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1. Sole Proprietorships: Sole proprietorships are the most common and involve minimal formality. However, the proprietor’s liability is personal and unlimited. 2. General Partnerships: When two or more individuals wish to conduct business together, they may form a partnership. While subject to more regulation than sole proprietorships, partnerships have less regulation compared to limited liability partnerships and companies. The liability of partners is personal and unlimited. 3. Limited Liability Partnerships (LLP’s): Designed for large professional firms, LLPs closely resemble companies in many aspects. 4. Private Limited Companies by shares: A type of company, usually small, that does not issue shares to the public. The company’s name is usually followed by ‘Ltd’, short for ‘Limited’. 5. Public Limited Companies: A public company is that which allow its members the right to transfer their shares in the company and allows invitations to the public to subscribe for shares or debentures of the company. Difference?

Sources: Companies Act, 2015; The Partnership Act, Cap 29; The Registered Land Act, Cap 300.

Table of Contents

1. Introduction

2. Sole Proprietorship

3. General Partnership

4. Limited Liability Partnerships (LLPs)

5. Private Limited Companies

6. Public Limited Companies

7. Conclusion

8. Introduction

This response will analyze the differences between the five business structures mentioned: sole proprietorships, general partnerships, limited liability partnerships (LLPs), private limited companies, and public limited companies, drawing upon relevant Kenyan legislation. The key differentiators will be liability, regulatory requirements, and share structure.

1. Sole Proprietorship

A sole proprietorship is the simplest form of business structure in Kenya. It involves a single individual who owns and operates the business. (No specific Act solely governs sole proprietorships; their regulation is largely derived from general business laws and tax regulations).

• Liability: The proprietor's liability is unlimited and personal. This means the owner is personally liable for all business debts and obligations. Any personal assets can be used to settle business debts.

• Regulation: Minimal formal registration is required. Registration may be necessary for tax purposes with the Kenya Revenue Authority (KRA).

• Share Structure: There is no share structure as it is a single-owner entity.

1. General Partnership

A general partnership involves two or more individuals who agree to carry on a business in common with a view to profit. (The Partnership Act, Cap 29, governs general partnerships in Kenya).

• Liability: Partners have unlimited personal liability for the partnership's debts and obligations. Each partner is jointly and severally liable, meaning creditors can pursue any partner for the full amount of the debt.

• Regulation: While less regulated than companies, partnerships must comply with the Partnership Act, including registration with the relevant authorities for tax purposes. A partnership agreement is advisable, though not mandatory, to outline the partners' rights and responsibilities.

• Share Structure: Partnerships do not have a share structure. Profits and losses are shared according to the partnership agreement, or if none exists, equally among the partners.

1. Limited Liability Partnerships (LLPs)

LLPs are a relatively newer form of business structure in Kenya, designed primarily for professional firms like law firms and accounting firms. (The Companies Act, 2015, provides the legal framework for LLPs).

• Liability: The liability of partners is limited to their contributions to the LLP. Partners are not personally liable for the debts and obligations of the LLP beyond their agreed-upon contributions.

• Regulation: LLPs are subject to more stringent regulatory requirements than general partnerships, including registration with the Registrar of Companies. They must maintain detailed accounting records and comply with corporate governance standards.

• Share Structure: LLPs do not issue shares. Profits and losses are shared among the partners according to the LLP agreement.

1. Private Limited Companies

Private limited companies are incorporated entities with limited liability. (The Companies Act, 2015, governs private limited companies).

• Liability: Shareholders have limited liability, meaning their personal assets are protected from business debts. Creditors can only pursue the company's assets.

• Regulation: Private limited companies are subject to significant regulatory requirements, including registration with the Registrar of Companies, compliance with corporate governance standards, and the filing of annual returns.

• Share Structure: Shares are issued to shareholders, who own the company. Shares are not publicly traded. The company's name typically ends with "Ltd."

1. Public Limited Companies

Public limited companies are also incorporated entities with limited liability, but with the added feature of allowing public share ownership. (The Companies Act, 2015, governs public limited companies).

• Liability: Shareholders have limited liability, similar to private limited companies.

• Regulation: Public limited companies are subject to the most stringent regulatory requirements, including stricter corporate governance standards, more frequent reporting requirements, and compliance with securities regulations. They must comply with the Capital Markets Authority (CMA) regulations.

• Share Structure: Shares are issued to shareholders and are publicly traded on the Nairobi Securities Exchange (NSE) or other recognized stock exchanges. The company's name typically ends with "PLC."

1. Conclusion

The choice of business structure depends on various factors, including liability preferences, regulatory compliance, and capital requirements. Sole proprietorships and general partnerships offer simplicity but expose owners to unlimited liability. LLPs, private limited companies, and public limited companies offer limited liability but involve greater regulatory compliance. Public limited companies offer access to public capital but come with the most stringent regulatory requirements. Careful consideration of these factors is crucial when selecting the appropriate business structure under Kenyan law.