This archive report was first published on 11 July 2019.
Understanding Business Registration in Kenya ¶
When it comes to registering a business in Kenya, there are two main options: registering as a business name or as a company. While the two may seem similar, they have distinct differences that can impact small business owners.
On July 11, 2019, Bett Kinyatti wrote an article explaining the differences between the two options, highlighting the implications for small business owners.
According to Kinyatti, a business name is a registered trade name used for trading purposes only. One person or ten can own the business name, and the owners are listed in a certain form at the point of registration. When you register your business as a business name, the Registrar of Companies gives you a business certificate, which costs Sh3,500.
On the other hand, a company is a separate legal entity from its owners. It trades by its company name and is made up of X number of shares, with each share having a nominal value assigned to it. The owners can be the company directors or shareholders, and some directors may be shareholders by default.
Registering a company can cost anywhere between Sh13,000 to Sh25,000, depending on whether it's through e-Citizen or an agent. Once registered, a company can bring more shareholders on board by floating its shares.
For small business owners, the main concerns are whether clients and banks care about the distinction between a business name and a company. According to Kinyatti, clients don't necessarily care, as long as they see a distinction between the business and its owner. Banks also don't care, as a business account is a business account, regardless of whether it's registered as a business name or a company.
However, when upgrading from a business name to a company, the business name becomes the company name, and the business owners may not necessarily become company directors or shareholders. The KRA PIN remains the same, but the business postal address and physical location can become the company address and location.
Alerting the bank and Safaricom that you are now trading as a limited liability company is essential, as the Paybill and Till number with Safaricom will remain the same. With the bank, you may have to open a new account because your company now has the 'Ltd' suffix, or you could ask your bank to change your bank account name.
