Sole Proprietorship in Kenya: A Comprehensive Guide

Introduction

In Kenya, a sole proprietorship is the easiest and most affordable business structure to set up. Starting a business is, by itself, overwhelming, so it helps that you can simply start and change the structure as the business grows. Sole proprietorships are the perfect structure for individual entrepreneurs who want to formalise their business, open professional business accounts and start building their brand without too much red tape.

In this guide, we explain everything you need to know about sole proprietorships in Kenya. From registration to taxes, compliance, and what is needed later when you want to convert to a limited company.

What is a Sole Proprietorship?

A sole proprietorship is a business owned and run by one person. Legally, there is no separation between the owner and the business. That means the owner is personally responsible for all business debts and liabilities.

In Kenya, sole proprietorships are governed under the Business Registration Service (BRS) through the Registration of Business Names Act.

Key Features of a Sole Proprietorship

• One owner
• Simple and quick registration
• Low start-up costs
• The owner has unlimited liability
• Taxed as part of the owner’s personal income

Why Choose a Sole Proprietorship?

Many small business owners in Kenya prefer sole proprietorships for several good reasons.

1. Simple Setup: It takes only a few days to register a sole proprietorship through the eCitizen portal. No need for complex documents or multiple directors.
2. Low Costs: You don’t need a lawyer or accountant to get started. This is ideal if you’re running on a tight budget.
3. Full Control: As the sole owner, you make all the decisions. You don’t have to consult a board or partners.
4. Easy Taxation: You file your business income as part of your personal tax return. That makes compliance simpler for many people.

How to Register a Sole Proprietorship in Kenya

Step 1: Name Search and Reservation

• Log in to Citizen and go to the Business Registration Service (BRS) section
• Conduct a business name search
• Reserve your preferred business name
• Wait for approval (usually 1–2 working days)

Step 2: Fill in the Business Name Registration Form

Once the name is approved:

• Provide your ID or passport details
• Provide your KRA PIN
• Fill in your physical and postal address
• Add your phone number and email

Step 3: Pay the Registration Fee

• The registration fee is KES 850
• Pay via M-PESA or debit/credit card

Step 4: Download the Certificate of Registration

• Once approved, you’ll get a Business Name Certificate
• Print and keep it as proof of registration

Timeline: The whole process can take between 1–3 days if everything is in order.

What Documents Do You Need?

To register a sole proprietorship, you’ll need:

• A scanned copy of your National ID or passport
• KRA PIN certificate
• Passport-size photo (sometimes optional)
• Your physical and postal address
• Business activity description

Common Business Activities Registered as Sole Proprietorships

• Retail shops
• Freelance services (e.g., photography, writing, digital marketing)
• Food vendors
• Agribusiness
• Consultancy services
• Transport (e.g., bodaboda or taxi services)

You can run almost any low- to medium-risk business under this model.

Taxation of Sole Proprietorships in Kenya

Sole proprietors don’t pay corporate tax. Instead, you pay income tax on the profits your business makes. You’ll file your returns as an individual, not a company.

What Taxes Do You Pay?

1. Income Tax (Turnover Tax or Presumptive Tax)
   • If your annual revenue is between KES 1 million and KES 25 million, you’re eligible for Turnover Tax (1% of gross sales)
   • If you’re operating from a county business premise, you may also be charged presumptive tax by the County Government
2. VAT (if applicable)
   • If you make over KES 5 million annually, you must register for VAT and remit it monthly.
3. PAYE (if you have employees)
   • You must deduct and remit Pay As You Earn for any salaried employees
4. SHIF/NSSF Contributions
   • For yourself and employees, where applicable

Responsibilities and Compliance

Annual Returns

Sole proprietorships are not required to file company returns. However, you must file personal tax returns annually by 30th June.

Business Permits

You must get a Single Business Permit from your local County Government. Rates vary depending on the nature and size of your business.

Other Licences

Depending on your activity, you may need:

• Health licence (for food vendors)
• Tourism licence (for accommodation or travel services)
• Trade licence (for retail businesses)

Check with your county’s licensing office for specifics.

Advantages and Disadvantages of Sole Proprietorships

Advantages

• Easy to start and manage
• Full control over decision-making
• Simple tax compliance
• Lower costs of operation

Disadvantages

• Unlimited liability (you are personally liable for all debts)
• Harder to raise capital
• Less credibility with large clients
• Business dies with the owner unless converted

Converting a Sole Proprietorship to a Limited Company

As your business grows, you may want to convert it to a private limited company. To do this, you must register a private limited company and cease operations as a sole proprietorship. The process involves:

1. Reserving a new company name

You can reserve the same name, but now as a company.

2. Registering the Company

• Draft and upload the CR1, CR2, CR8, and Statement of Nominal Capital
• Upload the Memorandum and Articles of Association (use Form CR2)
• Pay the registration fee based on the share capital

You can learn more about the process from our article How to Register a Company in Kenya.

3. Close or Transfer the Sole Proprietorship

• You may continue using the sole proprietorship name as a trading name, or deregister it

Conclusion: Is a Sole Proprietorship Right for You?

If you’re starting small and want to test the waters, a sole proprietorship is a great option. It allows you to formalise your hustle without much red tape or cost. However, as your business grows, consider converting to a limited company for better legal protection and credibility.

The most important thing is to start. Formalising your business shows your customers, suppliers, and regulators that you mean business.

Need Help With Your Sole Proprietorship? Let’s Talk

We help entrepreneurs like you make smart legal choices. Whether you’re registering your first business or ready to upgrade to a company, we will guide you every step of the way.

Schedule A Consultation with our team, Email Us or fill out the form on our Contact Us page for fast, friendly, personalised and professional legal support on business registration, compliance, and growth.

Frequently Asked Questions (FAQS)

Is a sole proprietorship a legal entity?

No. The owner and the business are the same in the eyes of the law.

Can I open a bank account for my sole proprietorship?

Yes. Most banks allow business accounts under a registered business name.

Can I have employees under a sole proprietorship?

Yes. You can hire staff, but you must comply with employment and tax laws.

How long is a sole proprietorship valid?

It doesn’t expire, but you must renew your business permits annually.

Can I change my business name later?

Yes. You can apply to change your business name through eCitizen.

Can I register more than one sole proprietorship?

Yes. There’s no legal limit to the number of business names you can register.

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