In, finding the right business organisation for you, we explored the three main forms of business organisations and their suitability for entrepreneurs in Kenya.
In this post, we will explore common questions entrepreneurs have when registering their business organisation.
Q. What is the registration process for registering a sole proprietorship.
A.The registration process consists of the following steps.
Step 1. Approval of business name
You need to choose a business name and submit it through eCitizen where the Companies registry will check whether your business name is unique and is not among the names that are not prohibited. You must also state the nature of your business when applying for the business name as well as your contact details. You must have an account with eCitizen in order to access its services.
Step 2. KRA Registration
You need to apply to KRA using the personal name of the trader, for a KRA PIN. For taxation purposes, the business owner is not registered as a separate entity from the business. Therefore, all profits accruing to the owner is filed as personal income and taxed accordingly. This is essential for purposes of payment of any taxes due such as Value-Added Tax and Pay as You Earn, where appropriate. The registration process is undertaken through the iTax platform.
Step 3. Registration of the business.
Once you receive the business name approval and reservation, you may go ahead and submit the business name approval alongside your KRA PIN to a Huduma Centre near you.
After seven days, you are required to go and collect your business registration certificate.
Step 4. Business Permits
Municipal laws mandate the application of business permits where requirements with respect to your permit validity and license fees are considered. Various counties mandate different business permit requirements therefore it would be advisable to explore their requirements at the County level. Visit the Business Licensing Portal to know the requirements your County has mandated.
Step 5. National Social Security Fund (NSSF) and National Health Insurance Fund (NHIF) Registration
If you have employees, it is mandatory to register them for their pensions via NSSF and for NHIF. Registration for NSSF and NHIF is free and takes one day.
Q. What about Partnerships and is there different registration requirements for General Partnerships and Limited Liability Partnerships?
A. The registration process consists of the following steps.
Step 1. Name Search and Registration
The partnership submits the name of the Partnership through eCitizen where the registrar checks for uniqueness and whether the names is prohibited. Once the Partnership business name is approved and reserved, you can go ahead and complete the registration process.
Step 2. Submit the Statement of Particulars
The statement of particulars highlights the business name, the individual partners, contact details, nature of business amongst others. This is submitted through the eCitizen portal.
For general partnerships, the Form BN/2consists of the Statement of Particulars that must be filed for the registration process to be complete. It requires the exposition of the name of business, nature of business, contact details, name of partners, name of manager and their identification amongst others.
For limited liability partnerships it is recommended to submit the Partnership deed alongside the Statement of Particulars. Furthermore, for Limited liability partnerships, the form LLP1is its Statement of Particulars and has differential requirements from general partnerships. Therefore, you need to fill in the form LLP1 before your registration.
Step 3: Pay fees and Issuance of Registration Certificate
You pay the requisite fees and a registration certificate is issued. The fees differ based on the form of partnership that is being registered with limited liability partnerships carrying exorbitant registration fees compared to general and limited partnerships.
Q. What about the registration of Companies?
A.A company is usually registered by a promoter and the registration process consists of the following steps.
Step 1. Name Search and Registration
The promoter submits the name of the proposed name of the Company through eCitizen where the registrar checks for uniqueness and whether the names is prohibited. Once the Company name is approved and reserved, you can go ahead and complete the registration process.
Step 2. KRA Registration
The Company must be registered for Tax purposes using the Company registration number. This is done through the iTax platform. This is essential for purposes of payment of any taxes due such as Value-Added Tax which ought to be remitted to KRA once a good/service is sold to the consumer; Pay as You Earn where the business has employees; Corporation Tax as the annual tax on profits.
Step 3. Registration forms.
There are various forms that ought to be submitted for the registration of a Company once the name has been approved.
Fill out Form CR1, which is the application to register a company limited by shares which includes the proposed name, the registered office, liability of company (whether limited by shares or guarantee), the name of the director and company secretary (if applicable). This form also includes the KRA PIN, NSSF,NHIFregistration numbers.
Form CR3is key in the registration process as it highlights the name of company, the type of company, the physical address and contact details of the company, the name of directors and secretary, if applicable.
The Companies Act provides for Model Memorandum and Articles of Association that can be used when registering a company. However, promoters are also encouraged to develop a memorandum and articles of association that are tailored to the needs of the specific business.
Form CR2is the Model Memorandum of Association. For the Model Articles of Association, please see the Fourth Schedule of the subsidiary legislation, the Companies Regulations, 2015.
The Statement of nominal capitalhighlights the authorised number of shares that a company limited by shares can issue and is submitted alongside the Memorandum and Articles of Association.
Step 5. Payment of fees and Issuance of Certificate of Incorporation
Once all the fees have been paid, the certificate for incorporation is issued within a week and is available through the eCitizen Platform for downloading. The Company is now ready for trading!
I hope the answers were helpful and you now have a good understanding of the registration process of different businesses organisations in Kenya. Should you have any questions, kindly don’t hesitate to reach out to us by leaving a comment down below.
Abdullahi Abdirahman
Entrepreneurship Unit
Strathmore Law Clinic 2018 ©
