How to Register a Business in the US from Kenya

Step 1: Benefits of starting your US business from Kenya

Starting a US business from Kenya offers a range of compelling benefits that can significantly enhance your entrepreneurial journey. As a Kenyan entrepreneur, you get the advantage of accessing one of the world's largest and most dynamic markets. This opens up opportunities for growth and expansion that might be challenging to achieve locally. Operate in a high-demand environment where innovation, technology, and customer-centric solutions thrive, helping you scale your business globally. This also allows for better brand recognition and reputation, as the US market is often seen as a benchmark for quality and reliability.

Moreover, running a US business from Kenya provides you with an advantageous tax framework, which can be optimized to maximize profits and reduce liabilities. Various states in the US offer different tax incentives, making it possible to select a jurisdiction that aligns with your business goals. Additionally, Kenya's time zone allows for unique operational benefits, such as round-the-clock service capabilities. This can translate to enhanced customer support and more efficient business processes, giving you a competitive edge in the market. Enjoy the synergy of Kenyan innovation and US market reach to bring forth a prosperous business venture.

Step 2: How to start your US business from Kenya

Starting a US business from Kenya involves several key steps, beginning with identifying the type of business entity you wish to establish. The most common options are a corporation or a limited liability company (LLC). Each type has its own specific requirements and implications for taxation, liability, and management. Once you have chosen your business structure, you'll need to register your business in the state where you intend to operate. This typically involves filing formation documents with the state's business registration agency, which can often be done online.

After registration, you will need to obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). An EIN is essential for tax purposes, hiring employees, and opening a US bank account. Additionally, depending on the nature of your business, you may need to apply for various federal, state, and local licenses and permits. Consulting with a US-based attorney who specializes in international business can provide valuable guidance through the legal and regulatory complexities. Furthermore, it's crucial to understand and comply with any specific US tax obligations and potentially engage with a US-based certified public accountant (CPA) to ensure all financial matters are handled correctly.

Step 3: Opening a Business Bank Account

A business bank account is a separate account that is used exclusively for business transactions. But why is it important to open a business bank account?

Keeping your personal and business finances separate is crucial. A dedicated business bank account allows you to do just that, making it much easier to track your business’s income and expenses. This clear separation translates to simpler tax reporting come tax season.

But the benefits go beyond bookkeeping. Having a separate account can provide legal protection. It establishes your business as a distinct entity from yourself. In the unfortunate event of a lawsuit or bankruptcy, this separation can help shield your personal assets from business liabilities.

Furthermore, a business bank account can boost your credibility and project professionalism.

It demonstrates to clients and vendors that you take your business seriously and are committed to maintaining accurate financial records. This can be especially important in establishing trust with potential partners.

Finally, a business bank account is essential for accepting payments, even if you utilize a merchant account. Whether you use doola or another service, funneling those customer funds into a dedicated business account is necessary.

doola partners with banks that allow you to open a bank account remotely from anywhere in the world, like Mercury. Shop around and compare different banks’ fees and services.

Look for a bank that offers the features you need, such as online banking, mobile banking, or overdraft protection.

You may also want to consider working with a bank that specializes in small business banking.

Step 4: Understanding Your Compliance Requirements in Kenya

Understanding Compliance Requirements for Running a US Business in Kenya

Expanding your business to Kenya entails navigating a distinct set of compliance standards. Understanding these requirements ensures smooth operation and contributes to your business's success. Below are some key considerations to keep in mind.

Business Registration

To legally operate in Kenya, you must register your business with the Kenyan government. The registration process typically involves:

1. Choosing and registering a business name with the Registrar of Companies
2. Obtaining a Personal Identification Number (PIN), Value Added Tax (VAT) certificate, and other tax-related registrations
3. Ensuring compliance with licensing requirements specific to your business industry

Tax Compliance

Understanding the Kenyan tax system is crucial for compliance. Important taxes include:

• Corporate Tax: The standard corporate tax rate is 30% for resident companies and 37.5% for non-resident companies.
• VAT: The typical VAT rate is 16%, though certain goods and services have different rates or are exempt.
• Withholding Tax: Applicable to various payments, including interest, royalties, and dividends, with rates varying based on the transaction and the country involved.

Labor Laws

Kenya has stringent labor laws that govern the employer-employee relationship. Key aspects include:

• Employment Contracts: All employees should have a written contract within two months of employment commencement.
• Working Hours: Standard working hours are 52 per week, with limitations on overtime.
• Employee Rights: Provisions for minimum wage, leave entitlements, and other employee benefits.
• Termination of Employment: Specific procedures and notice periods must be adhered to when terminating employment.

Intellectual Property Rights

To protect your business’s intellectual property (IP) in Kenya, you should:

1. Register trademarks, patents, and copyrights with the Kenya Industrial Property Institute (KIPI)
2. Understand and adhere to the Kenyan IP laws which align with international standards

Compliance with Local Regulations

Local regulations vary depending on the business sector and location. Key areas to be aware of include:

• Environmental Regulations: Ensure that your business adheres to the National Environment Management Authority (NEMA) standards.
• Industry-Specific Licenses: Certain industries like healthcare, education, and telecommunications require specific permits and licenses.

Conclusion

Ensuring compliance with Kenyan laws and regulations is critical for successfully running a US business in Kenya. Engaging local legal and financial experts can help navigate these requirements and ensure adherence to all legal standards. Understanding these key compliance areas will enable smooth operations and contribute to business growth in the Kenyan market.

doola offers a Total Compliance package, including bookkeeping services, to help you stay on top of your compliance requirements. This ensures your business operates smoothly and adheres to all legal and regulatory standards.

Step 5: Understanding Your Tax Obligations in Kenya

Understanding Tax Obligations for US Businesses Operating in Kenya

Running a US business in Kenya requires familiarity with both local and international tax obligations. To ensure compliance and optimize your tax strategy, consider the following key factors:

1. Registration and Permits

Before engaging in any business activities, a US business must register with the Kenyan authorities. This includes obtaining a Certificate of Incorporation from the Registrar of Companies and relevant licenses depending on the business sector.

2. Corporate Tax

Kenya imposes a corporate income tax on all registered businesses. The standard corporate tax rate is 30% for resident companies and 37.5% for non-resident companies. Ensure accurate calculation and timely submission of corporate tax returns to avoid penalties.

3. Value Added Tax (VAT)

Businesses in Kenya that supply goods and services are typically required to register for VAT if their annual turnover exceeds a certain threshold. The standard VAT rate is 16%, and it is crucial to maintain proper records to facilitate the accurate filing of VAT returns.

4. Withholding Tax

Kenya imposes withholding tax on various payments including interest, dividends, and royalties. The rates can vary depending on whether the recipient is a resident or non-resident. For non-residents, the rates can be higher, necessitating careful planning.

5. Double Taxation Treaty

Kenya and the US have a treaty to avoid double taxation, which provides relief for taxes paid in the other jurisdiction. Understanding this treaty can help in claiming tax credits and ensuring compliance with both Kenyan and US tax laws.

6. Transfer Pricing

For US businesses with Kenyan subsidiaries or affiliates, transfer pricing regulations are crucial. These rules aim to prevent profit shifting by ensuring that transactions with related parties are conducted at arm’s length prices.

7. Employment Taxes

US businesses employing staff in Kenya must comply with local employment tax obligations. This includes Pay As You Earn (PAYE) tax on employee salaries and contributions to the National Social Security Fund (NSSF) and the National Hospital Insurance Fund (NHIF).

• PAYE: Deducted from employee wages at graduated rates
• NSSF: Mandatory social security contribution
• NHIF: Health insurance contribution based on income brackets

8. Local Tax Advisors

Navigating the Kenyan tax landscape can be complex, and it is advisable to engage local tax advisors who are familiar with the latest regulations and compliance requirements. They can provide invaluable support in tax planning and filing.

By understanding and adhering to these tax obligations, US businesses can successfully operate in Kenya while minimizing risks and maximizing opportunities for growth.

It’s a good idea to consult with a tax professional or an accountant (or to hire these roles in-house) to make sure you’re not missing anything.

doola's Total Compliance package can handle your tax filings for you, ensuring you remain compliant with federal, state, and local tax requirements.

Step 6: How doola Can Assist

doola simplifies the incorporation and setup process for your company, ensuring you’re ready to charge customers, hire your team, and raise funds as quickly as possible.

Fill out your company details in the doola form in less than 10 minutes. Then, we’ll incorporate your company in any of the 50 US states, get your IRS tax ID (EIN) for you, and file your 83(b) tax election if needed. 

doola can also help you open a bank account and start accepting payments even before the IRS assigns your tax ID.

doola founders also gain access to exclusive discounts at leading software partners, one-click onboarding with select partners, and free CPA consultations.

The doola Application

It takes less than 10 minutes to fill out the details of your new company. You’ll choose your company structure (C corporation, limited liability company) and pick a company name.

Our instant company name checker will let you know if it’s available before you submit your application. You’ll add an address and phone number and review and sign your EIN SS4 letter in one click.

Forming the Company

doola will review your application and file your formation documents in the state within one business day. doola charges $297 for our Starter Plan and your first year of registered agent services (a state compliance requirement), and $297 each year thereafter to maintain your registered agent. 

You can also opt for our Total Compliance plan.

Getting Your IRS Tax ID (EIN)

After your formation in the state is complete, doola will file for your company’s IRS tax ID. Founders who provide a US Social Security number, US address, and US phone are eligible for expedited processing. All other users will receive standard processing. 

For standard orders, doola will fax your form SS4 to the IRS and then call the IRS to retrieve the EIN for you to expedite the process if we can, using real-time IRS data to determine when your filing is likely to be available.

Filing Your 83(b) Tax Election

Many startup founders choose to file an 83(b) tax election to potentially save on future personal taxes. doola can file and mail your 83(b) tax election in one click for both US and non-US founders — no trip to the post office required.

We’ll file it using USPS Certified Mail with tracking, and you’ll get a copy of your signed 83(b) election and proof of filing in your Dashboard.

Partner Perks and Discounts

doola partners with a range of third-party tools to offer special pricing or access to founders. We offer discounts on engineering, tax and finance, compliance, and operations tools, including Amazon Web Services.

doola also partners with Mercury to provide faster, automatic onboarding using your doola company information so you can get ready to bank and fundraise even faster.

Founders may also access discounts on other doola products, including up to one year of free credits toward payment processing.

Read our guides for startup founders, or learn more about doola and how we can help you set up your new business quickly and easily.

Turn your entrepreneurship dream into reality today!

We do our best to provide accurate and up to date information, however the information provided here are just guidelines. Please speak with a tax and compliance professional in your country