Types of Companies in Kenya

Kenya offers various types of legal business structures that entrepreneurs and investors can choose from, depending on the size, nature, and objectives of their business. 

Understanding these structures is essential when deciding which type best suits your needs, as each comes with its own legal requirements, taxation obligations, and management structure. 

Here’s an overview of the most common types of companies in Kenya:

1. Sole Proprietorship

A sole proprietorship is the simplest and most common form of business ownership in Kenya. It is owned and run by one individual, with no legal distinction between the owner and the business. This type of company is ideal for small businesses with low capital needs.

Key Features:

• Ownership: Owned by one individual.
• Liability: The owner has unlimited personal liability for debts and obligations.
• Taxation: The business is taxed as personal income for the owner.
• Registration: Registered as a business name with the Registrar of Companies under the Business Names Act.
• Ideal For: Small businesses, sole traders, freelancers, and artisans.

2. Partnership

A partnership involves two or more individuals (up to 20) who come together to run a business and share profits and losses. There are two main types of partnerships in Kenya:

General Partnership: All partners manage the business and share responsibility for the debts and obligations of the partnership.

Limited Partnership: Comprises both general partners (who manage the business and have unlimited liability) and limited partners (who contribute capital but have limited liability).

Key Features:

• Ownership: Owned by two or more individuals.
• Liability: In a general partnership, partners have unlimited liability, while in a limited partnership, the liability of limited partners is restricted to their capital contribution.
• Taxation: Partnerships are taxed as personal income for the partners.
• Registration: Registered under the Business Names Act.

Ideal For: Small to medium-sized businesses involving multiple owners, law firms, accounting firms, or family businesses.

3. Limited Liability Company (LLC)

A Limited Liability Company (LLC) is the most common type of business structure in Kenya, especially for small and medium enterprises (SMEs). 

It is a separate legal entity from its owners, meaning the company’s debts and liabilities are separate from the personal assets of its shareholders.

Key Features:

• Ownership: Can be owned by one or more shareholders. Shareholders’ liability is limited to the value of their shares.
• Liability: Shareholders have limited liability, meaning they are only liable for the amount they have invested in the company.
• Taxation: The company is taxed as a separate entity.
• Registration: Registered under the Companies Act, 2015, with the Registrar of Companies.

Types of Limited Liability Companies:

1. Private Limited Company (Ltd): The company’s shares are privately held and not offered to the public.
2. Public Limited Company (PLC): The company can offer its shares to the public through a stock exchange, such as the Nairobi Securities Exchange (NSE).

Ideal For: SMEs, family-owned businesses, and any business seeking limited liability protection.

4. Public Limited Company (PLC)

A Public Limited Company (PLC) is a company that offers its shares to the public and is listed on a stock exchange. 

PLCs are subject to stricter regulations and are typically larger corporations that seek to raise capital through public share offerings.

Key Features:

• Ownership: Owned by shareholders who can buy and sell shares publicly.
• Liability: Shareholders have limited liability.
• Taxation: The company is taxed as a separate legal entity.
• Registration: Registered under the Companies Act and must comply with listing requirements of the Nairobi Securities Exchange (NSE).

Ideal For: Large corporations looking to raise capital through public investors.

5. Company Limited by Guarantee

A Company Limited by Guarantee is a type of company often used by non-profit organizations, charities, and associations. 

Instead of shareholders, the company has guarantors who agree to pay a nominal amount in the event of winding up the company.

Key Features:

• Ownership: Does not have shareholders; instead, guarantors are members.
• Liability: Guarantors’ liability is limited to a pre-agreed amount, usually a nominal sum.
• Taxation: Tax-exempt in most cases if registered as a non-profit organization.
• Registration: Registered under the Companies Act, 2015.

Ideal For: Charities, NGOs, clubs, and other non-profit organizations.

6. Branch Office of a Foreign Company

A Branch Office allows foreign companies to operate in Kenya without registering as a local entity. 

The branch is considered an extension of the parent company, meaning it is not a separate legal entity from the foreign company.

Key Features:

• Ownership: Owned by a foreign company.
• Liability: The parent company is fully liable for the branch’s debts and obligations.
• Taxation: The branch is taxed on Kenyan income.
• Registration: Registered with the Registrar of Companies as a foreign company branch.

Ideal For: Foreign companies looking to establish a presence in Kenya without incorporating a local subsidiary.

7. Unlimited Company

An Unlimited Company is a type of company where the liability of shareholders is not limited. This means that in the case of insolvency, the personal assets of shareholders can be used to cover the company’s debts. 

Unlimited companies are rare and typically used when owners want complete control of the company while assuming all its risks.

Key Features:

• Ownership: Owned by shareholders with no liability limitation.
• Liability: Shareholders have unlimited liability.
• Taxation: The company is taxed as a separate entity.
• Registration: Registered under the Companies Act, 2015.

Ideal For: Specific industries or businesses that want flexibility in financing and control, and are willing to take on unlimited risk.

8. Non-Governmental Organization (NGO)

An NGO is a non-profit organization that operates independently of government, typically focusing on humanitarian, social, or environmental goals. 

NGOs in Kenya must be registered with the NGO Coordination Board.

Key Features:

• Ownership: Operated by a board of trustees or directors, with no shareholders.
• Liability: Directors and members have limited liability.
• Taxation: NGOs can qualify for tax exemptions under specific conditions.
• Registration: Registered with the NGO Coordination Board under the NGO Coordination Act.

Ideal For: Non-profit organizations focused on charity, social impact, or community work.

Final Take

When choosing the type of company to register in Kenya, consider factors such as the number of owners, the level of liability you’re willing to accept, and whether you’re running a for-profit or non-profit organization. 

Each company structure has its own legal, financial, and operational implications, so it’s important to assess your needs carefully before making a decision. 

If you’re unsure, consulting with a business advisor or legal professional can help guide you to the right choice for your business venture.