Ask a lawyer:
legal requirements for starting a business in kenya

mwakili.com

Introduction

Starting a business in Kenya involves several legal requirements that must be adhered to in order to ensure compliance with the law. These requirements are stipulated in various Acts and regulations, including the Companies Act, the Business Registration Act, the Income Tax Act, and the Employment Act, among others. This comprehensive guide will outline the key legal requirements for starting a business in Kenya.

Business Name Registration
- Business Registration Act, Cap 499
Company Incorporation
- Companies Act, 2015
Tax Registration
- Income Tax Act, Cap 470
Licenses and Permits
- Various Acts and Regulations
Employment Laws
- Employment Act, 2007
Compliance with Sector-Specific Regulations
- Various Sector-Specific Acts
Conclusion

1. Business Name Registration

Business Registration Act, Cap 499

Name Search and Reservation: The first step in starting a business is to conduct a name search to ensure that the desired business name is available. This is done through the eCitizen portal. Once the name is approved, it can be reserved for a period of 30 days.
Business Name Registration: After reserving the name, the next step is to register the business name. This involves filling out the Business Name Registration Form (BN/2) and paying the requisite fee. The Registrar of Companies will then issue a Certificate of Registration.

2. Company Incorporation

Companies Act, 2015

Types of Companies: The Companies Act, 2015 provides for the incorporation of different types of companies, including private companies, public companies, and companies limited by guarantee.
Memorandum and Articles of Association: These are essential documents that outline the objectives of the company and the rules governing its operations. They must be prepared and submitted to the Registrar of Companies.
Form CR1, CR2, and CR8: These forms are required for the incorporation process. Form CR1 is the application for company registration, Form CR2 is the model memorandum for a company with share capital, and Form CR8 is the notice of residential address of directors.
Certificate of Incorporation: Upon successful submission and approval of the required documents, the Registrar of Companies will issue a Certificate of Incorporation, signifying the legal existence of the company.

3. Tax Registration

Income Tax Act, Cap 470

Kenya Revenue Authority (KRA) PIN: Every business must register for a Personal Identification Number (PIN) with the Kenya Revenue Authority (KRA). This is necessary for tax purposes and can be done online through the KRA iTax portal.
Value Added Tax (VAT): If the business expects to have an annual turnover exceeding Ksh 5 million, it must register for VAT. This involves filling out the VAT registration form on the iTax portal.
Pay As You Earn (PAYE): If the business will have employees, it must register for PAYE to facilitate the deduction and remittance of income tax from employees' salaries.
Other Taxes: Depending on the nature of the business, other tax registrations may be required, such as Excise Duty, Customs Duty, and Withholding Tax.

4. Licenses and Permits

Various Acts and Regulations

Single Business Permit: This is a mandatory permit issued by the county government where the business will operate. The requirements and fees vary depending on the county and the nature of the business.
Sector-Specific Licenses: Certain businesses require specific licenses or permits to operate. For example, a food business will need a health certificate from the county health department, while a transport business will need licenses from the National Transport and Safety Authority (NTSA).
Environmental Impact Assessment (EIA): For businesses that may have an environmental impact, an EIA license from the National Environment Management Authority (NEMA) is required.

5. Employment Laws

Employment Act, 2007

Employment Contracts: The Employment Act, 2007 requires that all employees be provided with written contracts outlining the terms and conditions of employment.
Minimum Wage: Employers must adhere to the minimum wage regulations as stipulated by the government. The minimum wage varies depending on the industry and location.
Workplace Safety: Employers are required to ensure a safe working environment for their employees, in compliance with the Occupational Safety and Health Act, 2007.
Statutory Deductions: Employers must make statutory deductions from employees' salaries, including contributions to the National Social Security Fund (NSSF) and the National Hospital Insurance Fund (NHIF).

6. Compliance with Sector-Specific Regulations

Various Sector-Specific Acts

Financial Services: Businesses in the financial sector must comply with regulations set by the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA).
Healthcare: Healthcare providers must adhere to regulations set by the Kenya Medical Practitioners and Dentists Council (KMPDC) and other relevant bodies.
Education: Educational institutions must comply with regulations set by the Ministry of Education and the Teachers Service Commission (TSC).
Manufacturing: Manufacturers must comply with standards set by the Kenya Bureau of Standards (KEBS) and obtain necessary certifications.

Conclusion

Starting a business in Kenya involves navigating a complex web of legal requirements. It is essential to ensure compliance with all relevant laws and regulations to avoid legal pitfalls and ensure the smooth operation of the business. By following the steps outlined in this guide, prospective business owners can set up their businesses in accordance with Kenyan law.

In summary, the key legal requirements for starting a business in Kenya include:

Registering the business name.
Incorporating the company.
Registering for tax purposes.
Obtaining necessary licenses and permits.
Complying with employment laws.
Adhering to sector-specific regulations.

By adhering to these requirements, entrepreneurs can establish a solid legal foundation for their businesses in Kenya.