Starting a business is easier when you know the order of the steps. Getting them wrong can mean paying penalties for things you did not know you had to do, so plan before you open your doors.

Step 1: choose the form

Decide whether you will trade as a sole trader, a partnership or a limited company; see sole trader or limited company for the differences. For most small businesses the first option is simplest.

Step 2: register the name

Register the business name or the company with the Business Registration Service through the eCitizen platform. Search the name first to confirm that it is available, and keep the certificate.

Step 3: get a KRA PIN

A business needs a KRA PIN. Individuals trading as sole traders use their personal PIN, and companies obtain their own. If you do not have one, read how to get a KRA PIN and then how to register on iTax.

Step 4: pick your tax obligations

On iTax, add the obligations that fit your business:

  • Income tax for the business or yourself
  • Turnover tax, if your sales will be between KES 1 million and KES 25 million
  • VAT, once your taxable sales reach KES 5 million in 12 months, or earlier by choice
  • PAYE, if you will employ people

Compare turnover tax with income tax with the turnover tax calculator and test whether VAT applies with the VAT registration checker.

Step 5: get a county business permit

Most businesses need a single business permit from the county where they operate, and some sectors need extra licences, such as food, health or alcohol; see business licences and permits in Kenya.

Step 6: open a business bank or mobile account

Keep business money apart from your personal money from day one; see separating business and personal money. A till or paybill makes recording sales easier.

Step 7: set up invoicing and records

Registered businesses issue electronic tax invoices; see eTIMS e-invoicing explained. Set up a cashbook and a place for receipts. The free simple cashbook and the start-up costs and funding calculator are a good starting point, and how to keep business records for KRA lists what to keep.

Step 8: plan for employees

If you will hire, you will need payroll, NSSF, SHIF and Housing Levy registrations; see hiring your first employee and how to run payroll.

Step 9: learn the calendar

Put your filing and payment dates into one place. The free KRA filing and payment calendar lists them, and the KRA filing calendar for small businesses explains each.

Step 10: do a simple plan

Even a rough plan helps. The three-year business plan financial model turns a few assumptions into monthly figures, and the 12-month cash flow forecast shows whether you will have enough money.

Where to go next

After registration, the first months are about records and cash. Read budgeting for a small business and invoicing and getting paid on time, and set up the free daily takings and expenses log from day one so that your first tax return is easy.

Requirements and procedures change. Confirm each step with the relevant authority.

Common questions

Do I need a KRA PIN before I register the business? You need a personal PIN to register a business name or company, and the business then gets its own PIN or tax obligations. Get the personal PIN first, because the registry and KRA both ask for it.

When do I have to register for VAT? Register when your taxable sales reach the VAT registration threshold in a twelve-month period, or are expected to. Below it, registration is optional. Track your sales each month so you do not pass the threshold without noticing.

Which tax route suits a new small business? Many very small businesses choose turnover tax for simplicity, others prefer income tax on profit when they have high costs. Compare both with your expected sales and expenses before choosing, and remember that changing route usually has to wait until a new year.