A company is an entity registered under the Companies Act and it is a legal entity with an existence that is autonomous from that of its owners. A company can either be private or public. A private company is one with restricted membership and it is not allowed to invite members of the public to subscribe for its shares. The maximum number of members in a private company is fifty excluding past and present members who are also employees of the company. A public company, on the other hand, allows for invitations of members of the public to subscribe in its shares.
Private companies may either have limited liability or unlimited liability. It is however rare to come across a registered unlimited company. Liability of members in a limited company can either be limited by guarantee or by shares.
To establish a company in Kenya the shareholders must:
Company registration is now done online in Kenya through the Government platform; eCitizen.
A company limited by shares is one where its members liability is limited to the amount unpaid on its shares. In these companies, members own shares in the company and are entitled to certain membership rights.
A company limited by guarantee is one where its members liability is limited to the amount they undertake to contribute to the liabilities of the company in the event of liquidation.
Foreign companies that want to do business in Kenya can either incorporate a subsidiary in Kenya or register their company is Kenya as a foreign company. If registered as a subsidiary, the subsidiary will be resident in Kenya for tax purposes. However, if they chose to register a foreign company, the foreign company will be a regarded as a branch for tax purposes unless the management and control of the company is done in Kenya in that year of income in which the control and management was done in Kenya.
General Partnerships in Kenya should have a minimum of two partners and a maximum of 20 partners. The partners contribute to the capital of the business and they share the profits as per their partnership agreement. General Partnerships do not have a limitation on the liability of its partners. Partnerships should register their business name and should have a personal identification number (“PIN”) for tax purposes.
The income of the partnership is subjected to tax at the share of profits level and not at the partnership level.
A limited liability partnership is a partnership with legal existence and limitation of liability of the partners. The minimum number of members of a limited liability partnership is two and if the number of members fall below two, the partner that continues business while the number of partners is reduced to two for a period of two years or more becomes liable to an unlimited extent for the liabilities of the partnership. A Limited Liability Partnership must maintain its registered office in Kenya.
A sole proprietorship is a business owned and conducted by one person either in his own name or under a business name which he has chosen and registered with the Registrar of Business Names.
All business profits are treated as income of the sole proprietor who then pays income tax according to the applicable rates in force.