Business entities in Kenya
Healy Consultants will be pleased to assist our Clients with Kenya company setup. There are several ways of doing business in Kenya, the most common being the setting up of a Kenyan limited liability company, locally known as a private limited company. The Kenyan authorities also introduced in 2012 the limited liability partnership, which is quickly becoming a popular alternative to the formation of a limited liability company in Kenya. Foreign companies can also register a branch in Kenya. However, local regulations do not provide for the registration of a representative office.
The Kenya Government also introduced in 2015 the requirement for all types of entities except a LLP to appoint a Kenyan shareholder holding at least 30% shares for a company to be registered or incorporated.
The Kenya private limited company
- The Kenya private limited company (also known as a limited liability company) is the type of business entity most commonly used for Kenya business setup by both local and foreign entrepreneurs;
- A Kenya LLC requires a minimum of 2 shareholders, 1 of whom must be Kenyan by birth and two directors of any nationality and who can be living outside of Kenya;
- In accordance with the Kenya Companies Act, there is no minimum share capital requirement when setting up a company in Kenya. However, foreigners wishing to relocate to Kenya by obtaining an entrepreneur visa are required to show that they have (or will) invest at least US$100,000 in the company;
- After business setup in Kenya, all companies are required to i) register for tax with the Kenya Revenue Authority and ii) prepare financial statements, which must always be audited.
- Since 2012, it is also possible to register a limited liability partnership (LLP) in Kenya with only i) two corporate or individual partners ii) US$2 as the minimum capital contribution and iii) a manager, who must be an individual allowed to work in Kenya (Kenya citizen or foreigner with a work permit);
- Unlike many other countries, all partners of a Kenya LLP can be limited partners, enjoying limited liability against the partnership’s losses;
- The main advantage of the limited liability partnership is that it is a tax transparent entity, not subject to corporate income tax: all the income channeled through the partnership is directly taxed at the partners’ level, and must be included in their personal/corporate income tax filings;
- It is also easy to convert an existing Kenya company into a limited partnership, by submitting an application to the Kenyan Companies Registrar along with the certificate of incorporation of the company, an up to date list of its shareholders and their ID documents. The conversion is then usually approved within two weeks.
- Setting up a Kenya public limited company requires a minimum of seven shareholders and two directors. Like an LLC, this entity must appoint a Kenyan shareholder holding at least 30% shares in the company to be incorporated;
- Other requirements are like those of a private limited company, except that the company will also have to file its (audited) financial statements with the Kenya Companies Registry;
- A Kenya public company is mostly preferred by entrepreneurs or investors looking to list their company on the Nairobi Stock Exchange.
The Kenya Limited liability partnership
The Kenya public limited company
The Kenya Branch office
- Although 100% foreign ownership was permitted initially, the Kenyan government introduced in 2015 an amendment requiring all foreign entities registering in Kenya to appoint a local shareholder with at least 30% shareholding;
- The branch office is allowed to invoice local customers, sign local sales contracts and receive income from customers. However, the branch office will be required to obtain the necessary licensing for its industry of business;
- The foreign company will also be required to appoint one resident representative in Kenya.
The Kenya EPZ company
- Local and foreign business looking to establish a manufacturing company or an agriculture oriented business in Kenya for export purposes can choose to set up a limited liability company in an Export Processing Zone (EPZ);
- Currently this is the only limited liability company permitted to have a 100% foreign ownership and must register and get approval with the Export Processing Zone Authority.
Table comparing different entities in Kenya
|LLC||PLC||Branch||Limited liability Partnership|
|Also known as:||Pte. Ltd.||PLC||Branch||LLP|
|How long to set the company up?||4 weeks||4 weeks||6 weeks||4 weeks|
|How long to open company bank account?||4 weeks||4 weeks||4 weeks||4 weeks|
|Wholly foreign owned?||Yes||Yes||Yes||Yes|
|Minimum share capital?||US$2||US$7||N/A||US$2|
|File annual tax return?||Yes||Yes||Yes||Yes|
|Corporate bank account?||ABC Bank||EcoBank||Citibank||EcoBank|
|Does our Client need to travel?||No||No||No||No|
|Resident director required?||No||No||No||No|
|Resident representative/manager required?||No||No||Yes||Yes|
|Kenya shareholder/partner required?||No||Yes||No||No|
|Minimum directors/partners allowed?||1||3||1||2|
|Kenya resident company secretary required?||No||No||No||No|
|Corporate shareholders allowed?||Yes||Yes||Yes||Yes|
|Corporate director(s) allowed?||Yes||Yes||Yes||Yes|
|Kenya corporate tax rate?||30%||30%||37.5%||0%|
|Annual financial statements required?||Yes||Yes||Yes||Yes|
|Statutory audit required?||Yes||Yes||Yes||Yes|
|Allowed to issue sales invoices in Kenya?||Yes||Yes||Yes||Yes|
|Allowed to sign contracts with local entities?||Yes||Yes||Yes||Yes|
|Allowed to import and export goods?||Yes||Yes||Yes||Yes|
|Can rent an office in Kenya?||Yes||Yes||Yes||Yes|
|Can buy Kenya property?||Yes||Yes||Yes||Yes|
|Can own equity in other local companies?||Yes||Yes||Yes||Yes|
|Total Kenya business setup costs in Yr. 1||US$13,750||US$16,850||US$14,150||US$13,750|
|Subsequent annual costs (excl. accounting and tax fee)||US$1,100||US$1,100||US$1,100||US$1,100|
|Sample engagement fee invoice|