TYPES OF BUSINESS ENTITIES THAT CAN BE REGISTERED IN KENYA
When starting a business in Kenya, there are many forms the business can take depending with various factors be it nature of business,the ownership structure etc.
Different businesses will fit in various forms of entities and to help you come up with a sound decision of what form of business you want to register, we have discussed the various forms of entities that can be registered in Kenya.
SOLE PROPRIETORSHIP
A Sole Proprietorship is the simplest form of business that one can open and operate.
It is owned by one person who is liable for its debts and solely enjoys the profits and suffers losses of the business.
Thus a business name is not a legal entity and therefore it is not separate from its owner.
In Kenya Sole Proprietorships are registered under the registration of Business names Act.
NB:
The business name takes the owners KRA Pin and thus the owner declares his/her taxes using his/her pin.
PARTNERSHIPS
Unlike a Sole Proprietorship, a Partnership is owned by two or more persons to a maximum of up to twenty who come together with the sole purpose of carrying on business and sharing profits according to the agreed ratios in the partnership deed.
In Kenya Partnerships are registered under the registration of Business names Act.
NB:
A Partnership has its own seperate KRA Pin for the purposes of filling tax returns but its not subject to any corporate tax.The profit /loss realised is then declared by the partners individually according to the profit sharing ratios agreed.
LIMITED LIABILITY PARTNERSHIPS (LLP)
These are unique forms of business associations which combine the features/elements of a company with those of a partnership.
The number of partners is not restricted.
LLP has limited liability where partners in the LLP are not personally liable directly or indirectly for obligations in the partnership, however individuals are liable for their own wrongful acts or omissions.
The LLP can enter into contracts in its own name, can own property in its own name and can sue or be sued in its own name.
NB:
An LLP is not subject to Corporate Tax and therefore partnership income is taxed in the hands of the individual partners and not at the firm level.Partners are deemed self-employed and hence each partner declares their profit and pay tax on their share of profit.
PRIVATE LIMITED COMPANY
Also known as a limited liability company.
A Private Limited Company requires a minimum of one director/shareholder of any nationality and who can be living outside Kenya.
A private limited company has share capital,its a seperate legal entity and the liability of members is limited to the amount, if any, unpaid on the shares respectively held by them.
A private limited company is subject to corporate tax and therefore has its own KRA Pin for the purposes of filling tax returns and the director(s) declare their tax returns using their personal KRA Pins.
COMPANY LIMITED BY GUARANTEE (CLG)
A CLG is an alternative type of corporation used primarily for non-profit organizations that require legal personality.
A CLG does not have a share capital.
The liability of its members is limited by the company’s articles to the amount that the members undertake, to contribute towards the debts of the company in the event of its winding up.
Its certificate of incorporation states that it is a company limited by guarantee.
Various associations for charitable causes and not for profit (for example, clubs, and associatio may be incorporated in many forms including as a company limited by guarantee.
The profits realised is not distributed to the shareholders as in the case of a private company limited by shares butis rather re-invested for the good of the business.
FOREIGN COMPANY
Its a type of company registered outside Kenya but has a branch/has established a place of business in Kenya.