As a potential business or company owner, by now you must have already done your research on which business you would like to start in a bid to leverage on one of the East Africa’s fastest growing economy, Kenya that is. You may have also set aside the initial working capital, established where you would like the business to be located and perhaps even already started to envision the profits that you are going to get from your business.
Great, right? However, one of the most crucial things to do is to familiarize yourself with all the legal requirement that you are expected to satisfy.
In this post, we highlight the legal requirements that you require to successfully set
up your business in Kenya.
1. Registering Your Business Name / Company.
The first and most critical step while setting up your business is to register your business name and to secure an identity/ domain name. It is prudent to conduct a research to ensure that the name does not exist with another service provider.
While registering your business, you also need to determine in what type of business structure it will take. You can register your business in the following ways;
a) Sole Proprietorship – this is where the business is owned by a single individual who also operates the business. The sole proprietor is solely responsible for all liabilities accruing to the business. The registration for this business is business name approval by the Registrar of Companies after which application for registration is made. If there are no issues with the name, then a certificate of registration is issued within two weeks.
b) Partnership- A business that takes the form of a partnership involves two or more people who share ownership on prorated whereby each partner contributes to all aspects of the business. Profits and losses are shared among the partners according to the formula agreed by both parties in the partnership deed and are governed by the Partnership Act.
The registration process is similar to that of the sole proprietorship with the main
difference being that a partnership deed is provided.
c) Limited Liability Company- this is a distinct entity from its owners. Upon registration, an LLP acquires a separate legal entity personality from its partners such that any change in its partners does not affect the existence, rights or obligations of the limited liability partnership. Further under section 7(2) of the LLP Act, it is a requirement for a limited liability partnership to maintain and use a common seal that bears its name to be utilized to execute all documents that are required by law to be sealed by it. The liability of all partners in a LLP is limited. Therefore a partner is not personally liable, directly or indirectly, for the partnership’s obligations arising in a contract, tort or otherwise. In addition, a partner in a LLP is not personally liable for the wrongful act or omission of another partner of the LLP. The liabilities of a LLP are from the property of the LLP and from the personal assets of the partners.
d) Branch of a Foreign Company- this is for international companies seeking to set up a branch in the country. The branch is registered with the Registrar of Companies. This is a simple low cost formality and needs a maximum of two weeks for registration.
The requirements for setting up a branch of a foreign company in Kenya are provided for under Section 975 of the Companies Act, 2015. These include;
- certified copy of a current certificate of the foreign company’s
incorporation or registration in its place of origin, or a document of
similar effect; - A certified copy of its constitution;
- List containing the names of its directors and shareholders and their
personal details; - notice of the address of its registered office under section 983. (A foreign
company in Kenya is require to maintain a registered office where all
communications maybe sent)
Afterwards, the Registrar issues a Certificate of Compliance signifying that the
registration of the Foreign Company is complete. In the case of setting up a company, you do require professional services for instance of a lawyer to help you acquire the certificate of incorporation, company seal and a Tax PIN certificate for your business.
The basic requirements that are needed in order to fill in the Business Name Registration application (BN/2Form). This includes details of the following:
- The Business Name
- The Nature of Business
- Land reference Number/Plot No
- Postal Address
- Town Name
- Street Name
- Full Names of the owner as shown on your ID or Passport
- Nationality
Other key statutory requirements that you need to register are;
2. KRA PIN
The Tax Procedure Act 2015. (11), (12) and (13) have made Tax payer PIN mandatory when setting up a new business, opening bank accounts for the business in addition to filing of returns etc.
A PIN is a Personal Identification Number used while doing business with Kenya Revenue Authority, other Government agencies and service providers. Getting registered for your PIN is an online process that is done on iTax and this is acquired
3. National Social Security Fund
National Social Security Fund (NSSF) is the statutory retirement benefits scheme and operates as a public trust. Its mandate is to offer social security protection to workers in the formal and informal sectors by providing retirement benefits to members. Application for employer registration is done via the funds website and or at the NSSF offices.
4. National Hospital Insurance Fund (NHIF)
National Hospital Insurance Fund (NHIF) is a statutory retirement benefit scheme which provides limited in-patient medical insurance cover at accredited health facilities to eligible members from both the formal and informal sectors. To register as an employer or, you are required to fill in and submit the Employers Form.
5. Business Permit
Business permits are a mandatory requirements for one to be able to conduct your business legally and with ease both in the capital city and in other towns. To obtain these you are required to have a duly filled BR-1 form which is submitted to the officials who may pay you a visit to determine the type of business, location and number of employees that you will have. Visit the ward office to obtain a BR-1 form which you will fill in with the details from the last permit. Once this is approved, a fee is charged and the permit is stamped by the Registry for collection.
6. Registration with the National Industrial Training Authority (NITA)
It is a requirement for all employers to register with NITA. Registration as an employer is a legal requirement as per Sec 5B of the Act and the Levy order. NITA is a state corporation whose mandate is to promote highest standards in the quality and efficiency of Industrial Training in Kenya and ensure adequate supply of properly trained manpower at all levels in industry.
Other industry requirements include;
Fire Safety Certificate
It is a requirement for every business to be Fire safety certified. A fire safety inspector usually advises you on the fire safety requirements crucial for your business and thereafter offer you a Fire Safety Certificate should you meet all the safety requirements.
Food/ Health Related Permits.
This permits are applicable to anyone whose business is in the food beverages, tourism industries etc. A Health Inspector will usually visit your place of business to inspect whether you have met all of the health standards. Thereafter, you will get a certificate.
In Conclusion
As a trusted business partner, MGK is in a position to assist you with the entire process of business/company registration and thereafter offer you tax compliance and advisory services to ensure your long term business success.
For business advisory needs; please contact us at enquiries@mgkconsult.co.ke or +254-736-957-669