Costly Mistakes Kenyans Make While Registering Businesses

An image of traders running from county askaris
An image of traders running from county askaris

Running a successful business is informed by making conscious decisions from finding a name, reserving and registering it, and managing the operation processes.

But before setting up a business, there are key factors one must consider in the registration process as they determine whether the business will thrive or fail to take off.

Any wrong step at the registration process may lead to the collapse of a business with well defined objectives.

Here are some costly mistakes Kenyans make during the registration process:

Settling on Business Name

A file image of traders at Gikomba market.
A file image of traders at Gikomba market.

Most budding entrepreneurs make mistakes at this step. Naming a business gives it identity and makes it stand out among its competitors. 

The rules of settling on a name include choosing more than one. Entrepreneurs make mistakes by presenting only one name that in some cases end up being rejected during the name search process. Another mistake is choosing a similar name. This only serves to increase the chances of the name being rejected.

In the naming process, some people even pick insulting words or fancy street words. In extreme cases, others pick names affiliated to political figures and parties. Such mistakes make the company registration process hectic as the names end up being rejected immediately. This also applies to picking names from famous trademarks or other registered entities.

Registering Several Companies

Most entrepreneurs have fallen into this trap of registering many companies from all business ideas that pop up in their minds. Registering too many businesses exposes the owner to a lot of scrutiny and government compliance requirements. These include filling of annual tax returns, beneficial ownership and even renewing of the licenses.

It is advisable to do proper research if the business idea is viable before rushing into the registration process.

Picking partners and shareholders

Most businesses are started by partners while others leave room for shareholders to join or even directors to chirp and support the growth of the company.

In this case, entrepreneurs hastily pick partners or shareholders without doing a proper background check to establish whether the people being onboarded are a good fit.

Breaking up with a partner or a shareholder is a tedious process, more than a divorce. Parting ways in business signifies the breakup of a relationship, therefore, ends up being expensive in terms of settling the legal duels.

Before picking a partner or a shareholder, make sure you have an agreement that clearly outlines the roles and defines the breakup process.

Defining Target Market

Before registering a company, one is advised to define the market. This includes mapping the clientele and categories of services and goods being offered.

Establishing how the business will communicate to the target market matters a lot. Targeting the wrong market in the registration process reduces the chances of success of a business.


Most people venture into business and register them with limited funds hoping to make money, assuming that the business will generate enough income and become profitable in just a short period of time.

The seed fund runs out forcing entrepreneurs to shut down their doors due to financial constraints.  

Share Allocation and Nominal Capital

How an entrepreneur allocates shares and determines the nominal capital of a business depends on its purpose. If it is a family business, then it should be defined in the registration papers. If one intends to invite shareholders, then in the registration process, it should be properly explained in the documents. This prevents infightings among partners and shareholders.

Right now, registering a business in Kenya has become easy after the introduction of the eCitizen digital portal.

The platform allows individuals to carry out the entire process from name search to the actual registration after the manual registration process was abolished on October 15, 2017.

The process of registration is easy and well defined in the eCitizen portal.

Traders and customers pictured at a market in Kenya.
Traders and customers pictured at a market in Kenya.
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