Choosing Between a Business Name, Limited Liability Partnership and Company Formation in Kenya

If you are an entrepreneur, you are on the right track. Before proceeding to venture into any business, however, it is important to know the basics of different company formation in Kenya that will best suit your business, not just in the short term, but long term as well.

Business Name

A business name simply means a name which a business trades under for commercial purposes. In registrations, the business name is the category where sole proprietorship and basic partnerships fall into. It is suitable for not just single-owned businesses and partnerships, but also for businesses that are not already looking forward to raising capital through the issuance of shares.

The reasons why you may prefer to register your small business as a business name are:

• They are easy to register.
• They require only one person to start.
• You can upgrade to a limited company when need be.
• Registration fees are affordable.
• A business name requires less formalities
• Profit from the business is solely owned by the owner
• Tax liability in business name is minimal.

Limited Company

Limited companies are companies which have been incorporated at the registrar of companies as a separate legal entity from the owner. The principal reasons for trading as a limited company are:

– LIMITED LIABILITY
This means the company can enter into contracts and be sued, in its own right. In the event that the company is sued, its directors and shareholders do not have to sell their own assets to pay the debt, unless, in the case of directors, they have been found guilty of wrongdoing. This legal separation means that directors and shareholders cannot take money out of the company whenever they want. Money earned from sales belongs to the company, not to the individuals.

– PROFESSIONAL STATUS
Another major benefit of forming a limited company is the professional status that you get from the company formation in Kenya. Many customers and some businesses would much rather deal with a company that is incorporated because they have gone through the process of registering and simply seem to be much more stable than a company that is not incorporated.

PERPETUAL SUCCESSION
After company formation in Kenya, the Company is valid and eligible for succession even after the directors pass away. Unless the company is dissolved it will always be in existence, as opposed to sole proprietorship which might come to an end soon after the sole proprietor dies or becomes bankrupt.

EASE OF STAFFING
A company as a legal entity can hire staff. with its own KRA PIN and bank account. There will be ease of staffing and even paying out salaries without these being in the director’s personal account

TRUST
Not only does having your company incorporated make customers feel that you are more trustworthy, it can also help you when you need to finance that business or raise capital for business growth. Most lenders prefer for companies to be incorporated in order to lend them money.

LIMITED LIABILITY PARTNERSHIP (LLP)

A limited liability partnership [LLP} is a partnership in which some or all partners depending on jurisdiction have limited liabilities. It exhibits elements of partnership and limited companies. LLPs are useful for companies that usually operate as a partnership, such as accountancy firms or lawyers. The advantages of LLP are:

– As Many Owners as Needed
One of the greatest things of a limited liability partnership is that there is no limit on the number of owners that can be involved with the business. This is great because it evenly spreads out the amount of liability each partner has.

–  Less Liability
Just as the name suggests, limited liability partnerships limit your liability. Since there are multiple owners involved in the business all of the risks of the business are spread out and made much smaller than if a single person was responsible for the business on their own. This generally refers to legal issues, like if the company was sued for any reason.

– Great Flexibility.

LLPs are more flexible when it comes to adding or removing people in the business whereas the structure of a limited company is more rigid. LLPs have no limit for partners and may have partners varying from two to many.

In conclusion, the right type of structure for your business depends on a variety of factors and the interests of different investors. These factors are likely to include but not limited to: taxation, market sector, management and ownership structure.

Our Business Registration Fee.

Business registration plus setup cost, Ksh. 50,000 (Kenyans), Ksh. 1, 600, 000 (Foreigners).

Here’s the package to expect from our legal and business service engagements,

We will help you to unwrap your business goals by:

• Identifying the right business structure for your project, i.e, Business Name or Sole Proprietor, Private Limited Company by Shares, Private Limited Company by Guarantee, Limited Liability Partnership, Branch – Foreign Company, NGOs, Saccos and so on;
• Making a business registration application with the Kenyan Government;
• Prepare the correct business templates; Business Plan, Legal Agreements, Human Resource, Finance & Accounting, Sales and Marketing, Production & Operations and, Administration;
• Organize and structure all departments of your business;

Benefits:

• Be more efficient by smoothing business processes;
• Guide your team tasks with standard operating procedures;
• Save a lot of time and boost your productivity;
• Save thousands of money in lawyer fees;
• Grow your business and close great deals; and
• On matters: Negotiation, Mediation, Arbitration and Court Litigation if need be.

Conclusion

We hope that this article answered most of your questions relating to the types of business entities in Kenya and all the other important topics to help you make an informed decision. For your legal and business services, reach us via our online platform on this website. For our premium paid legal and business services, make your order via the ORDER NOW page.