In this post I will highlight five tips or areas to consider before starting your freelancing business in Kenya. I will use graphic design related examples which happens to be my field but the tips can be applied across board.
- Choose whether to operate as a consultant or company
From the beginning, it is good to decide whether you will do business and be paid using your personal name or will register a business. You need to weigh carefully the pro and cons of each mode of operation since what you settle on will impact your business. For example when you operate as a consultant who gets paid in your personal name, you might not be able to bid for bigger projects which require only registered companies.
But when you decide to register a business name or company, do not be tempted to issue any invoice with your preferred business name until you have been successfully registered and issued with a certificate of registration. A freelancer might jump the gun and ask a client to write a cheque in a business name that has not been registered only to go to the registrar of businesses later on and discover there is an already existing business with a similar name. The result is, having to go back to the client and ask the cheque to be rewritten in a different name-how unprofessional and embarrassing this is.
- Open a bank account
After registering your business at the registrar’s office, shop for a bank that meets your needs and open an account. Learn to separate your business monies from personal ones. Avoid banking money paid out by a client for services rendered into your personal account. If you ever require a business loan from your bank, one of the assessments the bank will make is on your cash flow (how your money comes in and goes out). So learn to bank every payment made to you by clients, whether small amounts or huge ones for you never know when you might require credit facilities. It is also one of the easiest ways of keeping track of your total sales.
- Decide if you are I or We
If you register a business, another thing to decide is whether to refer yourself as I or we. This sounds obvious but many freelancers have found themselves in dilemmas when pitching jobs or writing proposals on whether to refer themselves as I or we. If you intend to involve other associates or partners in your business then using “we” is appropriate but if you will be offering the services alone then use “I”.
- Narrow down your passion
Define and narrow down your passion. Choose areas you are good at and invest your time and money in them. People will pay more to deal with a specialist than a general practitioner. If you are good in logo design but find yourself struggling to come up with creative animations or websites, outsource or get another creative you can refer the business to and he can also refer you in areas you are strong at.
When clients seek your services, they want to be sure you can solve their briefs without abandoning their work half way. Clients are happy when you handle their projects professionally and even exceed their expectations. This cannot be achieved if you only know a bit of everything, master one or two areas where you will do a thorough job.
- Streamline your accounting
Get your books in order either by hiring an accountant or purchasing a booking keeping software to assist you. Many freelancers and business persons start their business without giving thought to this aspect of their business until they land into trouble with Kenya Revenue Authority (KRA) or miss out on an opportunity because they couldn’t prove that they have been paying taxes. Not only does paying taxes and good accounting discipline keep you in good books with Kenya Revenue Authority (KRA), it will also help you know the financial status of your business and whether you are making any progress or just marking time.
I know I have left out many more areas that are often overlooked, feel free to add to the list by commenting below.
Hope this helped,
Hi, I have been a freelancer who find work of design from abroad and work. the payment does not is paid via credit card. I am not working under any business name or company.
What is my obligations to pay the KRA tax, and how do I go about it?
Thanks
Hi Njoka, even though you operate as a freelance designer finding work in many of the available freelance websites, KRA expects you to file income tax where all the money earned from freelance work is declared. Feel free to visit any of their offices for further assistance on how to file the returns. In the meantime you can apply for a PIN number for free if you do not have one by clicking here, which you will need to do the returns.
I registered a company 10 years ago after being terminated from a full time employment. I later got a job and the company has been dormant ever since. To keep the company’s bank account active, I have been depositing and withdrawing some small cash into/from the account. I now want to start doing business with the company. I have however never done any tax returns for the last 10 years. What are my possible fate with KRA? Should I register for iTax PIN, will this affect both my individual and company’s tax compliance status? How can I regularize the tax status of the company?
Hi Peter, I am not sure how KRA will handle it but if I get an answer I will post it here. For now you can go to their offices and present your case then hear what they have to say. But if you have an accountant in your circles whom you can contact and make use of, please do for it will save you time. Trying to solve some of those issues yourself can at times be overwhelming. It is better off to pay some one who handles such cases every other time and have them do the follow-up for you as you concentrate on other issues in your business which only you can handle.
Hi. I just started being a consultant where I get paid via cheque. I want to pay taxes on the money I am given how should I go about this? Thank you.
Hi Sunny, I think the best way would be to get an accountant to create an accounting system for your business which will also assist in computing the taxes. It is a faster way and saves you time to concentrate on what you know and like doing. The accountant can be coming in once a month or once in three months to check your books. Unless your business is very busy, you do not need to hire a full time accountant. Alternatively you can visit the Revenue Offices and they will also advice you on how to go about it.
I do freelance accounting …if you need any assistance feel free to contact me
Point noted Beaty and many thanks!!
Hi, been operating a registered business and doing my accounts n returns well. question is, i deposit both payments with vat and those done without vat in my business account. Will there be an issue with KRA if they go thru my bank statements?
Hi Clement, thanks for posting and yes there will be an issue if the deposits without VAT were supposed to have attracted VAT in the first place or if you are running a parallel system like what Imperial Bank were accused of.
Hi I am running a Design business what is the best way to approach clients in Kenya?
That’s a good question Serah, and there are different ways of going about it but for now I will only mention three.
To start with, there is the usual way of sending out proposals to clients you would wish to work with and hope they will be impressed by your proposal and invite you on board .
Secondly, you can attend networking forums where potential clients are present and you can target to have one or two meaningful contacts out of every meeting. I say this because there is usually a tendency of splashing out business cards to every person you meet in such forums but more often than not it doesn’t translate to business. While still on this point, let me point out that it usually pays to interact with people with a mindset of seeing how you can help their business grow. This calls for minimal talking, and a lot of listening and asking of questions. Zig Ziglar said, “You can have everything in life you want, if you will just help other people get what they want”. As you seek to give, you will also be given.
Finally, labour to provide excellent services to the clients you have and they will be happy to refer you to others. Referrals are the best form of advertisement for your business since they involve other people marketing for you without even your knowledge.
I hope this helps!!!
If am operating a lending money business with a profit percentage in return is it legal and if the client pays the amount direct in my business account can I be deducted taxes directly from my business account.thanks
Thanks for your question Wallace and about the legality of the business you are operating I cannot tell. I believe the registrar’s office can shed more light if you walk into their offices and inquire or talk to a lawyer. About paying taxes from your business account to KRA, it is possible but you need to talk to your bank to get more details.
Hi Kabii, I registered a business name two (2) years ago. Have been trading with this business name from registration and been very keen to deposit each and every coin I earn in the business name to the business account. What are the repercussions of not having paid taxes for this long of which have never paid since registration?
How do I determine what to pay to KRA for tax compliance certificate? Please help.
Again have registered another business name which is dormant for three (3) years. What of it with KRA and registrar’s office?
Hi Reuben, glad you found time to go through the post. The major repercussion is that it is not possible to get tax compliance certificate until you clear your tax obligations. The easy way to find out how much you owe the Kenya Revenue Authority (KRA) is to engage the services of an accountant who will prepare your books first if you have no accounting system in place. Trying to do it yourself might prove very overwhelming unless you have a background in accounting or finance. Once the accountant works out the tax that is due, pay it up if it is possible but you can also apply for a waiver. I cannot guarantee you that once you apply for a waiver that you will get it but just try since it might relieve you of the tax burden if it is a lot. All I know is that it becomes easy to ask for a waiver once they see you have started the process of complying by at least paying up a percentage of the tax already overdue.
For the other business name you registered, if you have not traded through it then it might be a bit easier to deal with KRA since you can file nil returns.
From my own personal experience, I would highly recommend getting the services of a trained accountant even if it is a friend and you will be able to iron out the issues sooner or later. In case you do not have the budget to pay an accountant now, you can trade services or work out a payment plan that would be convenient for both of you but I can assure you it will be worth it.
If you still have another question or need more clarification please reply to my comment or send me an email through the contact form on the talk to us page.
Hi,thank you for that information. What if am running a family business of a coffee house in town, ,should I deposit my daily sales in a personal account or business account in compliance with KRA? kindly take me through the both accounts.
Thank You.
Hi Maurice, you should deposit your daily sales in your business account. It is a good practice to separate personal finances from those of the business since it makes it easy to do an audit of your business amongst other things. In your personal account, you should deposit the salary or allowance you receive from your business in addition to any other money you get for example from chamas or gifts from friends and relatives. I am not sure if I have answered you as desired, but feel free to contact me again in case I have not.
Thank you for taking time to read the post.
Am Dan i have operated as a freelancer for one year now but things are getting thick as in i used to deal with only five small flower companies to make export documents for but now wit my good work i did get good reference to three big flower exporting companies and yes has of last week i started doing docs for them but they want me to furnish them with either my freelance cert of my company cert which i have not……how do go about it thank you and God bless
Thanks Dan for stopping by to read the post and congratulations for the good work you are doing which has earned you bigger referrals. Now to your question, most companies like dealing with registered companies which poses a challenge to a supplier who has not registered his trading name. The easiest way to go about it is to ask for some time to register your business at any Huduma Centre. If you do it yourself, the whole process should cost you less than Kshs 1,200 and should take a week or thereabout since the government has tried to speed up the process. If your clients are pleased to work with you then I believe they would be kind enough to give you time to get your paper work right. I hope this answers you.
Do i need to pay tax as a freelancer who operates a business in my personal name?
Thank you Della for your question and the answer is yes. Kenya Revenue Authority expects you to be honest enough to volunteer and pay income tax. If you do not know how to go about it I would suggest you seek counsel from an account or visit any KRA office near you. At Times Tower in Nairobi I know they have a programme where they train/advice young entrepreneurs on how to go about their tax obligations. All the best and thanks for visiting.