Organisational plan and types of business in Kenya

1. EMMANUEL OJWANG
LYNDA ATIENO

2.  This is a segment that identifies the key
personnel, their positions and responsibilities
and the career experiences that qualify for
those particular roles.
 The entrepreneur’s role in the venture is also
clearly outlined.
 It also identifies Board of directors, Advisors,
Consultants etc

3. It explains:
 The organizational structure
 Management team and critical personnel
 Experiences and technical capability
 Ownership structure and compensation
agreements
 Board of directors, outside consultants and
advisors.
 The total number of employees

4.  An organization chart is always a diagram that illustrates
the relations between people within the business
enterprise. The following is an example of an organization
chart.
Chief Executive
Officer
Human
Resource
Manager
Receptionist
Public Relations
Officer
Financial
manager
Accountant

5.  The experience of the CEO that makes
him/her suitable for the business is described
 The academic qualifications
 The roles the CEO will play i.e.. his/her job
description
 The salary of the CEO

6.  Specifies the person/individual the human
resource and financial manager will be
reporting to.
 The experience and qualifications are also
described
 The job description
 The salaries the individuals will be earning

7.  Their experiences and qualifications for the
positions they hold.
 The tasks they will perform in the
organization
 Their salary specification i.e. fixed monthly
salary or commissions

8.  Describes the number of board members
 The chairman of the board
 The description of their occupations and
contributions in the business.
 Their degree of control in the business.

9.  These are individuals who will provide
professional assistance.
 They include; lawyers, consultants, insurance
agents and Auditors
 Their role in the business is specified
 Their background information is outlined

11. Sole Proprietorship
Partnership
Corporations

12.  This is a business that is owned and operated by
one person. The enterprise has no existence
apart from its owner who has a right to all of the
profits and bears all of the liability for the debts
and obligations of the business.
 The entrepreneur also has unlimited liability in
the sense that If the business cannot meet its
financial obligations the owner can be forced to
sell his personal assets that would satisfy the
creditors.
 It is easy to form in that a person will only need
to obtain the necessary licenses and start
operation.

13.  Decision making and control vested in the owner-The entrepreneur has
total control and decision making power over the business.
 The sale or transfer of the business can take place at the discretion of
the sole proprietor-this is because the entrepreneur can sell the business
when he/she sees it fit.
 Ease of formation - Few formal business requirements and restrictions
are involved. It is less expensive because the legal costs associated with
its formation are minimal.
 Low start-up costs since the business ranges from having no employees up
to a number of employees which is easier to deal with in terms of
expenses, taxes and compensations.
 Sole ownership of profits - The owner can keep all the profit to himself
and not share with anyone.
 Flexibility – Management is able to respond quickly to business needs in
the form of day to day management decisions as governed by various laws
and good sense.
 Relative freedom from governmental control- Except for requiring the
necessary operating licenses, very little governmental interference
occurs in the operation.
 Freedom from corporate business taxes- sole proprietors are taxed as
individual taxpayers and not as businesses.

14.  Unlimited Liability - The entrepreneur can be held personally
liable for the debts and obligations of the business. The liability
extends to all of the proprietors assets.
 Lack of continuity – The enterprise may be closed if the owner
becomes ill or dies.
 All responsibilities and business decisions fall on the shoulder of
the sole proprietor.
 Less available capital- The sole proprietor cannot easily come up
with a large amount of capital to start and sustain the business.
It is also difficult for a sole proprietor to obtain long term
financing because the enterprise rests exclusively on one person.
 Relatively limited viewpoint and experience – The operation
depends on one person, i.e.., the individual’s ability, training and
expertise will limit its direction and scope.
 Limited decisions mostly if the problems encountered are
complex that it requires like-minded people to brainstorm. The
entrepreneur cannot be able to have different views

15.  This is an association of two or more persons
acting as co-owners of a business for profit. Each
partner contributes money, property, skills and
each share in the profits and losses of the
business in their ratio of contribution.
 A partnership Act which among other things
clearly outline the financial and managerial
contribution of the partners must be read
through and the partnership contract signed by
the partners.
 Different partnership agreements must also be
considered by the entrepreneurs before getting
into a partnership arrangement.

16.  Direct rewards – Partners are motivated to
put forth their best efforts by direct sharing
of profits
 Growth and performance facilitated - it is
often possible to obtain more capital and a
better range of skills.
 Possible tax advantage – Most partners pay
taxes as individuals, thus escaping the higher
rate assessed against limited companies.

17.  Unlimited liability of at least one partner- one partner who
is general partner in most cases assumes unlimited liability
 Lack of continuity – If any partner dies, withdraws from
the business or is adjudged insane, the partnership
arrangement ceases.
 Relative difficulty in obtaining large sums of capital – this
is especially when long term financing is involved. Usually
the collective wealth of the partners dictates the amount
of total capital the partnership can raise, especially when
starting out.
 Bound by the acts of just one partner- a general partner
can commit the enterprise to contracts and obligations
that may prove disastrous to the enterprise in general and
other partners in particular.
 Difficulty of disposing of partnership interest - The buying
out of a partner may be difficult unless specifically
arranged for in the written agreement.

18.  There are two classes of partnerships: general
partnerships (discussed above) and limited
partnerships.
 In a general partnership, all partners are equal.
Each partner has equal power to incur
obligations on behalf of the partnership, and
each partner has unlimited liability for the debts
of that partnership.
 In a limited partnership, there is usually only one
general partner (although there could be more).
The other partners are called limited partners,
hence the name limited partnership

19.  In a limited partnership, the general partner or
partners have full management responsibility
and control of the partnership business on a day-
to-day basis
 A limited partner cannot incur obligations on
behalf of the partnership and does not
participate in the daily operations and
management of the partnership.
 A limited partner is essentially a passive investor.
 A limited partner’s liability is capped at the
amount of his or her financial contribution to the
partnership

20. Types of corporations include
 Limited liability companies
 Closely held corporations
 Professional corporations
 S & C corporations

21.  Limited liability companies (or LLCs) combine
many of the advantages of a corporation and a
partnership without the disadvantages.
 LLC provides limited personal liability, along
with being a separate legal entity that can sue
and be sued as well as buy and own property.
 Like a partnership, shares in the LLC cannot be
transferred without the approval of all other
members of the LLC.
 The death, retirement, expulsion, or bankruptcy
of one member does not end the LLC.

22.  a close corporation is one whose shares are
owned by only a few shareholders.
 The purpose of a close corporation is to keep
ownership and control within a small group
of shareholders who have the same goals.
 Unlike publicly held corporations, a closely
held corporation’s shares are not traded on
the open market.

23.  This is a certain type of corporation that is
designed for professionally licensed
entrepreneurs only, and that professional can
be the only shareholder
 Examples includes doctors, lawyers, dentists,
psychologists, and accountants.
 Note though that a corporation cannot
normally shield you from a malpractice
award.

24.  S corporations are intended for smaller
enterprises. Like an LLC, S corporations are
informal enough to allow you to run your
business like a sole proprietorship or
partnership, while giving you the protection of
the corporate shield; that is, limited personal
liability.
 S corporations do not pay a corporate tax at all.
Instead, their shareholders report profits and
losses on their personal tax returns.
 A C corporation is your basic, standard variety,
large corporation. Airtel and Safaricom are
examples of C corporations.

25.  The corporation limits one’s personal liability.
 The corporation is a separate legal entity. It has its own tax identification
number and is its own legal entity, separate and apart from the owners.
 Sole proprietorships and partnerships normally end upon death,
disability, bankruptcy, or retirement of the proprietor or a partner.
Corporations, being a separate legal entity, do not cease to exist when
one of the founding members leaves.
 As the corporation grows, management and ownership can be separated
so that the business can continue and the owners can still reap benefits.
However, they may choose not to run the corporation.
 An important corporate characteristic is the ability to consolidate,
merge, or buy other corporations.
 You may be taken more seriously by others if you have a corporation. •
Corporate stock may be freely transferred by sale or gift.
 A corporation can buy and sell property in the corporate name.
 A corporation can contract with the government, whereas most other
business entities cannot.
 A corporation has numerous tax advantages, including pension and profit-
sharing options.

26.  It is expensive to create and to maintain
depending on the type and complexity.
 Majority shareholders can overpower
minority shareholders.
 The shareholders, as owners, have little say
in day-to-day operations.
 A corporation is subject to greater
governmental regulation and control than
other types of business entities.

27. Limited Liability
Perpetual
Existence
Easy
Transferability
of ownership
Separate
Legal
Entity cost
Sole Proprietorship No No No No Low
General Partnership No No No No Low
Limited Partnership
Limited
partners only
LLC Yes Yes Yes Yes Medium
Close Corporation Yes Yes No Yes High
S Corporation Yes Yes Yes Yes High
Professional Corporation Yes Yes No Yes High
C Corporation Yes Yes Yes Yes High
Summary – comparing business entities

28.  Defined based on the degree of legal
formality.
 It can be used between formal and informal
sectors
 Here MSME’s are considered enterprises that
are not registered and do not comply with
legal obligations concerning safety, taxes and
labour laws.
 Can also defined based on the limited
amounts of capital and skilled workers
 Also based on number of employees &
turnover

29. Employs less than 10 workers
With an annual turnover less that
Kshs 500,000
A capital of less than 5 million for
services or
Less than 10 million for enterprises
doing manufacturing

30. Employs between 10 and 50 workers
With an annual turnover between
Kshs 500,000 and 5 million shillings
Capital formation between 5 million
and 20 million and
Between 5 million and 50 million for
enterprises doing manufacturing

31. Source - GOK
ENTITY NUMBER OF
EMPLOYEES
ANNUAL
TURNOVER
INVESTMENT
IN PLANT &
MACHINERY
+REG CAPITAL
EQUIPMENT
INVESTMENT
+ REG
CAPITAL
MICRO
Ent
<10 <Kshs
500,000
< Kshs 10
million
< Kshs 5
million
Small
Ent
>10
<50
>Kshs
500,000
< Ksh5
million
>Kshs 10
million
< Ksh50 million
>Kshs 5
million
< Kshs 20
million

32. Source - NSE
Main Market segment
 The issuer shall have a
minimum authorized
issued and fully paid up
share capital of Kshs. 50
million.
 Net assets immediately
before the public
offering of shares
should not be less than
Kshs. 100 million.
Alternative Market Segment
 The issuer shall have a
minimum authorized
issued and fully paid up
share capital of Kshs. 20
million.
 Net assets immediately
before the public offering
of shares should not be
less than Kshs. 20 million.


33.  Selling vegetables
 Hawking
 Selling Mitumba clothes
 Car wash business in small towns
 Shoe shining business
 Photography
 Rearing kienyeji
 Chicken
 Mobile manicure

34.  Kinyozi
 Salon
 Grocery
 Boutique in small towns
 Selling women’s hand bags
 Selling women's clothes
 Farming tomatoes, onions, pineapples, water
melons, maize & beans
 Photocopying, scanning and printing business
 Investing in shares and bonds

35.  Fast food restaurants
 Small pub
 Hotel
 Classic kinyozi
 Salon in posh estates
 General shop
 Laundry business
 Car wash business in nairobi
 Starting an mpesa shop
 Starting a banking agency business
 Starting a motor cycle spare parts business
 Starting a cosmetic shop
 Starting an audit firm

36.  Electronic shop
 Pub business in major cities
 A restaurant or fast food in Nairobi CBD
 A jewellery shop
 Furniture making business
 Large scale farming
 A school
 A SACCO
 Wines & spirit wholesale shop
 Starting a bookshop
 Starting a matatu business
 Motor vehicle spare parts business
 Starting a chemist
 Starting a security firm
 Starting a recording studio

37.  Building rental houses
 Real estate firm
 Starting business of letting out earth movers
 Starting a stock brokerage
 Starting a radio or TV station
 Starting a supermarket
 Starting a manufacturing industry
 Starting a 5 star hotel
 Starting an ATM machine business