land to be cultivated, equipment, and farm buildings (if needed).
- Prepare documents for registration, choose KVED codes depending on the areas of activity, decide on the taxation system.
- Register the FE, register with the tax service, open a bank account.
- If you plan to receive state support, grants, additional bank financing, develop a business plan.
Important! The Ministry of Agrarian Policy of Ukraine, by order dated April 19, 2024, No. 1275, approved the form of a typical business plan for FEs, which includes such subsections as financial plan, feasibility study, risks and ways to minimize them, etc.
How to Name a Farm Enterprise
The name of an FE without legal entity status can be anything. The only requirement, according to Part 5 of Article 8-1 of Law No. 973-IV, is that it must be specified in the agreement (declaration) when creating the enterprise, along with such information as address, purpose, and types of activities, etc.
However, the question of how to name a farm enterprise with legal entity status is somewhat more complex. Guidance should primarily be taken from the provisions of Article 16 of the Law of Ukraine No. 755-IV “On State Registration of Legal Entities, Individual Entrepreneurs, and Public Formations” dated 15.05.2003 and the Order of the Ministry of Justice dated 05.03.2012 No. 368/5. In particular, the name of a legal entity must include information about its organizational and legal form. The name should not be identical to the name of another business entity. Additionally, it is prohibited to use certain words, terms, and abbreviations in the name, the list of which is defined in Part 5 of Article 16 of Law No. 755-IV.
To avoid non-unique names, prior to state registration of the FE, a search should be conducted on specialized resources, for example, using the Opendatabot service.
Procedure for Creating a Farm Enterprise
Let’s break down step by step how to register a farm enterprise:
- Obtaining ownership or lease of land.
According to Article 8 of Law No. 973-IV, an FE can be registered only if agricultural land is owned or used (including under a lease agreement). If such land is not available, Article 7 of this Law provides a procedure for its allocation. For this, the future farmer must apply to the Main Department of the State Geocadastre in the respective region and to the united territorial community.
- Preparation of documents for FE creation.
As mentioned earlier, there are different types of farm enterprises. Depending on the chosen type and status of the FE, a declaration (for a sole entrepreneur), an agreement between members (for a family enterprise with entrepreneur status), or a charter (for a legal entity) is prepared. These documents must be certified by a notary.
- State registration.
An FE can be registered at the place of residence of the founder (head) or at the location of the land. Information about the creation of the farm enterprise is entered into the state register.
- Deciding on the taxation system.
The legislation provides many options for farmers to choose a taxation system. This can be either a general or simplified procedure (single tax), with or without VAT. For FEs, the 2nd, 3rd, and 4th groups of single tax may be suitable. However, certain nuances need to be considered, including income size and employee hiring.
A farm enterprise that has been operating for more than a year will likely need certain material and technical resources for development. Where to find money for these? This is where the online service WEAGRO comes in handy, offering advantageous and quick agricultural installment plans.
Read also: Qualified Electronic Signature (QES): What It Is and How to Obtain It
How to Register a Farm Enterprise in Ukraine
The requirement for mandatory state registration of an FE is enshrined in Article 8 of Law No. 973-IV. However, since there are different types of farm enterprises, the list of documents for their registration differs slightly. The registration procedure involves three steps:
- submitting documents online or in person;
- carrying out the relevant registration action – entering a record of the newly created business entity in the Unified State Register of Legal Entities, Individual Entrepreneurs, and Public Formations;
- obtaining an extract from the register.
Answering the question of how to register a farm enterprise, let’s highlight the documents that need to be submitted to the state registrar (at the CNAP)/notary or through the Diia government services portal (if documents are submitted online, an electronic digital signature must be obtained in advance):
- a document confirming the right of ownership/use of the land plot;
- an application (to fill out the standard application form, passport data and TIN of the founders will be needed);
- when registering a legal entity, you need to add the charter and the decision of the founder(s) to create an FE. When registering an individual entrepreneur – a declaration or agreement on creating an FE.
Note! An administrative fee is not required when opening an FE.
Read also: How to register and deregister a tractor: procedure and necessary documents
Prospects for Creating a Farm Enterprise in Ukraine
Despite numerous skeptical and pessimistic forecasts, the development of farm enterprises in Ukraine continues. Many farmers have been hardened in wartime conditions, blackouts, and even destruction of farms due to Russian aggression. Small agricultural producers have proven their higher resilience, flexibility, and efficiency compared to large agricultural companies.
At the same time, the state is also expanding support programs for FEs. The Cabinet of Ministers adopted resolution No. 300 dated March 15, 2024, on allocating funds to support farmers. In particular, it provides for a budget subsidy per hectare for farmers from de-occupied territories and those territories where combat operations have ended.
Before creating a farm enterprise, it’s worth clarifying the areas in which the state provides support. These include partial compensation for the cost of seeds, purchased agricultural machinery, additional support for enterprises with family status, and more. When talking about the advantages of a farm enterprise, one should not forget the subsidy for newly created FEs.
If these arguments are not enough, we remind you: every farmer who has been working for more than a year can use the online service WEAGRO for more convenient settlements with suppliers – you can get the necessary goods when needed and pay gradually in a comfortable mode.
