How to Setup Business in Kenya

How to set up business in Kenya
Tally Solutions | Updated on: July 13, 2022

Kenya is attracting a lot of attention from businesspeople and investors. With its high GDP growth and ranking for ease of business, setting up business in Kenya is very attractive. Kenya is economically stable and has a high population of people with a disposable income. The Kenyan government is strengthening its policies and making reforms to enhance the ease of doing business in the country. There is a lot of ongoing investment in improving the infrastructure in the country. The tax rates are also very straightforward to calculate. So, it is no surprise that Kenya is attracting investors to set up business there.

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Setting up a company in Kenya

When you set up a business, you must have a clear business plan and budget in place. Before setting up a business in Kenya, also consider the following:

Business factors: If you are a foreigner looking to start a business in Kenya, you must obtain a work permit from the Ministry of Immigration. Depending on whether the business owner will be a foreigner or an employee, there are different permit types. You must consider the business owner's nationality and the type of business you plan to open. You should also find out if there are any existing trade agreements or relationships between your home country and Kenya.

Location: Different regions and cities have their own local rules and regulations. Do your due diligence and explore the rules applicable in the location where you plan to open your business.

Types of businesses in Kenya

You can open three types of companies in Kenya as a foreign company. They are a corporation, branch office, and representative office. The government allows for different capital requirements, scope, and registration requirements for starting a business in Kenya. The different types of businesses also have their inherent advantages and disadvantages.

Corporation: The types of corporations allowed are private limited corporations and public limited corporations. A foreigner who is an applicant should first hold a valid work permit before becoming a shareholder in Kenyan companies. Some rules govern the percentage of holdings a foreigner can have in different types of companies, with a minimum defined holding for Kenyan citizens.

Branch office: You can open a branch office for your company without incorporating a company. However, since operating a branch office has many drawbacks and restrictions, it is better to open a corporation instead. But, if you do need to open a branch office for minimal business activities, this option is sufficient.

Representative office: Since a representative office is not an independent legal entity, it has very limited activities allowed. It can promote the business interests of companies registered outside the country but cannot indulge in direct commercial or revenue-generating activities such as entering or executing contracts, receiving funds, selling or buying goods, or services, etc. A corporation is better if the office needs to perform business activities.

Outsourcing employment

After deciding whether to incorporate your business or run it as a branch or representative office, the next step is staffing. You can recruit staff directly or use a Global Employment Organization to manage recruitment, payroll, and other employee-related activities. A GEO can help a company in all the aspects of how to open a company in Kenya  if they have the following needs:

  • An urgent requirement to setup operations quickly
  • A limited budget
  • A restricted initial commitment in Kenya
  • Requirement of help with the local employment, tax, immigration, and payroll compliance in Kenya

Since the employment regulations in Kenya are very involved, it makes the best sense to enlist the services of a GEO who will help companies comply with the law and enter into contracts with employees. Since the GEO has expertise in the field, they can help a new company quickly ramp up their human resources within their given budget and timelines.

Business entities in Kenya in 2022

You can set up different business entities in Kenya. Some of the more popular ones are:

  • Kenya private limited company: This is also called an LLC or limited liability company and is the most popular option for foreign and local entrepreneurs. It does not require a minimum share capital, but if you are a foreigner looking to relocate to Kenya on an entrepreneur visa, you will have to show an investment of US $100,000 in the company. At least one director or shareholder is a must, and they can be a person located outside of the country.
  • Kenya limited liability partnership: This is an option where two corporations or two individual partners can start a business with an investment of US $2 and a manager who has the required permissions to work in the country. This is a tax transparent entity, and one can easily convert another type of company into a limited liability partnership.
  • Kenya public limited company: You need a minimum of two directors and seven shareholders for this type of company. The rules are similar to a private limited company, except that the company will also have to file its statements after auditing the Kenya Companies Registry.
  • Kenya branch office: this type of business does not have all the functionalities of the previously listed businesses. It can receive money, sign local contracts and invoice customers only after it has obtained the required licensing for the industry it is operating in.
  • Kenya EPZ: This is a business that is set up in an Export Processing Zone (EPZ). IT can be opened by a local or a foreigner setting up a business solely for exports. The permit must be obtained from the Export Processing Zone Authority.

Visas and permits required

The Kenya Directorate of Immigration and Registration issues visas, foreign national registration certificates, permits, and passes.

Kenya has different types of work permits that are offered:

Class A for investors in prospecting and mining

Class B for investors in agriculture and animal husbandry

Class C for the individuals who intend to engage in a prescribed profession

Class D is for the employees who are offered employment by a specific employer

Class F work permit for the investors in the manufacturing sector

Class G work permit for the investors who intend to engage in a specific business, consultancy, or trade

Property and environmental compliances

The Land Registration Act and the Land Act of the Constitution of Kenya define the Kenyan land system, which classifies land as public land, private land, and community land. Public land is for the use of the public or held for environmental protection by the National Land Commission. Communities hold community land, and people can hold private land. The Ministry of Lands registers private land. Land can be held as freehold with no restrictions on land use or conditional freeholds restricting the land for agricultural uses only. The leasehold land tenure system leases out the land for a fixed tenure, after which it returns to the owner. Non-citizens of Kenya can lease land for a maximum of 99 years.

Sectoral licenses and county permits

The designated authorities govern the different sectors of industry and business. Any business that intends to operate in a sector must get the required licenses from the relevant authority. There are also different permits and licenses to be obtained from the county authority based on location in which you intend to open your business.

Registration of companies in Kenya

The process to register a company in Kenya is

  • Search and reserve the business snake with the registrar of companies
  • Execute the forms CR1, CR2, CR8, and a statement of the nominal capital
  • After the name approval, execute the company registration forms
  • Apply for registration
  • Registration and issue of the certificate of Incorporation.
  • Application for the PIN

Registration of a company and obtaining all the relevant licenses, permits, and other paperwork are much easier when you work with an agency specializing in these services. They help you get familiar with the way business is done in Kenya.

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