Business Formation Procedure

Setting up a business in Kenya involves a series of legal, administrative, and regulatory steps. Following these steps can ensure a smooth and compliant setup of your business in Kenya. Afribiz Consultancy can assist with each phase, from business formation to compliance management, to help you establish a strong foundation for success.

Below is a comprehensive guide to help navigate the process:

Procedure

1

Decide on a Business Structure

Choose the type of business entity that best suits your goals. In Kenya, common business structures include:

  • Sole Proprietorship: Ideal for small-scale businesses with a single owner.
  • Partnership: Suitable for businesses with two or more owners who share profits and responsibilities.
  • Limited Liability Company (LLC): Offers limited liability protection to shareholders, ideal for larger or growing businesses.
  • Public Limited Company (PLC): Suitable for large businesses that may want to raise capital publicly.
  • Branch Office: For foreign companies that want to operate in Kenya but don’t want to set up a new entity.
2

Name Search and Reservation and Register the Business

  • Visit the eCitizen portal and use the Business Registration Service (BRS) to start Registration Process. Business Registration is Unistep where you provide a minimum of three potential business names.
  • If the name is available, it will be reserved for a 60 days.
  • Complete Sole Proprietorship or Partnership registration online with minimal costs.

For Sole Proprietorship's and Partnerships:

  • Register your business name through the eCitizen platform. This requires basic information, including owner(s) details.
  • Sole proprietorship registration costs are typically minimal, and the process is usually straightforward.

For Limited Liability Companies (LLC):

  • Prepare Memorandum and Articles of Association outlining your company’s objectives and structure.
  • Complete the CR1 Form (company registration form) and CR2 Form (particulars of company directors and secretaries).
  • Appoint at least one director and one company secretary.
  • Submit these documents via eCitizen. The registration fee depends on the share capital of the company.
  • Once approved, you’ll receive a Certificate of Incorporation within 1-2 weeks.
3

Obtain a KRA PIN for the Business

  • Every business in Kenya requires a Kenya Revenue Authority (KRA) Personal Identification Number (PIN) for tax purposes.
  • Register for the KRA PIN on the iTax portal by providing your business registration details and uploading necessary documents.
  • The KRA PIN is essential for transactions such as opening a bank account, filing taxes, and obtaining business licenses.
4

Open a Business Bank Account

  • With your Certificate of Incorporation and KRA PIN, open a corporate bank account in Kenya. Most banks will require the business registration documents and personal identification documents of the directors.
  • Choose a bank with services that meet your business needs.
5

Obtain Necessary Licenses and Permits

The licenses and permits required vary by industry and location. Common permits include:

  • Single Business Permit: Issued by the county government, required for operating in any county.
  • Sector-Specific Licenses: Such as those from the Kenya Bureau of Standards (KEBS), National Construction Authority (NCA), or Pharmacy and Poisons Board, depending on your industry.
  • Apply for these through the respective regulatory bodies or county government offices.
6

Register for Social Security and Health Contributions

  • Register with the National Social Security Fund (NSSF) and National Hospital Insurance Fund (NHIF) for employee social security and health insurance contributions.
  • These registrations are mandatory if you plan to hire employees and provide benefits as per Kenyan labor laws.
7

Register for VAT (if applicable)

  • If your business turnover is expected to exceed Ksh 5 million annually, you must register for Value Added Tax (VAT) with the KRA.
  • The VAT registration process is completed through the iTax portal, and you'll receive a VAT certificate upon approval.
8

Set Up Accounting and Record-Keeping Systems

  • Implement an accounting system to maintain accurate financial records, manage taxes, and track income and expenses.
  • Keep thorough records of business transactions to remain compliant with Kenyan tax and reporting regulations.
9

Comply with Employment Regulations (If Hiring Staff)

  • Familiarize yourself with Kenyan labor laws and regulations, including minimum wage, employee contracts, leave policies, and termination terms.
  • Draft employment contracts and set up a payroll system that complies with statutory deductions (PAYE, NSSF, NHIF).
10

Brand and Market Your Business

  • Develop a branding and marketing strategy to launch your business. This includes creating a company logo, building an online presence (website, social media), and employing digital or traditional marketing tactics.
  • Register trademarks or intellectual property if needed to protect your brand.

Ongoing Compliance

After your business is set up, it’s essential to stay compliant with Kenya’s regulations. This includes:

  • Annual Returns: Submit yearly returns with the Registrar of Companies to avoid penalties.
  • Tax Compliance: File and pay taxes on time, including VAT, corporate income tax, and PAYE (if applicable).
  • Renewal of Licenses: Ensure your business permits and licenses are up-to-date.