The article is devoted to the substantiation of theoretical and methodical principles and practical recommendations regarding the potential of territorial communities’ financial and economic formation in the context of local self-government reform. The approaches to the definition of "territorial community" focused on development of territorial community as a subject of economic development of the territory are analyzed. In order to determine the directions of activating the Ukrainian territorial communities’ financial and economic potential in the context of local self-governance reform, the development features of territorial communities in the EU countries during the period of decentralization and administrative-territorial reforms were researched. The main characteristics of local self-government were investigated. The models of local self-government organization were studied. Institutional, systemic and structural organization of local self-government was analyzed. Special attention was given to certain aspects of its development and reform. The experience of its functioning and development in the given states was summarized and the conclusion of possibility of its application in Ukraine was given. The research showed that the main directions of local government reform in the EU countries were: the change of the administrative-territorial structure in the direction of the administrative-territorial consolidation units of the base level, as well as the powers redistribution and financial resources for the local self-government benefit. It is determined that the administrative-territorial organization peculiarities of local self-government in the EU countries depend on the local level of financial resources and powers should be fulfilled by local self-government bodies. In terms of the research the crucial role of the territorial community’s endogenous financial and economic potential, which ensures its economic development, was identified. This article presents the role of local governments in supporting entrepreneurship development. The content of the article presents the factors which foster activities undertaken by local authorities to promote entrepreneurship and also shows different considerations of when the supporting instruments are in use. It indicates potential of possible changes in local policy on supporting entrepreneurship. The article sets out areas of possible improvements in policy when stimulating economic activity by local authorities. 

territorial community, financial and economic capacity, administrative-territorial reform, local economic development, decentralization