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Before registering a business in Kenya, it is important to understand the different business structures and their legal requirements. Choosing the right structure helps ensure compliance while aligning with your business goals, operational needs.

In Kenya, you can register the following business entities:

• Sole Proprietorship (Business Name)
• Private Limited Liability Company
• Company Limited Guarantee
• Public Limited Company
• Foreign Company
• Partnerships

Sole Proprietorship (Business Name)

This is the simplest business entity one can set up in Kenya. It is relatively easy and inexpensive to register, and has fewer legal compliance requirements. With this type of business entity, there is no distinction between the business owner and the business, and all liabilities are borne by the business owner. The business taxes are filed under the proprietor’s name as personal income since the business is not taxed separately.

Registration Process

Registration is done through the eCitizen Portal. The process involves conducting a name search to establish the availability of the proposed business name. Once the name is reserved, the applicant files Form B2N) with the relevant details. Upon approval, a certificate of registration issued. The registration cost is KES. 950.

Private Limited Liability Company

A private limited company is the most common business vehicle in Kenya. It can own property, enter into contracts, sue and be sued, and has perpetual succession. It is a distinct legal entity separate from its shareholders and directors. Liability is limited to the amount each shareholder has contributed to the share capital.

A private company must have at least one shareholder and one director, who must be a natural person. There is no legal requirement for Kenyan shareholders or directors. The maximum number of shareholders is 50, and the company cannot invite the public to subscribe to its shares. Private companies with a share capital exceeding KES 5 million must appoint a company secretary.

The corporate income tax for both resident and non-resident companies is 30%

The registration process

The applicant must provide 3 to 5 proposed names in order of priority, details of all shareholders, directors, nominal capital, registered office details, and beneficial owners. These details are captured in forms CR1, CR2, CR8, the Statement of Nominal Capital, and BOF1. Once submitted and approved, a certificate of incorporation is issued. The registration fee is KES 10,650.

Public Limited Company

A public limited company, as defined under the Companies Act, 2015, allows its members to transfer shares, does not restrict invitations to the public to subscribe for shares or debentures, and is identified as a public company in its certificate of incorporation. It must have at least two directors but there is no restrictions on the maximum number of shareholders. In addition, all public companies are required to appoint a company secretary.

The registration process

The applicant must provide 3 to 5 proposed names in order of priority, details of all shareholders, directors, nominal capital, registered office details, and company secretary details. These are submitted through forms CR1, CR2, CR8, CR10, CR12, and the Statement of Nominal Capital. Upon approval, a certificate of incorporation is issued. The registration fee is Kes. 10,650.

Company Limited By Guarantee

A company limited by guarantee is commonly used for non-profit organizations. It can own property, enter into contracts, sue and be sued, and has perpetual succession. This entity does not have a share capital, instead it has members rather than shareholders. The liability of members is limited to the amount they agree to contribute to the company’s assets if it is liquidated.

A company limited by guarantee may benefit from access to funding and tax exemptions on application to the Kenya Revenue Authority.

The registration process

The applicant will be required to provide 3 to 5 proposed names, details of all members, directors, registered office details, and a statement of guarantee outlining each member’s financial commitment in case of liquidation. These details are submitted through forms CR1, CR3, CR6, and CR8. The Registrar forwards the details to the National Intelligence Service (NIS) for director vetting, which takes approximately two to three months. Once cleared, the Registrar proceeds with registration, and a certificate of incorporation is issued. The registration fee is KES 10,650.

Foreign Companies

A Foreign Company can set up business in Kenya either as a branch or a subsidiary.

A subsidiary: It is registered as a private limited company, with the parent company owning all or a majority of the shares. It operates as an independent legal entity, and its liabilities do not extend to the parent company.

A branch: Operates as an extension of the parent company. The branch may be registered using its corporate name under the law of its place of incorporation or an alternative name under which it proposes to carry on business in Kenya. It shares the same legal structure, has the same directors, same shareholders, is governed by the same constitutive documents, and may be subject to the parent company’s policies and procedures. As it does not operate as a separate legal entity, its liabilities extend to the parent company.

The foreign branch must appoint a local representative, who need not be a Kenyan citizen, but must be resident in Kenya. The local representative’s duties include but are not limited to ensuring that the company is compliant with statutory requirements, maintaining the registered office in Kenya to ensure it is kept open for any communication and notices that may be served, among any other relevant duties in relation to the operations of the company.

The corporate income tax for both subsidiaries and branches of foreign companies is at 30%.

The registration process

The applicant must submit a copy of the company’s certificate of incorporation, constitutive documents, details of directors, shareholders, beneficial owners, place of business in Kenya, and the appointed local representative. These are submitted through forms FC2, FC4, FC6, and BOF1. Upon approval, a Certificate of Compliance is issued. The registration fee for a foreign branch is KES 7,550.

Partnerships

A partnership is formed when two or more individuals conduct business with the intent to make a profit. The partners may enter into a partnership agreement outlining the terms and obligations of the partnership.

In Kenya, we have three types of partnerships, general partnerships, limited partnerships and limited liability partnerships.

General Partnerships: Under this partnership, the partners share equally in the responsibilities, management, profits, and liabilities.

Limited Partnerships: Consist of general partners with unlimited liability and limited partners whose liability is restricted to the extent of the amount contributed to the partnership at the time of joining the partnership.

Limited Liability Partnerships (LLP): A hybrid of a partnership and a limited liability company. It is a separate legal entity and has perpetual succession. It is required to have at least two partners, one of whom must be the manger.

Partnerships do not pay corporate tax, instead, the Partners are taxed individually based on their agreed profit-sharing ratio.

The registration process

Applicants are required to provide proposed partnership names, physical address, nature of business, and partner details. These are submitted through form LLP1. Upon approval, a certificate of registration is issued. The registration fee for an LLP is KES 25,050.

Conclusion

At BIK Advocates, we have successfully assisted numerous businesses in setting up operations in Kenya, ensuring compliance and smooth establishment. Our team is dedicated to providing personalized legal guidance tailored to your business needs.

For any inquiries or assistance, please reach out to us at info@bikadvocates.com . We look forward to helping you navigate the business registration process.

Disclaimer

This article is for informational purposes only and should not be construed as legal advice. It does not establish an advocate-client relationship with any reader.