Limited Liability Partnership (LLP)

Definition: A Limited Liability Partnership (LLP) is a unique business association provided for in the Partnership Act, No. 6 of 2012.

What is an LLP?

Limited Liability Partnership

A LLP combines the characteristics of both a company and partnership.  It is easier to register than a company because the formalities for registration are less (e.g. there is no need for a Memorandum of Articles of Associations).

Once an LLP is registered, it becomes a corporate, legal, entity separate from its members and may own property in its own name.

An LLP is effective from a tax perspective as the partnership income is taxed on the individual income of each partner and it is not subject to Company Tax.

An Unlimited Liability Partnership follows in general the same processes as a LLP

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 register for Tax with the Kenya Revenue Authority (KRA)

STEP THREE

How to register your Company with the Registrar of Companies

STEP FOUR

How to apply for a Business Permit

STEP FIVE

How to register with the National Social Security Fund

STEP SIX

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

PROS

Advantages of a Limited Liability Partnership

LIMITED LIABILITY
  • All Partners have limited liability
  • No limit to the number of Partners
  • No need for a Memorandum of Articles of Association so Partners can agree their own structure & regulations
PROFIT AND LOSS
  • Partners share the profits
  • Partners are taxed on personal income
  • Partners may withdraw part of their share of the company (post tax)

CONS

Risks of a Limited Liability Partnership

LIMITED LIABILITY
  • A Partner in an LLP is personally liable for his or her own negligence
  • A Partner in an LLP is liable for the negligence of any employee working under that Partner’s direct supervision
  • There is liability for debts incurred by the Partnership
PROFIT AND LOSS
  • Partners share the losses
  • Lenders and Financial Institutions prefer corporations in terms of loan security
  • Partnerships face more challenges in raising outside capital investment

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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