Introduction: Is a General Partnership Right for You?
If you’re starting a business in Kenya and you have one or more partners, a general partnership might be a simple and affordable way to get going. Similar to a sole proprietorship but making it possible to have partners, a general partnership is a suitable business structure for professionals, family members, and friends going into business together.
This guide explains everything you need to know to decide if it’s the right fit for your venture.
What Is a General Partnership?
A general partnership is a business arrangement in which two or more individuals agree to run a business and share profits and losses. Each partner contributes capital, time, skills, or other resources and is personally liable for their share of the business’s debts and obligations. This can be equally, or as agreed upon between the parties at the start of their relationship.
Unlike companies and limited liability partnerships, general partnerships do not create a separate legal identity. The law treats the business and its partners as the same legal entity.
In Kenya, general partnerships are governed primarily by the Partnership Act, No. 16 of 2012.
Assumption of a General Partnership
It is possible to create a general partnership even without signing any documents. Under Section 4 of the Partnership Act, if two or more people carry on a business together and intend to make a profit, a partnership may be assumed. This is known as an implied partnership.
In such cases, the law looks at the conduct of the parties, not just written agreements. If you share profits, make joint decisions, or act on behalf of each other in a business, you could be in a partnership, whether or not you planned to be.
In an implied partnership, you could face personal liability without realising it. To avoid surprises, always document your arrangements.
Key Features of a General Partnership
- No separate legal personality: The business and partners are legally the same.
- Unlimited liability: Each partner is personally liable for the business’s debts.
- Mutual agency: Any partner can bind the partnership in contracts or business dealings.
- Profit and loss sharing: Partners share profits and losses as agreed.
- Minimum two partners: There must be at least two partners.
Legal Framework of General Partnerships in Kenya
General partnerships in Kenya operate under the Partnership Act. Important provisions include:
- Section 3: Defines what constitutes a partnership.
- Section 4: Sets rules for determining the existence of a partnership.
- Section 25: Outlines partner responsibilities and mutual agency.
- Section 35: Discusses dissolution of partnerships.
While registration is optional, it’s highly recommended for credibility, tax compliance, and contract enforcement.
The Registration Process
You can register your general partnership with the Business Registration Service (BRS) via the eCitizen platform.
Steps to Register:
- Name Reservation – Propose and reserve a unique name for the partnership.
- Draft Partnership Deed – Outline terms like profit-sharing, capital contribution, and dispute resolution.
- Fill BN2 Form – Business Name Registration form.
- Pay Registration Fee – Currently around KES 850.
- Certificate of Registration – Issued by the Registrar.
Documents Required to Register a General Partnership
- Partnership deed
- National ID or passports for all partners
- Passport photos
- Physical address of the business
Benefits of a General Partnership
Despite its simplicity, a general partnership offers several advantages:
- Simple to form: Fewer regulatory hurdles compared to companies.
- Cost-effective: Low startup and operational costs.
- Flexibility: Easy to manage with minimal formalities.
- Shared decision-making: Combines the skills and resources of all partners.
Disadvantages to Consider
General partnerships also come with significant drawbacks:
- Unlimited liability: Partners risk personal assets for business debts.
- Lack of continuity: Partnership dissolves when a partner leaves or dies.
- Conflict risk: Disagreements can harm the business if not managed well.
- Limited growth potential: Difficult to attract investors without formal structure.
General Partnership vs LLP vs Private Company
| Feature | General Partnership | LLP | Private Company |
|---|---|---|---|
| Legal status | No separate entity | Separate entity | Separate entity |
| Liability | Unlimited | Limited | Limited |
| Registration | Optional | Mandatory | Mandatory |
| Perpetual succession | No | Yes | Yes |
| Ownership | Partners | Partners | Shareholders |
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Taxation and Compliance Requirements
General partnerships are taxed on their profits, but the taxes are paid by individual partners based on their share.
Compliance Obligations:
- Income tax filing – Each partner files taxes individually.
- Business permit – Required by county governments.
- KRA PIN – Needed for tax identification.
- Accounting records – Maintain proper financial records.
Drafting a Partnership Deed
A well-drafted deed helps avoid disputes and sets clear rules. Make sure to include clauses on:
- Capital contributions
- Profit and loss sharing
- Duties and powers of partners
- Admission or exit of partners
- Dispute resolution
- Termination procedures
How to Dissolve a General Partnership
Dissolution may occur by:
- Mutual agreement
- Expiry of fixed term
- Completion of specific project
- Death or insolvency of a partner
- Court order
Upon dissolution:
- Settle debts
- Distribute remaining assets
- Notify Registrar (if registered)
Common Use Cases in Kenya
General partnerships are popular among:
- Retail and wholesale traders
- Family-run businesses
- Professional practices (before conversion to LLP)
Common Pitfalls to Avoid
- No written deed – Leads to disputes.
- Unequal effort or investment – Creates tension.
- Ignoring tax compliance – Attracts penalties.
Work with legal counsel to avoid these issues.
How We Can Help
At Wacu Mureithi & Co. Advocates, we guide you through every step of forming, structuring, or restructuring your general partnership. We:
- Draft robust partnership deeds
- Advise on dispute prevention
- Register your partnership with BRS
- Provide tax and compliance support
Let us help you build a strong business foundation.
Frequently Asked Questions (FAQS)
1. Is registration of a general partnership mandatory?
No. But it is advisable for legal and tax purposes.
2. Can foreigners form a general partnership in Kenya?
Yes. Foreigners can partner with Kenyan nationals, subject to licensing and immigration laws.
3. Are general partnerships taxed as entities?
No. Taxes are paid individually by each partner based on their income.
4. What happens when one partner wants to leave?
The deed should provide an exit clause. Otherwise, the partnership may be dissolved.
5. Can a partnership be converted into a company?
Yes. You can restructure your partnership into a private company or LLP.
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