LLC vs Sole Proprietorship in Uzbekistan: Which Business Structure Should You Choose?

1. What Your Choice of Structure Determines

Your business structure determines six things: what you are liable with for the business's debts, how money moves through the tax system, who can be your partner, what activities you may carry out, how you can sell the business and how you can close it. The choice can be corrected later, but at a cost. There is no direct “re-registration” of an IE as a legal entity, so in most cases you have to set up a new company (see section 15).

Several changes in 2026 affect the choice:

• From 1 January 2026, IEs pay a 1% turnover tax on income of up to UZS 1 billion, and the fixed personal income tax has been abolished (Law No. ZRU-1108 of 25 December 2025).
• From 17 April 2026, a new version of the list of activities permitted for IEs is in force (Cabinet of Ministers Resolution No. 175 of 16 April 2026).
• From 22 July 2026, the new Law on Limited Liability Companies No. ZRU-1137 of 21 April 2026 is in force. It replaced the 2001 law.
• From 1 September 2026, the basic calculation value (BCV) is UZS 440,000. Mandatory IE payments depend on it.
• From 1 June 2026, under Presidential Decree No. UP-100 of 26 May 2026, the threshold for moving to the general tax regime rises to 12,000 BCV (instead of UZS 1 billion).

2. Business Structures in Uzbekistan at a Glance

* With exceptions described in section 6.

Besides these structures, there are self-employment, family entrepreneurship without forming a legal entity, joint-stock companies, production cooperatives and business partnerships.

• Self-employment is designed for personal work without hiring staff. It is not an option for a business with a team.
• A joint-stock company is needed when capital is raised from many shareholders or a public offering is planned. For a typical entrepreneur, it is the next stage of growth: an LLC that grows beyond 50 participants must, within a year, convert into a joint-stock company or a production cooperative.
• Production cooperatives and general and limited partnerships are rare. This article does not cover them.

3. Individual Entrepreneur: Where It Works and Where It Doesn't

Who can be an IE. An IE is a private individual who runs a business without forming a legal entity. Foreign citizens can also register as an IE. They need a PINFL (personal identification number) and documents confirming their residence.

What an IE offers. Registration is simple, there is no charter capital, there are no corporate procedures or meetings, and under the turnover tax regime the tax burden is minimal. For a small service or retail business, this is the shortest path.

What limits an IE. There are three limits, and all of them are significant.

• A closed list of permitted activities (section 9).
• No more than five employees. Since 23 November 2021, entrepreneurs may hire up to five employees.
• Personal liability. An IE is liable for obligations with all property that belongs to them and can be seized under the law. An IE has no separate business assets that could be “lost” instead of personal ones.

IE taxes in 2026.

• IEs and self-employed persons with income of up to UZS 5.28 billion are turnover tax payers at a rate of 1%. They may voluntarily switch to VAT and profit tax, and they must switch from the day the threshold is exceeded.
• An IE pays social tax for themselves every month at 1 BCV. It is payable regardless of the tax regime chosen.
• An IE that imports goods across the customs border must apply profit tax (15%) and VAT (12%).
• An IE who employs staff withholds personal income tax from employees and pays social tax for them as a tax agent.

Suspension. An IE can temporarily suspend activity through an electronic service. No social tax accrues for the suspension period, but simply having no sales does not count as suspension. Closing an IE does not write off its debts.

Sale. IE status cannot be sold, but assets and rights can (section 15).

In practice. The most common mistake when choosing an IE is looking only at the 1% rate. First check whether your activity is on the list in its current version, then assess the growth ceiling: UZS 5.28 billion in turnover, five employees and one owner.

4. LLC: What the New Law Changed

Compared with the 2001 law, the new law is noticeably more liberal. The following provisions matter most for entrepreneurs.

• Participants. Participants may be legal entities and individuals. A company may be established by one person, and the number of participants may not exceed fifty.
• Activities. A company may carry out any activity not prohibited by law, including activities not listed in its constitutive documents. Licensed activities require a licence, permit or notification.
• Charter capital. There is no universal minimum, although licensing requirements may set one. Non-cash contributions worth more than 10,000 BCV must be valued by an appraisal organisation, and each contribution must be paid in full within one year of registration.
• Governance. The supreme body is the general meeting. A supervisory board is optional, and the executive body may be sole or collegial. A sole participant takes decisions alone.
• Corporate agreement. The law recognises the right of participants to enter into a corporate agreement.
• Reorganisation: merger, accession, division, spin-off and conversion.

The price of this flexibility is mandatory corporate decisions, an annual cycle of meetings, formal procedures when interests are sold, and the accounting and reporting required of a legal entity. The second risk concerns capital. If, at the end of the second and each following financial year, net assets are lower than the charter capital, the company must reduce its charter capital to the amount of net assets.

5. Taxes and Profit Withdrawal

Tax regimes

Basic rates: profit tax 15%, VAT 12%, social tax 12%, and turnover tax for legal entities 4%. Annual revenue above UZS 5.28 billion moves a legal entity to VAT and profit tax; below this threshold, turnover tax applies.

Profit withdrawal

This is where the difference between an IE and an LLC is most visible.

IE. The IE is the individual themselves, so there is no separate decision on profit distribution. From 2026, IE income is not included in the personal income tax base, and the fixed personal income tax for IEs has been abolished. After paying turnover tax or profit tax, the entrepreneur can dispose of the money with no dividend tax.

LLC. Profit must be distributed by a decision of the participants, dividend tax must be withheld, and the dividends must be paid on time. The law provides that:

• a decision on the distribution of net profit may be taken quarterly, semi-annually or annually; dividends are paid in proportion to ownership interests, and the payment deadline is no more than 60 days;
• profit may not be distributed until the charter capital has been paid in full, when there are signs of insolvency, or when net assets are lower than the charter capital and the reserve fund;
• dividend tax on LLC interests is 5% for residents and 10% for non-residents. The temporary exemption until 31 December 2028 applies to shares, not to LLC interests.

Private enterprise. Withdrawal follows the logic of a legal entity. The income of a private enterprise owner is treated as dividends and is subject to personal income tax.

Family enterprise. The law on family entrepreneurship states that profit after tax is at the disposal of the participants, and it does not set a special tax regime. The tax consequences of a specific payment must be checked separately.

An example where a comparison is essential

Take a business with an annual turnover of UZS 600 million under the simplified regime, ignoring salaries and expenses.

• IE: 1% is UZS 6 million, plus about UZS 5 million a year in social tax for oneself. The total is about UZS 11 million.
• LLC: 4% is UZS 24 million. In addition, 5% is withheld from the portion of profit that the participant decides to withdraw.

Above the UZS 5.28 billion threshold, the regimes for IEs and LLCs coincide (VAT and profit tax). The difference is then determined by dividends: for an LLC, every UZS 100 million of distributed profit adds UZS 5 million of tax for a resident, while an IE has no such layer.

6. Liability

Differences that are often overlooked:

• Private enterprises and family enterprises do not protect personal assets. The legal-entity form does not separate the owner from the debts.
• An LLC protects, but not absolutely. If a company's insolvency results from the unlawful actions of a director, a supervisory board member, a participant or a person who gives binding instructions, subsidiary liability may be imposed on that person when the company's property is insufficient. Participants who have not paid their contribution in full are jointly liable up to the unpaid amount.
• Bank and landlord practice. Loans and leases for a small LLC are often granted against a personal guarantee from the owner, so in practice the legal protection is narrowed by contract.

7. Founders and Ownership Structure

• IE and private enterprise: one owner, who is an individual. A legal entity cannot own a private enterprise, and an IE cannot have partners.
• LLC: from 1 to 50 participants, individuals and legal entities, residents and non-residents.
• Family enterprise: at least two participants, who must be legally capable family members of working age. The law defines the circle of relatives: spouses, children and grandchildren, parents and certain other relatives.

Changes in the membership of an LLC are governed by the law and the charter (section 15). For several owners, this is fundamental: IEs and private enterprises have no such regime, while in an LLC the rights and obligations of participants are fixed in advance. The right to leave the company does not depend on the consent of the other participants, and participants holding at least 10% may seek the expulsion of a participant through the court.

8. Employees

Family entrepreneurship without forming a legal entity may employ up to five permanent employees under an employment contract. This limit has applied since 28 December 2023; before that, the limit was three people.

An IE cannot hire a sixth employee. The only way out is to create a legal entity and move the business into it. If you already plan to grow your team, it is better to choose an LLC from the start.

9. Permitted Activities and the OKED Classifier

This is one of the key questions when choosing a structure.

IE: a closed list. Individuals may not carry out activities that are not included in the list approved by Cabinet of Ministers Resolution No. 6 of 7 January 2011, and public service centres must follow this list strictly at registration. The current version contains more than ninety items.

The list includes, for example:

• retail trade (with a number of exceptions: construction materials, alcoholic and tobacco products, petroleum products, jewellery, new imported cars and pharmaceuticals);
• freight transport by road;
• software development, design, translation and tutoring;
• real estate agency, tourism and education services;
• advertising, household and repair services.

The list does not include, among other things, wholesale trade, restaurants with seating, construction contracting, consulting and accounting services. If your activity is not on the list, the IE format is not available to you, regardless of turnover. The list is changed regularly, so always check the current version before filing documents.

Activities on the list may also be carried out by legal entities, and an IE may engage in foreign trade activity within the list.

LLC: any activity not prohibited by law. A company may also carry out activities that are not stated in its charter.

What OKED is. OKED is the classifier of economic activities. It is used for statistics, registration and tax accounting, but it does not permit anything by itself. The right to engage in certain activities depends on a licence, permit or notification, and the list of such activities is established by legislative acts. That is why the statement “OKED permits an activity” is legally inaccurate. The correct sequence is this: first check whether the activity requires a licence or other authorisation, then choose the OKED code, then choose the legal form.

10. Large Customers and Banks

Corporate customers. The legal form itself does not prevent you from working with companies: an IE can enter into contracts with businesses. But large customers have their own selection logic, and formal obstacles arise at three levels:

• VAT. An IE on turnover tax is not a VAT payer. A customer on the general regime cannot claim input VAT on purchases from such a counterparty. The solution is a voluntary switch to VAT and profit tax, which is also available to IEs (section 3).
• Eligibility. Tenders, accreditations and a customer's internal procedures may require a legal entity, a track record, a certain turnover or a licence.
• Contractual liability. A corporate customer often demands guarantees and penalty clauses, which for an IE mean a risk to personal property.

Banks. There are no universal differences between an IE and a legal entity in the mere fact of holding an account. Banks open settlement accounts for both. What differs is the tariffs, the set of documents and the depth of customer due diligence. For an LLC, the bank requests the ownership structure and information about beneficial owners, especially where a foreign participant is involved. Foreign currency transactions and foreign trade settlements are available to both legal entities and IEs (within the list), and the conditions depend on the bank and the specific product.

11. Foreign Capital: Regular LLC, JV LLC and FE LLC

A foreign investor can establish an LLC, buy an interest in an existing one, or enter the capital through an additional contribution.

These are not separate legal forms

In Uzbekistan, there is only one organisational and legal form: the LLC. The labels “JV LLC” (joint venture, “SP OOO” in Russian) and “FE LLC” (foreign enterprise, “IP OOO” in Russian) refer to the composition of participants and to status. According to registration practice:

• JV LLC (joint venture): an LLC with a foreign stake and local participants, where the foreign participant's stake must be at least 15% of the total charter capital;
• FE LLC (foreign enterprise): an LLC with 100% foreign capital.

Criteria for an enterprise with foreign investment

Under the Law on Investments and Investment Activity (ZRU-598), enterprises with foreign investment are those in which foreign investment accounts for at least 15% of shares (interests) or charter capital. But the presence of a foreign participant does not automatically confer this status:

• A stake below 15%. The company remains a regular LLC with a foreign participant.
• Who counts as a foreign investor. Foreign investors include foreign legal entities, as well as foreign citizens and stateless persons who permanently reside outside Uzbekistan. A foreign citizen holding a residence permit at the time of investing may not be recognised as a foreign investor. The tax status of an individual (resident or non-resident) is determined separately.
• Charter capital. Presidential Decree UP-1652 (as amended by UP-5684 of 6 March 2019) links the status to charter capital of at least UZS 400 million and a foreign stake of at least 15%. For Karakalpakstan and Khorezm region, a reduced amount of UZS 200 million applies in registration practice.

What changes for the participant and the business

• Tax incentives. The special incentives under Article 471 of the Tax Code require a foreign stake of at least 33% (at least 15% for joint-stock companies), production in approved sectors outside the city of Tashkent and the Tashkent region (with exceptions), investments in convertible currency or new equipment, and reinvestment of at least 50% of the incentivised income. The status threshold (15%) and the incentive threshold (33%) are different.
• Investor guarantees. The law guarantees ten years of legislative stability from the moment of investment, free repatriation of after-tax income and protection against nationalisation.
• Dividends to a foreign participant. The general rate for a non-resident is 10%. A double tax treaty may reduce it, but this requires confirmation of tax residency and beneficial ownership. From 2026, the tax withheld on dividends paid to a non-resident is reduced by the tax previously paid on dividends received from other Uzbek companies, provided the holding is at least 25% of the payer's capital.

When a regular LLC is enough

If the foreigner holds a small stake, plans to stay in Uzbekistan on a residence permit, or the project does not seek investment incentives, it makes sense to stay with a regular LLC with a foreign participant and not complicate the structure. Enterprise-with-foreign-investment status is justified when you need the guarantees and incentives, or when the investor contributes substantial capital and wants to lock in the legal regime for the investment.

12. Private Enterprise

What it is. A commercial organisation established and managed by its owner, a single individual.

Key parameters under the law:

• One owner, who must be an individual. A legal entity or several owners are not possible.
• Management. The owner manages the enterprise alone as its head. The law allows the head's duties to be transferred to another person only for the period of the owner's temporary absence. The law on private enterprises does not provide for a permanent hired director.
• Liability. The enterprise is liable with its own property, and the owner bears subsidiary liability with their own (section 6).
• Charter capital is indivisible and is determined by the owner, who also values the contribution on their own.
• Activities. A private enterprise may carry out any activity in accordance with the law.
• Reorganisation and liquidation. Reorganisation is possible by decision of the owner or the court. Liquidation is carried out by decision of the owner, the court or the registration authority.

When a private enterprise makes sense. Its only objective advantage over an IE is that it is a legal entity: it can carry out activities that are not on the IE list and is not limited to five employees. But compared with an LLC, a private enterprise has no limited liability, no ownership interests and no way of bringing in a partner. For a new business, a single-participant LLC is almost always better. A private enterprise is usually a legacy form, or a way of keeping an existing structure in place.

13. Family Entrepreneurship and the Family Enterprise

Two concepts need to be distinguished here.

Family entrepreneurship is activity by family members aimed at earning income at their own risk. It can be carried out with or without forming a legal entity, and when a legal entity is formed, its organisational and legal form is the family enterprise. Without a legal entity, family entrepreneurship is conducted in the manner established by law, with the right to hire up to five permanent employees (section 8).

A family enterprise is a legal entity and a small business entity. Under the law:

• Participants. At least two, who must be family members of working age and legally capable. Officials of state bodies and other persons whom the law prohibits from engaging in business cannot be participants.
• Personal labour. The activity of a family enterprise is based on the personal labour of its participants, and participants are required to take personal part in its activity.
• Governance. The supreme body is the general meeting of participants. The enterprise is represented by a head, whom the participants elect unanimously.
• Founding agreement. All participants sign it. Participants joining or leaving, a change of head, divorce or death are formalised through amendments to the agreement, with no re-registration needed.
• Liability. Participants bear subsidiary liability (section 6).
• Restrictions. A family enterprise may not produce excisable goods or extract minerals subject to subsoil use tax. A sole residential house or apartment cannot be contributed to its charter capital. The use of hazardous substances and equipment is limited, and industrial activity in residential premises of apartment buildings is not allowed.
• Headcount. The total number of participants and hired employees may not exceed the limit for small enterprises.
• Support measures. The law provides for leasing of unused non-residential premises, allocation of land and connection to utility networks. If the enterprise is located in residential premises, utilities are paid at household rates. Converting residential premises into non-residential is not required (except in cases provided for certain types of activity).
• Taxes. There is no special tax regime for family enterprises, and they pay taxes under the general procedure.

How it differs from an LLC and an IE. It is a legal entity with simplified registration, but with a rigid circle of participants, personal labour requirements and subsidiary liability. It suits production or services in a family format (a workshop, a bakery, a small manufacturing business). But when an outside partner or investor arrives, the form stops working, and the family moves to an LLC.

14. Scaling Up and Attracting Investors

LLC tools under the new law:

• Investor entry. Charter capital can be increased through additional contributions from participants and contributions from third parties. The decision to admit a third party is taken unanimously.
• Corporate agreement. Participants can separately agree on management rights and exit terms.
• Branches, representative offices and subsidiaries. A company may create branches and representative offices and participate in other legal entities.

An investor usually asks for a legal entity with ownership interests and a transparent structure. For an investor, IEs and private enterprises are practically closed. If you plan to raise capital within the next two to three years, choosing an LLC from the start saves the time and cost of restructuring.

15. Selling the Business, Reorganisation, Suspension and Closure

These concepts are often confused, although legally they are different mechanisms.

IE

IE status cannot be sold or transferred because it is inseparable from the person. What can be sold is equipment, trademarks, contractual rights and the customer base, that is, assets and rights individually. The buyer will have to formalise contracts, permits and employees anew.

Private enterprise

The owner may sell, donate or bequeath the private enterprise as a property complex, or dispose of it in another way. On disposal, rights to the corporate name and trademarks pass to the new owner unless the law or the contract provides otherwise. The enterprise remains the same legal entity; only the owner changes. The procedure for formalising a contract for the disposal of a property complex, and the consequences for creditors, must be checked against the Civil Code.

LLC: selling an interest

This is the most flexible and the most regulated mechanism. Under the new law:

• the transaction is made in simple written form unless the charter requires notarisation, and the right to the interest passes to the other person from the moment the entry is made in the Unified State Register of Business Entities;
• the participants, and then the company itself, have a pre-emptive right to buy the interest. The time limit for a response to such an offer is short (participants must notify their intention within seven days), and if the right is violated, you can ask the court to transfer the buyer's rights to you;
• the charter may restrict sales to third parties or require consent for other ways of transferring an interest. If consent is refused, the company must buy out the interest at its actual value;
• a person who becomes the owner of 50% or more of the interests must, within fifteen days, offer minority participants to sell their interests at market value, and if they agree, must buy the offered interests within thirty days. For an investor or the buyer of a controlling stake, this is a significant obligation;
• interests pass to heirs and successors, but the charter may require the consent of the other participants.

Reorganisation

Reorganisation changes the legal entity itself, not its owner. For an LLC, the law provides for merger, accession, division, spin-off and conversion. For a private enterprise, reorganisation is permitted by decision of the owner. Specific schemes, such as converting a private enterprise into an LLC, require checking the registration procedure.

There is no direct “re-registration” of an IE as an LLC. Reorganisation applies to legal entities, and an IE is not one. In practice, the entrepreneur registers an LLC, contributes property to it and closes the IE or winds it down. Contracts, permits and employees must be formalised anew, and the tax consequences of transferring property are calculated separately.

Suspension and closure

An IE can be temporarily suspended through an electronic service, and no social tax accrues for that period (section 3). For a legal entity, ceasing activity is formalised through liquidation: for a private enterprise, by decision of the owner, the court or the registration authority. For a project-based or seasonal business that may pause for a time, this is an argument in favour of an IE.

16. Summary Table

17. Choice Scenarios

When an IE is genuinely the more rational choice. Your activity is on the list, you have one owner, a team of up to five people, no major risks and no plans to sell the business. This is typical for services, retail, transport, design and software development.

When an IE no longer works. You need partners, a sixth employee or an activity outside the list; your turnover is consistently above UZS 5.28 billion and you want to minimise risk; or a customer requires a legal entity.

When to set up an LLC right away. You have two or more owners, you plan to bring in an investor or sell an interest, your activity is licensed, your property liability is significant, or you have a foreign participant.

When a private enterprise makes sense. One owner wants a legal entity for an activity outside the IE list and does not plan to bring in partners. But check whether a single-participant LLC would be better: it gives the same management and protects personal assets.

When a family enterprise fits. It is genuinely a family business in which all participants work personally, and state support measures (premises, land, utility rates) matter.

When a regular LLC with a foreign participant is enough. The investor does not need incentives and guarantees, and the foreign stake is small or the investor holds a residence permit.

When the question of a JV LLC or FE LLC arises. The foreign stake is 15% or more, the investor plans to lock in the legal regime for the investment and counts on the guarantees of the investment law. For tax incentives, an even higher stake and sector-specific conditions are needed.

What to choose if you plan to sell the business. An LLC: you sell an interest, and the company with its contracts, licences and team stays intact.

What to choose when property liability is high. An LLC. IEs, private enterprises and family enterprises leave personal property at risk.

What to consider if activity may be paused. An IE has a simple suspension procedure, while a legal entity ceases activity through liquidation.

18. A Step-by-Step Checklist Before Registration

• Check your activity. Does it require a licence, permit or notification? Is it on the IE list in its current version? Are there restrictions for your chosen structure?
• Define the ownership. One owner or several, individuals or legal entities, residents or foreigners.
• Assess liability. What the business could lose in the worst case, and whether you are ready to put personal property at risk.
• Forecast turnover and headcount for the next two to three years: the UZS 5.28 billion threshold and the five-employee limit.
• Calculate the tax cycle: regime, VAT, profit withdrawal, imports, and whether your customers pay VAT.
• Check customers and banks. Do customers require a legal entity and VAT, and what documents will the bank request?
• Define the foreign element: stake, investor status, charter capital requirements.
• Plan your exit: sale, change of partners, pause or closure.
• Choose the structure, prepare the documents and register the business on your own or with the help of CA Consulting's professional team.

19. Conclusion

An IE offers simplicity and a low tax burden while the business is small, one owner manages it personally and it operates within the list. Everything else, namely partners, investors, team growth, a sale and the protection of assets, is for an LLC to handle. Private enterprises and family enterprises keep a place in narrow scenarios, but they do not protect personal property. JV LLCs and FE LLCs are about foreign investment and remain LLCs with a special status. The choice should be made not on rates but on the combination of activity, ownership, risks and exit plans.