Most first-time business owners focus on the product, the branding, and the first customers. The financial and compliance foundations often come as an afterthought - until a penalty notice arrives. Here are the steps you need to take from day one.
1. Register the Business and Get a KRA PIN
Whether you register as a sole trader, a partnership, or a limited company, you need a KRA PIN before you can open a business bank account or issue an invoice that a corporate customer will accept. Apply via iTax.
2. Open a Dedicated Business Bank Account
Do not run business money through your personal account. The moment a customer pays you, you are creating a taxable event. Mixing personal and business funds makes it nearly impossible to file an accurate return.
3. Understand Your Tax Obligations from the Start
A sole trader pays personal income tax on business profit. A limited company pays 30% corporate tax (25% if listed). If your turnover exceeds KES 5 million in any 12-month period, you must register for VAT.
4. Set Up a Simple Chart of Accounts
Before your first sale, decide how you will categorise your income and expenses. Five to ten categories is enough to start. Consistency matters more than sophistication.
5. Register for NSSF and SHIF (if you have employees)
From the first employee, you are legally required to deduct and remit NSSF and SHIF contributions. Failure to do so can result in criminal liability for directors of limited companies.