SOLE PROPRIETORSHIP
Definition
Existing legal framework
Registration, formation, completion and dissolution
Organization how it is run, capital and share aspect
Pros and cons
Challenges faxing the particular business structure e.g. tax, winding up, decision making.
A sole proprietorship is a form of business owned by one person who has responsibility of the day to day
responsibility of running the business although multiple people can support its operation. The individual
own all assets of the business and profits generated and they also assume any of its liability or debt.
Legally the owner is not separate from the business. In the case of LakhmanRamji v Shivji Tessa and
sonsi states the legal position of a sole proprietor should sue in his name and in the body of the plaint
state that he carries business in the name of whatever his business name is and that he is the sole
proprietor of the business.
In Kenya sole proprietorship is registered under a business name within a specific period. Usually, a sole
proprietorship is not registered as a separate entity from the business owner for taxation purposes. The
tax registration of the business owner is the one used for business taxation purposes.
Features of sole proprietorship
Lack of legal formalities
There are not many regulations required to register a sole proprietorship. In Kenya one only requires a
business name to run the business and there is minimal legal process involved in its closure
Liability
Personal liability of the owner is unlimited in that incase the business is unable to pay its debts or
liabilities, they fall on the proprietor to pay them. The owner may be required to sell his personal assets
to pay off the debts.
Risk and profit
The owner bears all the risk since he is the only one who has financially invested in the company.
However he enjoys all the profits of the business
No separate identity
The business and the owner are the same so the owner is responsible for all the transactions and
activities of the business.
Continuity
The business is entirely depended on the owner and in a case of death, bankruptcy, insanity,
imprisonment or retirement the business will cease to exist.
, Business name registration in Kenya for sole proprietorship is registered under the Business Registration
Act cap 499 of (2012)ii provides for manners and particulars of registration as follows;
a) the business name;
(b) the general nature of the business;
(c) the full address of the principal place of business and the postal address of the firm, individual or
corporation;
(d) the full address of every other place of business;
(e) where the registration to be effected is that of a firm, the present forenames and surname, any
former forenames or surname, the nationality and, if that nationality is not the nationality of origin, the
nationality of origin, the age, the sex, the usual residence, and any other business occupation of each of
the individuals who are partners, and the corporate name and registered and principal office of every
corporation which is a partner;
(f) where the registration to be effected is that of an individual, the present forenames and surname,
any former forenames and surname, the nationality and, if that nationality is not the nationality of
origin, the nationality of origin, the age, the sex, the usual residence, and any other business occupation
of such individual;
(g) where the registration to be effected is that of a corporation, its corporate name and registered and
principal office;
(h) where the registration to be effected includes a married woman, the forenames and surname of her
husband in addition to her own forename and surname;
(i) the date of the commencement of the business
Registration of Business Act cap 499 of (2012)iii provides that on the registration of any firm, individual
or corporation under this Act, the Registrar shall issue a certificate in the prescribed form.
Process of registration in Kenya
When registering business in Kenya one needs to be registered with the Kenya revenue authority to get
the personal identification number certificate and a company tax identification card to register for VAT,
local service tax, turnover tax and income tax. iv
Steps of applicationv
i. Reservation of business name where one is required to submit at least three names for name
search costing ksh.100 and the unique one will be reserved
ii. After it has been reserved one proceeds to register the business name which coast Ksh.850
iii. One must specify nature of business in one line
Definition
Existing legal framework
Registration, formation, completion and dissolution
Organization how it is run, capital and share aspect
Pros and cons
Challenges faxing the particular business structure e.g. tax, winding up, decision making.
A sole proprietorship is a form of business owned by one person who has responsibility of the day to day
responsibility of running the business although multiple people can support its operation. The individual
own all assets of the business and profits generated and they also assume any of its liability or debt.
Legally the owner is not separate from the business. In the case of LakhmanRamji v Shivji Tessa and
sonsi states the legal position of a sole proprietor should sue in his name and in the body of the plaint
state that he carries business in the name of whatever his business name is and that he is the sole
proprietor of the business.
In Kenya sole proprietorship is registered under a business name within a specific period. Usually, a sole
proprietorship is not registered as a separate entity from the business owner for taxation purposes. The
tax registration of the business owner is the one used for business taxation purposes.
Features of sole proprietorship
Lack of legal formalities
There are not many regulations required to register a sole proprietorship. In Kenya one only requires a
business name to run the business and there is minimal legal process involved in its closure
Liability
Personal liability of the owner is unlimited in that incase the business is unable to pay its debts or
liabilities, they fall on the proprietor to pay them. The owner may be required to sell his personal assets
to pay off the debts.
Risk and profit
The owner bears all the risk since he is the only one who has financially invested in the company.
However he enjoys all the profits of the business
No separate identity
The business and the owner are the same so the owner is responsible for all the transactions and
activities of the business.
Continuity
The business is entirely depended on the owner and in a case of death, bankruptcy, insanity,
imprisonment or retirement the business will cease to exist.
, Business name registration in Kenya for sole proprietorship is registered under the Business Registration
Act cap 499 of (2012)ii provides for manners and particulars of registration as follows;
a) the business name;
(b) the general nature of the business;
(c) the full address of the principal place of business and the postal address of the firm, individual or
corporation;
(d) the full address of every other place of business;
(e) where the registration to be effected is that of a firm, the present forenames and surname, any
former forenames or surname, the nationality and, if that nationality is not the nationality of origin, the
nationality of origin, the age, the sex, the usual residence, and any other business occupation of each of
the individuals who are partners, and the corporate name and registered and principal office of every
corporation which is a partner;
(f) where the registration to be effected is that of an individual, the present forenames and surname,
any former forenames and surname, the nationality and, if that nationality is not the nationality of
origin, the nationality of origin, the age, the sex, the usual residence, and any other business occupation
of such individual;
(g) where the registration to be effected is that of a corporation, its corporate name and registered and
principal office;
(h) where the registration to be effected includes a married woman, the forenames and surname of her
husband in addition to her own forename and surname;
(i) the date of the commencement of the business
Registration of Business Act cap 499 of (2012)iii provides that on the registration of any firm, individual
or corporation under this Act, the Registrar shall issue a certificate in the prescribed form.
Process of registration in Kenya
When registering business in Kenya one needs to be registered with the Kenya revenue authority to get
the personal identification number certificate and a company tax identification card to register for VAT,
local service tax, turnover tax and income tax. iv
Steps of applicationv
i. Reservation of business name where one is required to submit at least three names for name
search costing ksh.100 and the unique one will be reserved
ii. After it has been reserved one proceeds to register the business name which coast Ksh.850
iii. One must specify nature of business in one line
