Last updated on September 29th, 2023 at 08:32 am
Geographical boundaries or demographics no longer define businesses in the modern world.
Anyone looking to start their own business should consider starting an online business in Kenya. There are numerous advantages to doing online business.
One of the most significant advantages of having an online business is the ease with which you can reach a global audience. Moreover, you don’t need much money or experience to get started, even if you’re on a tight budget.
How to start an online business in Kenya
01). Choose a niche
Numerous market gaps must be filled. Choose a niche where people will want to buy your product or services when starting an online business. Concentrate on one thing at a time rather than several.
02). Market research
When starting an online business, it is critical to conduct market research to see other businesses in your niche to get an idea of what’s working or not working.
03). Business registration.
Simply because you do not have a physical store does not exempt you from registering your business.
For revenue purposes, you will need to register your business. A registered business demonstrates to customers that your business operations are legal.
Before registering your business, you should search for a business name to ensure you get a unique name relevant to your industry. Business registration will help you protect your name from being used to conduct business in Kenya by anyone else.
Related: 7 Online Business Ideas in Kenya with No Initial Registration Fee
04). Find a domain name and web host.
You can use your unique name as your domain name. The domain name is the address of your website that internet users type into their browser’s URL bar to visit. A web host will also be required to host your website.
Web hosting is an online service that makes the content of your website available on the internet.
Do not settle for low-cost web hosting. Most of the time, cheaper web host providers have poor reliability or slow performance because they overload a single server.
What to look for in a Webhost:
- Should provide good technical support
- Should include all of the features required to run your online store
- It should have a reasonable uptime of at least 99%
05). Set up your storefront
Select a storefront that is appropriate for you. A great storefront should include, a single checkout page, coupon codes, and SEO-friendly URLs. it should also contain stock pictures as well as the prices for each item.
06). Payment method
The next step is to create a payment method.
Your payment method should be convenient for everyone interested, depending on your audience and their location. Paypay and pesapal are the most dependable payment methods for international customers, while MPESA is preferred by local customers.
07). Add contact information
Consider including a working customer service phone number and a professional customer service or sales email address. Customers will have more trust if they are guaranteed they can reach someone if something goes wrong with their orders or if they have questions.
It’s also a good idea to include a subscription box to build your email database, so you can send new product information, upcoming offers, and promotions directly to your customers’ inboxes.
08). Marketing
Because you are an online business, the majority of your target market is on social media. You must then create social media pages for your business. This is where you will connect with potential customers. Advertise your products both organically and through paid promotions.
In addition, include links to your website in your social posts and pages so that you can direct people to your store.
Legal requirements for starting an online business.
Many people who want to start an online business in Kenya ask, “Do I need a business license to sell online or start an online business?”
This depends on your perspective. However, licensing is critical if you want to grow your business in the long run.
Some entrepreneurs assume that online businesses are less formal and therefore may not need the legal requirements of physical businesses.
Online businesses must adhere to the same legal requirements as physical businesses.
In addition to registering a domain name, choosing a web host, designing your website, and developing a marketing strategy, online business owners must consider legal requirements. However, these legal requirements will differ depending on the nature of your business and other factors as well.
Whether or not business activities are conducted online, the following legal requirements are common.:
#1. Registering your business name
The most important step in establishing a business is to register your business name and secure an identity/domain name. You should do some research to make sure the name doesn’t already belong to another service provider.
The actual process of business name search and registration is done via an online system, eCitizen. This has made the process less tedious.
While registering your business, you must also decide on the form of business you are setting up. You can register your business in the following ways:
a). Sole proprietorship
A sole proprietorship is a business structure that is operated and owned by one person. The owner is the sole decision maker in the business and is personally liable for all losses and profits. In most cases, it is a business structure for small and medium-sized businesses.
b). Partnership
A partnership is a form of a business structure formed by two or more people who share a common goal of profit.
When compared to sole proprietorships, the level of financial risk in partnerships is lower because any loss is shared by all partnerships. The chances of the business failing are reduced because it involves the expertise of more than one person.
Furthermore, the registration formalities, (cost, requirements, and duration) are minimal, making it an appealing business structure.
c). Limited liability partnership
A limited liability partnership is a distinct business structure authorized by the limited liability partnership act that combines the characteristics of a corporation and a partnership.
Once registered, it becomes a separate legal entity from its members and can own property in its name. Furthermore, it is tax effective because partnership income is taxed in the hands of each partner.
d). Branch of a foreign company
This is for international businesses looking to open a branch in the country. The branch is registered with the company’s registrar.
When a foreign company registers a branch in Kenya, it does not create a separate legal entity from the foreign company.
This is a simple, low-cost formality that takes no more than two weeks to complete.
Licenses and permits needed to start a business in Kenya
To start a business in Kenya, there are several licenses and permits that need to be obtained.
The Registrar of Companies is responsible for business registrations in Kenya.
They issue certificates of compliance for foreign companies, certificates of incorporation for local companies, and certificates of registration for sole proprietorship and partnerships.
Firms must then obtain registration with the National Social Security Fund (NSSF), National Hospital Insurance Fund (NHIF), and the Kenya Revenue Authority (KRA).
A business permit should also be obtained from the County Government depending on the business type.
The legal requirements for starting a business in Kenya can seem overwhelming, but there are resources available to help simplify the process.
The following is a checklist of the legal requirements for starting a business in Kenya:
- 3 Passport Photos
- 2 copies of application for Name Reservation (CR14)
- Statement of Particulars
- 2 copies of Name Reservation letter
- 4 copies of Identity Card
- PIN certificate
- Assessed statement of particulars
- Payment receipt
- 2 copies of Business Permit Application Form
- Approved Business Permit Application Form
- Payment invoice for Application Fees
- Payment invoice for Business Permit
Additionally, depending on the nature of the business, permits and licenses may need to be obtained to operate the business legally.
These may include a City Council Business Permit, food/health-related permits, and a fire safety certificate.
Requirements for foreign company branch registration in Kenya
1). A certificate copy of a current certificate of incorporation or registration of the foreign company in its place of origin
2). A certified copy of its constitution
3). List containing the names of its directors and shareholders and their details
4). Notice of the company’s registered office its place of origin or if it does not have such an office, its principal place of business in its place of origin by providing this information on Form FC 2.
5). Coloured passport-size photos of the foreign directors of the company and the authorized local representative.
6). Payment fee of Kshs. 7,550
#2. KRA PIN
A Personal Identification Number (PIN) is issued when transacting with the Kenya Revenue Authority, other government agencies, and service providers. Obtaining your PIN is a simple online process that can be completed on iTax
When setting up a business in Kenya, having a taxpayer PIN is mandatory
#3. National Social Security Fund(NSSF)
The NSSF is a public trust that administers the statutory retirement benefits scheme. Its mission is to provide social security protection to workers in both formal and informal sectors by providing members with retirement benefits. Employer registration can be applied online or in person at the NSSF officers.
#4.National Hospital Insurance Fund (NHIF)
The NHIF is a social health insurance program to achieve universal health coverage by 2030.
The scheme provides eligible members from both the formal and informal sectors with limited inpatient medical insurance coverage at accredited health facilities.
To register as an employer, you must complete and submit the employer’s form.
#5. Business Permit
A business permit is a document that proves your business is legitimate and has a license to operate.
To obtain these, you must submit a properly completed BR-1 form to the officials who may visit you to determine the type of business, and the number of employees that you will have.
To apply for a business permit online (in the case of Nairobi)
i). Click on the unified business permit
ii). Under the UBP tab, select Register New Business
iii). Agree on the terms and conditions
iv). Fill in the required information, and click next to obtain an invoice for business license fees
v). Use the payment options provided to top up the eWallet. Nairobi County will send you a text message confirming receipt of your payment.
vi). Click on continue to make payment and confirm details. The payment amount will be provided.
vii). The system will prompt you with two links: one to print your business permit and the other to print the receipt. Print and download the business permit by clicking on the print permit tab.
viii). Display the permit on your business premises once it has been printed, as required by law.
#6. National Industrial Training Authority (NITA)
NITA is a state corporation whose mission is to promote the highest standards of quality and efficiency in industrial training in Kenya, as well as to ensure an adequate supply of properly trained workers at all levels of the industry.
It is a requirement for all employers to register with NITA.
#7. Health Related Permits
If your online business will prepare, sell or distribute food, you are required to obtain health-related permits.
Business permit for online business in Kenya
To operate an online business in Kenya, you need to register your business with the Registrar of Companies, obtain registration with the National Social Security Fund (NSSF), National Hospital Insurance Fund (NHIF), and the Kenya Revenue Authority (KRA), and obtain a business permit from the County Government depending on the business type.
The legal requirements for starting a business in Kenya can seem overwhelming, but there are resources available to help simplify the process.
The legal requirements for starting a business in Kenya include registering your business name or company, obtaining a City Council Business Permit, food/health-related permits, and a fire safety certificate, depending on the nature of the business.
How to register a business in kenya online
To register a business in Kenya online, you can follow these general steps:
- Create an account on the eCitizen portal.
- Submit your business name via the Attorney General and Department of Justice office.
- Make the required payments.
- Obtain a confirmation of name registration.
- Apply for and obtain a business registration certificate.
- Apply for and obtain any necessary licenses and permits.
It is important to note that the specific steps and requirements may vary depending on the type of business you are registering and the location in Kenya.
Conclusion
When starting an online business, it is prudent to consider all potential laws, regulations, and requirements that may impact your operations.
Every business has unique requirements, so the best thing you can do is begin by reviewing the specific requirements of your niche to understand what your business requires. You must also understand your responsibilities under digital rights and copyright laws. Violation of these provisions can be costly.
The legal requirements to start an online business in Kenya outlined above will put you on the right track as an entrepreneur.
Related: Process Of Starting And Registering An Online Business In Kenya