Limited by Shares (LLC)

Definition: A Company Limited by Shares is a separate legal entity to its owners (shareholders) and its directors (management). It has an authorized share capital and shareholders invest in the company and own its shares.

At a glance:

The steps you are legally required to follow are outlined in this section including:

STEP ONE

How to apply for a name for your Business.

STEP TWO

How to Draw up a Memorandum of Articles of Association and Statement of Nominal Capital

STEP THREE

How to prepare the details required as Particulars of Directors.

STEP FOUR

How to register for Tax with the Kenya Revenue Authority (KRA)

STEP FIVE

How to register your Company with the Registrar of Companies

STEP SIX

How to apply for a Business Permit

STEP SEVEN

How to register with the National Social Security Fund

STEP EIGHT

How to register with the National Hospital Insurance Fund (NHIF)

PROS

Advantages of a Company Limited by Shares (LLC)

LIMITED LIABILITY
  • Limited Liability Companies (LLCs) allow for multiple owners (shareholders) of the company.
  • The company is a separate legal entity from its owners. They are thus protected by limited liability.
    i.e. The company is responsible for any debts it incurs.
  • In the event of liquidation the financial liability for an owner is limited to the value of their shareholding.
ACCESS TO CREDIT
  • Loans are easier to apply for and receive than with other company structures.
  • The lending financier (bank or investor) can secure the loan against identified assets of the business, as a fixed charge.
  • Or the lending financier can secure its loan against the business as a whole, as a floating charge.
BUSINESS CONTINUITY
  • An LLC is its own legal entity and therefore has permanent succession.
    i.e. The company continues irrespective of changes in named owners (Directors and shareholders).
  • By registering your Company as an LLC it guarantees business continuity (unlike a Sole Proprietorship).
PROTECTION OF A COMPANY NAME
  • The choice of a Company Name is restricted
  • For more information on choosing a company name: http://kenyabusinessguide.org/limitedbyshares-step1/
  • Provided your chosen Company Name complies with the rules and is approved & registered correctly, no one else can use the same name.
OWNERSHIP FLEXIBILITY
  • Ownership (shares) may be issued, transferred or sold relatively easily.
  • Existing owners (shareholders) are protected by ‘pre-emption’ rights
    i.e. Existing shareholders have automatic right to the first option to purchase these shares in proportion to their existing shares.
  • Owners (shareholders) are also protected by company legislation protecting the interests of minority investors.
  • Shareholders usually receive profits.
BETTER PENSION SCHEMES
  • Approved Company Pension Schemes usually provide better benefits
    i.e. Better than those paid under contracts to self-employed, sole proprietor / sole trading businesses

CONS

Advantages of a Company Limited by Shares (LLC)

LIMITED LIABILITY
  • A Limited Liability Company (LLC) takes longer to register than a company limited by guarantee.
  • The cost of registration & incorporation is higher than the costs incurred in registering company limited by guarantee.

KENYA BUSINESS GUIDE

The Kenya Business Guide (KBG) is a think-tank that seeks to support the improvement and strengthening of the business environment in Kenya by providing access to information on key features of both the private and public sector prerequisites in the effective functioning of business. The KBG works in the intersection of the private and public sectors developing curated and value-added information to assist leaders in making more effective decisions.

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