Business name or limited company in Kenya
Whether a Kenyan start-up should register a business name, a private limited company or an LLP, with the BRS forms and turnaround for each.
By Achekam · · 5 min read · For Running a business businesses in Kenya
Two friends in Eldoret are starting a catering business. One says register a business name, it is cheap and quick. The other says register a limited company, because the big clients they want will only deal with a company. Both have a point, and the choice they make now affects who owns what, how the business is taxed, what a bank will lend against, and how much paperwork they take on every year.
Kenya's Business Registration Service offers three common forms for a new venture: a registered business name, a private limited company and a limited liability partnership. This article explains what each one is, what BRS says about forms and turnaround, how the books are set up either way, and the questions to answer before choosing.
Who registers what
The Business Registration Service says its Companies Registry administers three Acts: the Companies Act, 2015, the Registration of Business Names Act (Cap 499) and the Limited Liability Partnerships Act (No 42 of 2011). Each form of business sits under one of them, and BRS handles the registration for all three.
A business name is not a legal entity
BRS says a business name is the simplest business form but is not a legal entity. Registering a business name records the name you trade under, and who trades under it. The business itself does not become a separate person in law: it is still you, or you and your partners, trading under that name.
BRS lists registration of a business name at Kshs 950, on form BN 2, with the certificate in 1 day. That is the attraction: it is quick, inexpensive and simple.
The trade-off is that the business and its owner are not separate. Contracts, debts and obligations sit with the owner. For a one-person consultancy or a small trader taking modest risks, that may be acceptable. For a business that will sign large contracts, employ staff or borrow, it is worth thinking harder.
What a private company adds
A private limited company is incorporated under the Companies Act, 2015. BRS says it is registered by lodging forms CR 1, CR 2 and CR 8 with a statement of nominal capital, and that the company receives a Certificate of Incorporation in 3-5 days. BRS's own fee schedule and its FAQs give slightly different fees for incorporation, so confirm the current fee on the BRS fee schedule for the Companies Registry, which lists the official fees, documents and turnaround times for each type of registration.
In general terms, a company exists separately from the people who own it. It can own property, sign contracts and borrow in its own name, and ownership is held through shares that can be issued to new investors or transferred. That is why larger clients, lenders and investors often prefer to deal with a company.
The name has rules too. BRS says the name of a private limited company must end with "Limited" or "Ltd", while a public company incorporated under the 2015 Act must end with "plc" or "Public Limited Company". Kenyan company name rules covers how to choose and reserve one.
A company also carries ongoing obligations, such as annual returns and a register of beneficial owners lodged with the Registrar. Budget for that paperwork from the start.
Limited liability partnerships
The third option is a limited liability partnership under the LLP Act. BRS lists registration of an LLP at Kshs 25,000, on form LLP 1, with registration in 1 day. An LLP can suit professionals who want to practise together as partners while having the partnership registered as its own entity. For most trading start-ups, the realistic choice is between a business name and a private company, but partners in a professional practice should look at the LLP too.
Forms and turnaround at a glance
| Business name | Private limited company | LLP | |
|---|---|---|---|
| Law | Registration of Business Names Act (Cap 499) | Companies Act, 2015 | Limited Liability Partnerships Act (No 42 of 2011) |
| Separate from its owners | No, according to BRS | Yes, in general terms | Registered under its own Act |
| BRS forms | BN 2 | CR 1, CR 2, CR 8 and a statement of nominal capital | LLP 1 |
| Fee listed by BRS | Kshs 950 | Check the current fee schedule | Kshs 25,000 |
| Turnaround BRS gives | 1 day | 3-5 days | 1 day |
Whichever you choose, the next step is the same: KRA says a PIN is required for registering a business name or company, as well as for opening accounts with financial institutions and registering M-PESA pay bill and till numbers. Taxes for a sole proprietor covers what a business-name owner pays, and registering a company on eCitizen walks through the company route.
Opening your books in Achekam either way
The books do not wait for the legal form to be perfect. A business can sign up on Achekam as a business rather than an accounting firm, choose its country, and get its own workspace, its own books and its own web address on the Achekam domain, with the person who signs up as administrator. A workspace registered as Kenyan at sign-up makes the Kenya pack its default and, on activation, sets the shilling (KES) and the Africa/Nairobi time zone unless they are already set.
For a business name, use the books to keep the business's money apart from the owner's personal money, even though the law treats them as one person; it makes tax returns and any later move to a company far easier. For a company, the books belong to the company from day one, and the founders' money paid in should be recorded as share capital or a loan, not mixed with sales.
Questions to answer before you choose
- Will we sign contracts or take on debts large enough to worry about personally?
- Do the clients we want deal only with companies?
- Will we bring in investors or new partners?
- Are we ready for the yearly filings a company brings?
- Is this a professional practice that suits an LLP?
If most answers point to "yes", a private company is usually the better start. If they point to "not yet", a business name lets you begin trading quickly and revisit the question as the business grows.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
