A Limited Liability Partnership (LLP) is a body corporate, comprising of 2 or more Partners and a Manager, with perpetual succession and a legal personality, separate from that of its Partners.   

LLP’s are obligated to adhere to certain regulatory requirements, failure to which could lead to penalties.Top of FormBottom of Form They are required to maintain accurate books of accounts, prepare statements, and submit an annual return to the Registrar of Companies. An LLP is also required to declare its profit/loss and indicate the profit-sharing ratio.  

To ensure compliance and prevent penalties, LLPs must adhere to the following.  

Compliance requirements for LLP’s 

LLP’s are required to file its annual returns with the Registrar within thirty days of the anniversary of its registration. This document contains the details of the LLP including the address, business activities, declaration of solvency and the details of the partners and Manager. This should be accompanied by a declaration of solvency, stating that the business is able to pay its debts when they fall due. Failure to comply shall incur an administrative penalty of two thousand shillings.    

During registration, LLP’s are required to declare beneficial owners, meaning the natural person who owns or controls, or the natural person on whose behalf a transaction is conducted. Existing companies are required to have declared beneficial owners by end of 2023. LLP’s are also required to register any amendment to its register of beneficial owners within fourteen days after making the amendment. The LLP is then required to keep records of beneficial owners for at least ten years from the date a person ceases to be an owner. Failure to adhere to these obligations could incur a fine of up to five hundred thousand shillings and a penalty for each day of default.  

LLP’s are required to keep a record of Nominee Partners and the same shall not be available for inspection by the public. A Nominee Partner is an individual or legal person instructed by the nominator (the Partner) to act on their behalf.  

LLP’s are required to keep records of transactions, financial position, a profit and loss account and a balance sheet. The LLP shall retain its accounting records for not less than seven years after completion of the matters. Although the LLP is not required to submit these records, the Registrar could request for inspection of the records.  Failure to adhere could attract a fine of up to one hundred thousand shillings.  

LLP’s are required to maintain records for a minimum of seven years, failure to which, the LLP will be liable to a fine of up to five hundred thousand shillings and fifty thousand for each day in default.  

LLP’s are taxed like partnerships and sole proprietorships where the Partners are taxed on their personal income from the profit or loss. Each partner will report their share of the profit on their personal tax return. This is declared through the Income Tax Partnership Return (IT2P) which should capture the PIN of each partner and indicate the profit-sharing ratio.

Benefits of Compliance 

Legal Protection - compliance is essential to protect an entity from liabilities and other disputes. It ensures legal protection to the partners and eliminates potential risks. 

Avoidance of penalties - Non-compliance with regulations can result in significant penalties, which may weaken the financial stability of the company. 

Business Continuity - A compliant Partnership fosters business profitability by providing a clear understanding of their assets, liabilities, and financial growth.  

Reputation and creditworthiness of the company - Compliance enhances the company's reputation and creditworthiness, instilling confidence in potential investors. 

Conclusion 

Ensuring compliance for an LLP in Kenya is crucial for maintaining legal adherence, building trust among stakeholders, and safeguarding the operational integrity of the business. Non-compliance can result in penalties, legal risks, and reputational damage. By staying compliant with regulatory requirements, LLPs can enhance their financial health and foster long-term business growth. 

If you need assistance with meeting compliance obligations, we are here to help. Reach out to us via email or call +254 745 342 125 for guidance and support. 

Disclaimer: This content is for informational purposes only and should not be construed as legal or financial advice.​