Are you planning to start a business in Kenya? If so, there are several requirements you need to fulfil to start and operate your business legally. These requirements are designed to ensure that businesses operate legally and ethically. They are also designed to protect the interests of business owners, employees, and the public. In this article, we will discuss the requirements to start a business in Kenya. We will also provide tips on how to meet these requirements.
1. Business Registration and Licensing
Registering your business is probably the first step you will need to take when starting a business in Kenya. The registration process will depend on the type of business you want to start. For example, if you want to start a sole proprietorship, you will need to register with the Business Registration Service which can be done online through eCitizen. If you want to start a partnership or a company, you will need to register with the Registrar of Companies.
Before registering your business you register your business name and ensure it is not already in use. You can do this by conducting a name search at the Business Registration Service through eCitizen.
Tip: You can hire a lawyer or a business consultant to help you with the business registration process if the business you want to start is a partnership or a company. They can help you understand the specific requirements of your business and guide you through the registration process.
2. Tax Compliance – KRA PIN and VAT Registration
You need to comply with the tax laws in Kenya. This includes obtaining a Personal Identification Number (PIN) from the Kenya Revenue Authority (KRA). You will also need to register for Value Added Tax (VAT) if your business turnover exceeds Kshs 5 million. Once you have obtained your PIN and VAT registration, you will need to start filing returns for your business to avoid penalties even if your business is not making any profit.
3. Business Permits and Licenses
Depending on the type of business you want to start, you may need to obtain specific permits and licenses. For example, if you want to start a restaurant, you will need to obtain a food handling permit from the Public Health Department. For a pharmacy, you will need to obtain a license from the Pharmacy and Poisons Board. If you want to start a bar or a liquor store, you will need to obtain a liquor license from the county government. You will also need to obtain a business permit from the county government where your business will be located.
Consult with a lawyer or a business consultant to understand the specific permits and licenses that you need to obtain for your business.
4. National Social Security Fund (NSSF) and National Hospital Insurance Fund (NHIF) Registration
You need to register your employees with the National Social Security Fund (NSSF) and the National Hospital Insurance Fund (NHIF). This is a requirement under the Employment Act. You will also need to make contributions to these funds on behalf of your employees. To register your employees with NSSF and NHIF, you will need to obtain an employer’s code from NSSF and NHIF. You can do this by visiting their respective offices or through their websites.
5. Business and Employee Insurance
Insurance is an important requirement for any business. You need to obtain insurance for your business to protect it from risks such as fire, theft, and accidents. You may also need to obtain insurance for your employees to protect them from work-related injuries. Health insurance is also important for your employees. You might choose to obtain group health insurance for your employees even though it is not a requirement by law. It is important to note that some businesses are required by law to obtain specific insurance policies. For example, if you want to start a transport business, you will need to obtain insurance for your vehicles. Consult with an insurance broker or a consultant to understand the specific insurance requirements for your business.
6. Business Bank Account
To operate your business, you will need to open a business bank account. This is important for keeping your business finances separate from personal finances. It is also important for tax compliance. You will need to provide your business registration documents, your PIN certificate, and your identification documents to open a business bank account. You may also need to provide a business plan and a cash flow projection to the bank. A bank account is also important for obtaining loans and other financial services for your business. You can open a business bank account with any of the commercial banks in Kenya. Some banks offer special accounts for small businesses and startups.
7. Business Plan
This is not a legal requirement but it is important to have a business plan before starting a business. A business plan is a roadmap for your business. It outlines your business goals, your target market, your products or services, your marketing strategy, and your financial projections. A business plan is important for obtaining financing for your business. It is also important for guiding your business operations. You can write a business plan yourself or you can hire a business consultant to help you write one.
Pro Tip: You can use the business plan to apply for a loan from a bank or a microfinance institution. You can also use it to attract investors to your business.
8. Employment Contracts
This only applies if you are planning to hire employees for your business. Employment contracts are important for outlining the terms and conditions of employment. They are also important for protecting your business from legal disputes with employees. You can hire a lawyer to help you draft employment contracts for your employees. You can also use templates available online to draft employment contracts. It is important to ensure that your employment contracts comply with the Employment Act and other labor laws in Kenya.
9. Health Certificate and Workplace Safety
If you are planning to start a business that involves handling food or chemicals, you will need to obtain a health certificate from the Public Health Department. You will also need to ensure that your workplace is safe for your employees. This includes providing safety equipment and training your employees on workplace safety. You may also need to obtain a fire safety certificate from the county government. Your business needs to comply with the Occupational Safety and Health Act.
10. Environmental Impact Assessment (EIA)
Environmental Impact Assessment (EIA) is a requirement for businesses that may have an impact on the environment. This includes businesses that produce waste, emit pollutants or use natural resources. You will need to obtain an EIA license from the National Environment Management Authority (NEMA). You will also need to comply with the Environmental Management and Coordination Act. To get an EIA license, you will need to conduct an environmental impact assessment study and submit the report to NEMA for approval. You can hire an environmental consultant to help you with the EIA process.
Conclusion
Starting a business in Kenya requires you to meet several requirements. These requirements are designed to ensure that businesses operate legally. In most cases, the requirements will depend on the type of business you want to start. It is important to consult with a lawyer or a business consultant to understand the specific requirements of your business. You can also use online resources to understand the requirements for your business.