By Mukamba & Company Advocates

Starting a business in Nairobi is exciting, but compliance is non-negotiable. This detailed guide ensures you cover every legal requirement, from registration to ongoing obligations. Let’s break it down step-by-step.

1. Business Registration: Structure & Process

Choose the right structure and register under Kenyan law.

a) Business Structures

1. Sole Proprietorship/Partnership:
   • Governed by the Registration of Business Names Act (Cap. 499).
   • Ideal for small, low-risk ventures.
   • Key Limitation: Unlimited liability (personal assets are at risk).
2. Limited Liability Company (LLC):
   • Governed by the Companies Act 2015.
   • Offers liability protection for shareholders.
   • Requires at least 1 director and 1 shareholder (can be the same person).
3. Limited Liability Partnership (LLP):
   • Hybrid structure under the Limited Liability Partnerships Act 2011.
   • Combines flexibility of partnerships with liability protection.

b) Registration Process

• For Sole Proprietors/Partnerships:
  1. Name Search: Confirm uniqueness via eCitizen (KES 150).
  2. Submit Form BN2: Attach copies of IDs for all partners.
  3. Payment: KES 950 via M-Pesa or card.
  4. Certificate Issuance: Download from eCitizen within 1–3 days.
• For Limited Companies:
  1. Name Reservation: Reserve via eCitizen (valid for 30 days).
  2. Prepare Documents:
     • Memorandum & Articles of Association.
     • PINs and IDs of directors/shareholders.
     • Statement of nominal capital (min. KES 100,000 for private companies).
  3. Submit to BRS: Upload documents on eCitizen and pay KES 10,650 (companies with nominal capital ≤ KES 250,000).
  4. Collect Certificate: Issued within 7–14 days.

Case Study: PesaTech Ltd. incorporated as an LLC but failed to file annual returns for two years, incurring KES 50,000 in penalties. Always track deadlines.

2. Licenses & Permits: Sector-Specific & General

Identify licenses based on your industry and location.

a) Sector-Specific Licenses

• Food & Hospitality:
  • Public Health License (Nairobi County): Apply at City Hall Annex. Fees: KES 15,000–50,000/year.
  • Food Hygiene Certificate: Required for chefs and handlers (KES 2,000 via Kenya Institute of Food Safety).
• Financial Services:
  • CBK License: For fintechs, forex bureaus, or microfinance institutions. Fees: Up to KES 1 million.
  • CMA License: For investment advisors or fund managers.
• Tech & Media:
  • Communications Authority (CA) License: For telecoms, ISPs, or broadcasters.
  • Copyright Registration: For software/app developers under the Copyright Act 2001.
• Manufacturing/Import/Export:
  • KEBS Certification: Mandatory for product standardization. Apply via KEBS Self-Help Portal.
  • Import/Export License: Obtain from Kenya Trade Network Agency (KENTRADE).

b) General Licenses

• Single Business Permit (SBP):
  • Issued by Nairobi County. Fees: KES 5,000–50,000 (based on business size and location).
  • Steps:
    1. Apply via Nairobi County eJijiPay Portal.
    2. Attach business registration certificate and PIN.
    3. Display permit at your premises.
• Fire Clearance Certificate:
  • Required for offices, restaurants, and warehouses. Apply at Nairobi Fire Brigade (KES 3,500).

Pro Tip: A start-up in Kilimani was shut down for lacking a fire certificate after an inspection. Always pre-empt inspections.

3. Tax Compliance: KRA Obligations

Stay ahead of Kenya Revenue Authority (KRA) requirements.

a) Tax Registrations

1. Personal Identification Number (PIN):
   • Register via KRA iTax (free). Required for all businesses.
2. VAT Registration:
   • Mandatory if annual turnover exceeds KES 5 million.
   • Submit VAT 1 Form via iTax and await KRA approval (2–4 weeks).
3. Pay-As-You-Earn (PAYE):
   • Register within 30 days of hiring your first employee.
   • File monthly returns by the 9th of the following month.
4. Withholding Tax (WHT):
   • Applies to contractors and service providers (rates: 5% for residents, 20% for non-residents).

b) Tax Filing Deadlines

• Corporate Tax: 30% of profits, filed annually by 6 months after financial year-end.
• VAT Returns: Filed monthly by the 20th of the following month.
• NSSF/NHIF: File by the 9th of each month.

Penalties:

• Late VAT filing: KES 20,000 or 5% of the tax due.
• Late PAYE: 5% monthly interest on arrears.

Case Study: GreenFarm Ltd. overlooked VAT registration despite hitting KES 6 million turnover. KRA imposed a KES 100,000 back-tax penalty.

4. Labour & Social Compliance

a) NSSF & NHIF

• National Social Security Fund (NSSF):
  • Employers contribute 6% of employee’s salary (max KES 1,080/month).
  • Register via NSSF portal.
• National Hospital Insurance Fund (NHIF):
  • Employees contribute 1.7% of gross salary (min KES 500/month).

b) Employment Contracts

• Draft contracts compliant with the Employment Act 2007.
• Include terms on probation, termination, and leave.

c) Workplace Safety

• Comply with the Occupational Safety and Health Act 2007.
• Display safety policies and conduct regular drills.

5. Sector-Specific Registrations

a) Data Protection

• Register with the Office of the Data Protection Commissioner (ODPC) under the Data Protection Act 2019:
  • Fees: KES 4,000 (small businesses), KES 16,000 (medium), KES 40,000 (large).
  • Submit via ODPC portal.

b) Environmental Compliance

• Environmental Impact Assessment (EIA):
  • Mandatory for manufacturing, construction, and waste management firms.
  • Apply via NEMA portal (KES 10,000–100,000).

c) Intellectual Property (IP)

• Trademark Registration: Protect your brand via Kenya Industrial Property Institute (KIPI). Fees: KES 3,000–10,000.
• Patent Registration: For inventions (KES 12,000–60,000).

6. Post-Registration Compliance

a) Annual Renewals

• Business Name Renewal: Renew every 1–3 years via BRS (KES 950).
• Company Annual Returns: File with BRS annually (KES 1,000 for small companies).

b) Record-Keeping

• Maintain records for 7 years (invoices, receipts, payroll).
• Use accounting software like QuickBooks or Sage for accuracy.

c) Compliance Calendar

• Set reminders for:
  • Tax filings (PAYE, VAT, corporate tax).
  • License renewals (SBP, health licenses).
  • NSSF/NHIF submissions.

Q&A: Common Compliance Questions

Q1: Do home-based businesses need licenses?

A: Yes. Home-based businesses in Nairobi require a Single Business Permit and may need additional approvals from local authorities.

Q2: How do I handle county vs. national licenses?

A: County licenses (e.g., SBP) apply to all businesses in Nairobi. National licenses (e.g., CBK, NCA) are sector-specific.

Q3: What if I operate online/e-commerce?

A: Register your business, obtain a Single Business Permit, and comply with data protection laws.

Q4: Can I handle compliance without a lawyer?

A: Yes, but consult experts for complex sectors (e.g., fintech, healthcare) to avoid costly errors.

Q5: What penalties apply for non-compliance?

A: Fines (up to KES 500,000), business closure, or imprisonment for severe violations.

Key Takeaways & Pro Tips

1. Start Early: Registration and licensing can take 2–8 weeks.
2. Budget for Compliance: Set aside KES 50,000–200,000 for initial registrations.
3. Stay Organized: Use digital tools (e.g., Google Workspace) to track deadlines.
4. Consult Experts: Engage lawyers or tax advisors for high-risk sectors.

Avoid These Pitfalls:

• Operating without a valid Single Business Permit.
• Missing tax deadlines (use KRA’s iTax reminders).
• Ignoring data protection laws (fines up to KES 5 million).

Need personalized guidance?

Contact Mukamba & Company Advocates:

Email: info@mukambalaw.com
Phone: +254706223157
Website: https://mukambalaw.com

Final Note: Compliance is an ongoing journey. Regularly review regulations, attend KRA webinars, and network with industry peers to stay informed.

Disclaimer: This guide provides general information. Laws and fees may change—always verify with authorities.

Author: Eugene
Mukamba Managing Partner

Contact Us Today:
Email: info@mukambalaw.com
Phone: +254706223157
Website: https://mukambalaw.com