4 key things to consider when registering a business

by Wakili Liam
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Mahakamaninews.com publishes the below as per the tweets of one Angela Kioi (@WambuiKioi)

I have been a corporate advocate for the last 8 years and have registered and worked with over 400 companies in Kenya.

This is an informative piece.

Here are 4 key things to consider when registering a business:

  1. What’s in a name?

The naming process of a company is an exciting process as it gives your business its identity. Some rules when choosing your businesses name are:

A. Choose more than one name that you like. They should not be too similar. If one name is rejected during the name search process then there is a high chance that all similar names will be rejected.

B. Avoid insulting words, political names or names starting with Kenya as these will be rejected immediately.

C. The name should not be similar to any other registered entity or trademark.

2. Shareholders and Directors

Choose your potential shareholders and Directors wisely. The process of changing directors and shareholders can be expensive, tedious and emotional as it signifies the breaking of a relationship.

Be weary of registering a business if each person’s role is not well defined. Make sure you have a shareholders agreement that clearly outlines each role and how the end of the partnership, if any, shall be handled.

  1. Share allocation and Nominal capital.

How you allocate shares and determine the nominal capital of your business depends on its purpose.

For example if you are registering a family company, you may want to allocate all the shares in the company as you do not intend to on board new shareholders or investors.

However if you are interested in bringing in investors/funding, it is always wise to leave some of your shares unallocated to make it easier to on board these investors.

A common mistake that entrepreneurs make is assume that nominal capital = the actual value of the shares. Nominal capital is the assigned value of the company at the moment of inception, from which the value of the shares is derived from.

e.g If your nominal capital is Kshs. 100,000 you can have 100 shares valued at 1000/-, 1000/- shares valued at 100/- or any other variation that would amount to Kshs. 100,000/-.

The value of your company is determined by how much the shares are purchased for and this changes over the lifetime of the company.

  1. Registering too many companies

A common mistake made by entrepreneurs is to register several companies for each business idea. Each new company imposes on you compliance requirements including filing Annual Returns, Tax returns, Beneficial Ownership etc.

Instead, when you get a new business idea, register a business name as you move from Idea to proof of concept and only register the new company when the business is viable.

This will save you registration, compliance, maintenance and Winding Up costs and ensure that you do not have defunct shell companies which cost money to maintain.

If you have any other questions please DM or get in touch with @kioiadvocates (Twitter)

Mahakamani News used this for educational purposes.


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