LIMITED LIABILITY COMPANIES
Deciding on the appropriate structure for your business is an important
early decision. Many entrepreneurs opt for becoming a limited company
due to the benefits this legal framework provides. Incorporating offers
owners limited liability while also creating an entity that can function long
into the future regardless of any single owner's involvement.
To become a limited company, you'll need to draft key foundational
documents known as the Memorandum and Articles that outline your
operation's goals and internal rules. These tie into the broader Companies
Act that governs corporate registrations nationwide. Compliance with
ongoing legal obligations like holding annual shareholder meetings
becomes part of running your business properly as a company.
Private limited companies have a minimum of two shareholders but
cannot exceed fifty people, excluding any employees who may be granted
shares. This owner group has the flexibility to remain small and selective
about newcomers since shares cannot be advertised publicly but rather
only offered to approved parties. Ownership is also not easily transferrable
without getting consent from fellow shareholders first.
Initial operational funds come from the sale of shares to founding
investors, delineating a fixed value for each unit purchased. Additional
capital sources include retaining profits internally, taking loans from banks
and lending institutions, utilizing leasing structures, benefiting from trade
credit terms or seeking investment from supportive government
organizations. Together these options can fuel stable long-term growth.
Directors oversee daily administration and are usually larger shareholders
themselves with substantial commitment to the venture's success.
Incorporation offers the major advantage of owners enjoying limited
exposure for debts and liabilities. Personal residential property or other
assets owned outside of the business cannot be appropriated in
bankruptcy proceedings affecting the company.
Of course, adopting a company format requires more intricacies and
maintenance than a sole proprietorship. Proper tax and statutory
compliance becomes a necessity. However, for viable corporations aiming
to scale up over decades perhaps employing future generations, the long-
view benefits readily outweigh initial complexities for risk-averse
shareholders seeking to safeguard personal wealth. Incorporation remains
very popular among both new and mature enterprises in Kenya and
globally for good reason.
MEANING OF BUSINESS
Business refers to all profit-producing activities that provide goods and
services to satisfy customer needs. It involves work efforts connected to
producing wealth. A business makes, distributes or provides needed
products or services that customers can and will pay for. The essence of
business is producing and selling for profit by satisfying customer needs
through integrated activities bridging producers and customers.
Characteristics of Business Activities
Key characteristics of business activities include:
Production and acquisition of goods to be supplied and sold
Regular dealings in goods and services ensuring continuity
Sale or transfer of goods for profit
Profit as reward for services rendered and efficiency
Uncertainty and risk-taking focusing on the unknown future
Objectives of Business Organizations
Major objectives are:
Generate profits, the prime differentiator from non-business entities
Grow bigger in size and operations
Develop by improving goods, services, processes etc.
Survive through adaptation in the competitive environment
Other objectives relate to market share, sales increases, new product
launches etc. Social objectives include satisfying consumer needs, paying
fair wages etc.
Scope and Nature of Business
Businesses involve:
Industry - Production of goods through manufacturing and
construction
Commerce - Distribution of produced goods through trade
Types of Industries
Primary industries: Extractive (fishing, mining, agriculture) or
Genetic (agriculture, forestry, fish farming)
Secondary industries: Manufacturing (converting materials into
products) or Construction (buildings, infrastructure)
Service enterprises: Providing services like transport, insurance,
vehicle repair etc.
In summary, business refers to regular, integrated profit-seeking activities
of producing and distributing needed goods and services to satisfy
customer needs. It has economic objectives like profits and growth as well
as social objectives. The scope covers a range of goods producing and
distributing industries and service enterprises.
