287
[ESTABLISHING A BUSINESS ENTITY IN KENYA]
ESTABLISHING A BUSINESS ENTITY IN KENYA a) Types of business entities in Kenya Kenya has 5 main types of business entities that is, sole proprietorships, partnerships, limited liability partnerships, companies, non- governmental organizations and trusts. A highlight of the main types of business associations is provided below i) Sole proprietorship A sole proprietorship is a business owned by a single person and is registered through the Business Names Act. Registration of a sole proprietorship does not confer on the owner a separate legal entity, nor does it confer a limited liability on the owner. The sole proprietor remains personally liable for debts and often enters into legally binding arrangements such as contracts or lawsuits in his/her own name. The registration of a sole proprietorship is commenced by undertaking a name search and name reservation after which a form is filed. If the name is available and the particulars correct then a business registration certificate is issued. ii) Partnerships A partnership is largely defined as a business between 2 or more persons who carry on business with the aim of making a profit. The cap for the number of partners is 20. The Partnerships Act No. 16 of 2012 governs partnerships in Kenya. Registration of partnerships in Kenya does not confer any separate legal identity or confer corporate identity on the partners. As such, partners remain personally liable for debt. Partnerships have the option of drafting their own partnership deeds or adopting the statutory partnership deed provided in the Act. In the event a registered partnership does not provide its own deed,
then the statutory deed will be applied in default. Companies, commission agents and joint tenancies are not construed as partnerships and therefore fall outside the ambit of the Act. Partnership registration is done in the same method as the registration of a sole proprietorship through a statutory registration form that contains information about the partners, the location of the business and other mandatory details. A certificate of registration will be granted after the registration process. It is highly recommended for persons intending to form a partnership in Kenya, to draft and file a suitable partnership deed because doing so means that the statutory deed provided for in the Partnership Act will apply in default. Partnerships are most suitable for short- term engagements, for example collaborations as they are easier to wind up than companies. Partnerships are also used for professional entities such as law firms and accounting firms. This is because the law provides for this. Partners are personally liable for debt however the liability begins from the date the partner joined the partnership and subsists until the date when one exits the partnership. Governance of partnerships’ Governance of partnerships is provided in the partnership deed drafted by the partners. In the absence of a partnership deed drafted by the members then the provisions of the Partnership Act on governance will apply. The Partnership Act has provisions on governance such as: a) Regulations on partnership property
ILN Corporate Group – Establishing a Business Entity Series
Made with FlippingBook Ebook Creator