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.
Table of Contents
- What is a Sole Proprietorship?
- Why Choose a Sole Proprietorship?
- Popular Business Activities Registered as Sole Proprietorships
- How to Register a Sole Proprietorship in Kenya
- What Documents Do You Need to Register a Sole Proprietorship?
- Taxation of Sole Proprietorships in Kenya
- Responsibilities and Compliance
- Advantages and Disadvantages of Sole Proprietorships
- Changing the Name of Particulars of a Business Name
- Converting a Sole Proprietorship to a Limited Company
- Conclusion
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. The business is viewed as an extension of the individual owner, meaning that the owner is personally responsible for all the business’s debts, liabilities and any other obligations.
On the flip side, the owner enjoys all gains and profits, minus the applicable taxes, allowable expenses and deductions.
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 reasons.
- 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.
- Low Registration and Maintenance Costs: While professionals are always recommended, you do not need a lawyer or accountant to get started. This is ideal if you’re running on a tight budget.
- Full Control: As the sole owner, you make all the decisions. You don’t have to consult a board or partners.
- Easy Taxation: You file your business income as part of your personal tax return. That makes compliance simpler for many people.
Popular Business Activities Registered as Sole Proprietorships
You can run almost any low- to medium-risk business as a sole proprietor. Some business activities popularly run as sole proprietorships include:
- Retail shops
- Freelance services (e.g., photography, writing, digital marketing)
- Food vendors
- Agribusiness
- Consultancy services
- Transport (e.g., bodaboda or taxi services)
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
Your sole proprietorship has no fixed expiration, and your business name remains valid indefinitely. Nonetheless, you will be required to annually renew:
- County Business Permits: Must be renewed yearly. Operating without it can attract hefty fines.
- Sectoral Licenses: Food vendors, transport operators, and health-related businesses may require additional annual permits.
Missing renewal deadlines can pause or shut down your operations. Mark your calendar and renew before expiry to stay in good standing.
There is also no legal limit on the number of business names a person can register. A person may register several sole proprietorships to cater to different lines of revenue or locations. Provided that proper books of accounts are kept for each business and taxes and other deductions are paid.
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?
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
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?
- 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 (1.5% of gross sales)
- If you’re operating from a county business premise, you may also be charged presumptive tax by the County Government
- VAT (if applicable)
- If you make over KES 5 million annually, you must register for VAT and remit it monthly.
- PAYE (if you have employees)
- You must deduct, file and remit Pay As You Earn for any salaried employees
- Social Health Insurance (SHIF)/National Social Security Fund (NSSF)/Affordable Housing Levy Contributions
- You must deduct, file and remit employee and employer contributions to the various authorities for yourself and your employees, where applicable
Responsibilities and Compliance
Annual Company and Tax 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 also 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
Changing the Name or Particulars of a Business Name
You can change the name or other particulars of your registered sole proprietorship at any time after registration. This includes updates to the business name, physical address, nature of business, or ownership details. To do this, you’ll need to file a Notice of Change (Form BN4) and pay the applicable fee. Once approved, a new certificate of registration reflecting the changes will be issued. It’s important to update your bank, KRA, and licensing authorities after any such changes to maintain compliance.
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 cease operations as a sole proprietorship and register a private limited company.
1. Reserving a new company name
You can reserve the same name, but now as a company.
Remember:
A limited company must add the name Limited or Public Limited Company or the abbreviations LTD or PLC to its name, depending on whether it is a private or public 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)
Does a sole proprietor need a business license?
Yes. After registering your business name, you must apply for a county business permit to operate legally. However, some professional services, particularly licensed ones, may not be required to acquire business licenses.
How much tax does a sole proprietor pay in Kenya?
Depending on whether you are liable for Turnover Tax or Income Tax, if you earn KES 1 million to 25 million annually, you’ll pay Turnover Tax at 1.5% of gross income. Otherwise, you’ll pay income tax based on profits.
How do I file taxes as a sole proprietor?
You file taxes using your KRA PIN on the iTax portal. The type of return depends on whether you fall under Turnover Tax or Income Tax.
Can I open a bank account for my sole proprietorship?
Yes. Banks in Kenya allow the opening of business accounts under a registered business name. They will ask for a copy of the registration certificate and a copy of your KRA PIN.
Can a sole proprietor have employees?
Yes. You can hire employees, but you must comply with labour laws and register for PAYE if required.
Can a sole proprietorship be a limited company?
No. A sole proprietorship is not a company. However, you can convert it into a limited company later.
Can a company be a sole proprietorship?
No. A company and a sole proprietorship are completely different legal structures.
What’s the difference between a certificate of registration and a certificate of incorporation?
Sole proprietors get a Certificate of Business Name Registration. Only companies receive a Certificate of Incorporation.
Can a sole proprietorship have more than one owner?
No. A sole proprietorship can only have one legal owner. If you want to go into business with others, consider a general partnership or an LLP.
Is business registration the same as tax compliance?
No. Registration is just the first step. You also need a KRA PIN, a business permit, and must file tax returns regularly.