Business Registration in Kenya; Getting the right form for your business

One of the most important decisions for a prospective entrepreneur is to decide what type of business structure they intend to operate and how it is to be structured. In making this decision, the entrepreneur is required to understand the various forms of business registration applicable in the jurisdiction where they wish to operate, in this case we are looking at business registration in Kenya.. 

BUSINESS REGISTRATION CERTICICATE

Certificates of compliance is issued for foreign companies, certificates of incorporation for local companies and certificates of registration for sole proprietorships and partnerships. All company and business registrations are done via the online platform. The Registrar of Companies, Business Registration Service is responsible for business registrations in Kenya.

FORMS OF BUSINESS REGISTRATION IN KENYA

  1. Local Company

A local company is a company duly incorporated in Kenya. It may take one of the following forms

  1. Company Limited by Shares (Private/Public)

This is the most common form of company for businesses, it is a type of company having its liability limited by the number of shares subscribed to by its members. A company limited by shares is a separate legal entity, different from its shareholders.

The minimum number of members that can form this kind of company is two (2) with a maximum of not more than fifty (50), for a private company while a public company has no restrictions on the number of its members. While a private company is restricted from inviting the public to subscribe to its shares, a public company has no such restriction and is allowed to advertise its shares to the general public for sale.

  1. Company Limited by Guarantee

A form of limited company similar to a company limited by shares, but however does not have shareholders, instead, its members act as guarantors who agree to contribute an agreed amount of money on the winding up of the Company. This form of limited company is often used for non-profit purposes as it does not need to involve profit orientated business activities.

  1. Unlimited Liability Company

An unlimited liability company is a company incorporated with or without a share capital and similar to a limited company but where the liability of the members or shareholders is not limited. In essence, its members or shareholders have a joint, several, and non-limited obligation to meet any insufficiency in the assets of the company to enable settlement of any outstanding financial liability in the event of the company's formal liquidation.

  1. Foreign Company (Branch Company)

Companies incorporated outside of Kenya can do business in Kenya by registering a branch. A foreign corporation is a term used to refer to an existing corporation that is registered to do business in a state or jurisdiction other than where it was originally incorporated. Companies incorporated outside Kenya can do business in Kenya by registering a branch. Once all the requirements are met, the registrar of companies issues a certificate of compliance after which business can commence.

  1. Sole Proprietorship (Business Name)

This form of business is mostly preferred by small and medium sized enterprises (SMEs). Business name (sole proprietorship) is a business structure operated and owned by one person, in which he introduces the capital uses their own skills and intelligence in the management of its affairs, assumes all the risks of the business and is solely responsible for the results of its operations. The law recognizes the business owner and the business as one and the same, such that where the business suffers any loss, the sole proprietor can be called upon to settle the debts of the business.  

  1. Partnership

A partnership is a form of business structure between two or more people who have a common objective of making profit. The level of financial risk in partnerships is less when compared to sole proprietors as any loss incurred is shared between all the partners. In addition, the formalities of registration (cost, requirements, duration) are minimal making it an attractive business structure.

  1. Limited Liability Partnership

A limited liability partnership (LLP) is a unique business association, it combines the characteristics of both a company and partnership. This type of partnership has one or more general partners with unlimited liability and one or more limited partners with limited liability. Once registered, it gains a corporate legal entity different from its members and is able to own property in its own name. 

AFTER BUSINESS REGISTRATION WHAT NEXT

Entrepreneurs or business owners have to weigh the different forms of operating as a business and decide on which form to adopt. Depending on the specific industry, there are several other licenses, permits or approvals required before business can commence fully.


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