Limited Liability Partnerships in Kenya

On 16 March 2012, the new Limited Liability Partnerships Act, 2011 (“LLP Act”) took effect as law in Kenya. The Regulations only requisite to facilitate registration were later published in September the same year paving way for a new form of business association known as a limited liability partnership (“LLP”). The LLP combines some of the features of a traditional partnership with the Limited Liability benefits more typically hitherto only associated with Companies.

They were made available to combine the flexibility of partnerships with the protection of Limited Liability. Although still not widely used, many professional partnerships have chosen to convert to LLP.


It is not required that an LLP creates a constitution/Memorandum or Articles of Association. However, the Act provides that the Partners to an LLP would execute a Limited Liability Partnership Agreement to set out the agreement between the members. The LLP does not file any form of constitution. In this agreement, the members can agree on profit sharing, capital contributions, roles/duties, management or other arrangements amongst themselves and change those arrangements as often as they agree.


The tax rules for an LLP are the same as any ordinary partnership. The members are deemed self-employed. Each partner will report their share of the profit on their personal tax return. The individual partners will pay income tax on their profit share.

The LLP structure provides a potentially useful alternative business vehicle to the private company. It has the benefit, at least at present, of being less regulated than a private company. From a tax perspective, it may prove more effective than a company because currently partnership income is taxed (at individual level) in the hands of the individual partners and not at the firm level, whereas companies are taxed at the entity level and any dividends also taxed in the hands of shareholders. It remains to be seen whether the Government would propose taxing the LLP at firm level given its separate legal personality

Provided that Kenyan income tax laws are not amended to impose a tax on the LLP at firm level, then the LLP will also provide a superior alternative business vehicle to a general partnership. This is because the LLP will provide the same “pass through” taxation benefit as a general partnership, but in addition, retain Limited Liability to the partners akin to that offered by a Company to its shareholders.

Liability Protection

In general partnerships, each participant is personally responsible for the actions of the company. This includes debts, liabilities and the wrongful acts of other partners. One advantage of a limited liability partnership is the liability protection it affords. This type of partnership structure protects individual partners “from personal liability for negligent acts of other partners or employees not under their direct control,”. In addition, individual partners are not personally responsible for company debts or other obligations. This is advantageous for an individual partner when potential lawsuits or claims of negligence against the business are concerned.

Another potential benefit of an LLP over a general partnership is that the number of partners is not restricted. The Companies Act restricts the number of partners in a general partnership to no more than 20


Limited liability partnerships offer participants flexibility in business ownership. Partners have the authority to decide how they will individually contribute to business operations. Managerial duties can be divided equally or separated based on the experience and qualifications of individual partner. In addition, partners who have a financial interest in the Business can elect to not have any authority over business decisions but still maintain ownership rights based on their percentage interest in the Business.

Important Features

  1. MEMBERSHIP: It must have at least 2 partners and 1 manager. The partners may be natural persons or bodies corporate. However, the manager(s) must be a natural person.
  1. BODY CORPORATE: An LLP is a separate legal entity from its partners. In this respect, it is similar to a company, and different from a typical partnership. It thus can acquire/own/hold and dispose of movable and immovable properties (including land) and can sue and be sued in its own name.Whereas the Act establishing LLP is silent, it is believed that this Corporate feature enables an LLP to create Securities for Loans and charge them like any other Companies.
  1. LIABILITY: Partners of an LLP are not liable for the firm’s debts and obligationsnor are they liable for each other’s debts and obligations. This is not the case with general partnerships.However, individual partners in an LLP are liable for their own wrongful acts or omissions. The LLP is also liable for a partner’s wrongful acts or omissions, to the same extent as that partner, where the partner is engaging in the LLP’s business or acting with its authority.
  1. PERPETUAL SUCCESSION: LLPs enjoy Perpetual Succession in that, in the event of death or exit of any one or more Partners, the same does not affect the existence of the LLP.

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