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Entrepreneur's Corner

How To Register Different Business Entities In Kenya

BY Soko Directory Team · September 26, 2019 05:09 am

One of the decisions you will have to make as an entrepreneur is how your business is going to be structured. There are different types of business entities in Kenya, and each has various obligations as per the Companies Act.

Consulting with an accountant or legal personnel is highly advisable to understand the different pros and cons for each entity type. The type of business entity one chooses is dependent on various factors including;

  1. Nature of business activity
  2. Tax Implication
  3. Ability to raise capital
  4. Separation of ownership and management
  5. Limited Liability protection
  6. Continuity of existence (perpetual succession)
  7. Ease of formation and maintenance
  8. Level of control

Here are different types of entities that a business owner can consider in Kenya

  1. Public Limited Company
  2. Private Limited Company
  3. Limited Liability Partnerships
  4. Partnerships
  5. Sole Proprietorship
  6. Foreign Company
  7. Societies
  8. Trusts
  9. Non-Governmental Organizations (NGOs)

Public Limited Company 

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A public limited company (PLC) is a company which has a minimum of seven members and no maximum members and can offer shares to the public. Other features of a public limited company include:

  1. Shareholders have limited liability
  2. Shares/Ownership is freely transferable

Perpetual succession

  1. A PLC has a separate legal existence from its owner. Meaning, it can own property on its own, can sue or be sued, among other things.
  2. Required to hold a statutory meeting and file with the registrar

Private Limited Company

This is a type of company owned by a few individuals. It restricts the number of shareholders to fifty with the minimum being two and restricts the transfer of shares. Other features of a private limited company include:

  • The shareholders have limited liability
  • Perpetual succession
  • Can allot shares without issuing a prospectus
  • Restrictions in regards to remuneration do not apply to a private company
  • A private company is not required to hold a statutory meeting

Limited Liability Partnerships

Limited Liability Partnerships in Kenya are registered under the Limited Liability Partnerships Act, 2011. Limited liability partnerships commonly referred to as LLPs are unique forms of business association that combine elements of a company with those of a partnership. The main features for a Limited Liability Partnership include:

  • It is a separate legal entity from its members
  • They have the benefit of limited liability for their members
  • They are taxed as general partnerships
  • They have organizational flexibility of a partnership
  • Easy to form as compared to companies

General Partnerships

This is an entity that is formed between two or more people. Each partner is liable for any debts or judgments taken on by the business or the other partners. The partners share in all assets, profits, losses, financial, and legal liabilities. Partnerships are:

  • Easy to create because there are few formalities
  • Every partner has a say in the running of the business
  • Low cost of operation
  • Unlimited liability
  • Sole Proprietorship

It is a business owned and managed by one individual. It is the most common type of business entity as it is easy to form, the cost of registration is low, and owners enjoy sole control of the business. Some other features include

  • Unlimited liability
  • No perpetual existence
  • Quick decision making
  • The owner enjoys all profits and also suffers all losses on his own
  • Easy to dissolve in case of closure

Foreign Company

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.

The requirements for registration include:

  • Certified copies of foreign company’s memorandum and Articles of Association.
  • Certified copy of the certificate of Incorporation duly certified by a Notary Public.
  • If in a Foreign Language, certified copies of translated documents by a Notary Public.
  • Appointment of a Local representative of the Foreign Company in Kenya.
  • The registered address of the Foreign Company in County of registration.
  • Notificat