How to Transition From Employment to Entrepreneurship in Kenya

Updated 24 October 2026

Leaving a payslip to run your own business is one of the biggest money decisions most Kenyans make. A salary pays your rent, your SHA contribution, your NSSF and often a SACCO loan without you thinking about it. The day you resign, every one of those becomes your job. This guide walks through how to make the move in stages, what to register, how tax and statutory deductions change, and the money buffers that keep a young business alive through its first slow months.

In this guide

1. Step 1: Test the business while you are still employed
2. Step 2: Build your runway before you resign
3. Step 3: Sort out loans tied to your job
4. Step 4: Register the business properly
5. Step 5: Understand how your tax changes
6. Step 6: Keep SHA and NSSF going
7. Step 7: Separate business and personal money
8. Step 8: Leave on good terms
9. Frequently asked questions

Step 1: Test the business while you are still employed

The safest transitions start long before the resignation letter. Use evenings, weekends and leave days to prove that people will actually pay for what you plan to sell. A useful test is simple: can you find ten paying customers who are not friends or family, and do some of them come back? Keep a basic record of every sale and every cost from the first day. That record becomes your proof of demand, the base for your pricing and, later, the evidence a bank or SACCO will ask for.

Before you start, read your employment contract. Many contracts restrict side businesses that compete with your employer, use company time or equipment, or involve the employer’s clients. Some require you to declare outside work. Staying within those terms protects your final dues and your reference.

Once the idea is working and you have settled on a name, you can check and reserve the business name on eCitizen so nobody else registers it first.

Step 2: Build your runway before you resign

Runway is the number of months you can cover your personal costs while the business grows. Work it out from your real monthly spending, not your salary. Add rent, food, school fees, transport, loan repayments, SHA and any family support you send home. Most planners suggest six to twelve months of personal costs set aside, kept separate from the money the business itself needs.

Item	What to plan for
Personal runway	6 to 12 months of household costs in a savings account or money market fund
Business working capital	Stock, rent deposit, tools and at least three months of business running costs
Emergency cover	Medical cover through SHA plus any private cover you will lose when you leave
Debt	A plan for SACCO or check-off loans that were deducted from your salary

A money market fund is a common place to hold runway because you can withdraw within a few days. Compare current yields on our money market fund rates page.

Step 3: Sort out loans tied to your job

Check-off loans, staff loans and SACCO loans guaranteed by colleagues are often the biggest surprise for people leaving employment. When the payslip stops, the deduction stops, but the loan does not. Ask your SACCO how repayments will continue once you leave. Many allow you to keep membership and pay by M-Pesa or standing order, but some reduce what you can borrow once your income is no longer a salary. If you can, clear or restructure job-linked loans before you resign, and avoid taking new ones in your last months at work.

Step 4: Register the business properly

Most people start as a sole proprietor by registering a business name with the Business Registration Service (BRS). According to the BRS fee schedule, registering a business name costs KSh 950 and the certificate is usually issued within a day. A private limited company costs KSh 10,650 to register and takes about three to five days. A business name is not a separate legal entity, so you are personally liable for its debts; a limited company separates your personal assets from the business but comes with more paperwork and annual returns.

Registration	Fee (BRS)	Best for
Business name (sole proprietor)	KSh 950	Testing and small, low-risk businesses run by one person
Private limited company	KSh 10,650	Businesses with partners, investors, tenders or bigger liabilities
Limited liability partnership	KSh 25,000	Professional firms with two or more partners

Registration is done on the BRS portal through eCitizen. You also need a county trade licence for most premises; see how to apply for a single business permit. A company needs its own KRA PIN, covered in how to get a KRA PIN for a company.

Step 5: Understand how your tax changes

As an employee, PAYE was deducted for you. In business, you file and pay yourself. For many small businesses the relevant regime is Turnover Tax. KRA says Turnover Tax applies to resident businesses with gross turnover of more than KSh 1 million and not more than KSh 25 million a year, at 1.5 percent of gross sales from 1 July 2023 under the Finance Act 2023. It is a final tax and expenses are not deductible. It does not apply to rental income, management, professional or training fees, or income already subject to a final withholding tax. A Turnover Tax payer with vatable supplies and turnover of KSh 5 million or more must also register for VAT.

You can elect out of Turnover Tax and pay ordinary income tax on profits instead, which can make sense if your margins are thin. Our comparison of Turnover Tax, income tax and VAT and the Turnover Tax calculator help you compare. In the year you leave, you will usually still file one income tax return covering both your salary months and your business income.

Step 6: Keep SHA and NSSF going

Your employer used to deduct health and pension contributions. After you leave, you pay them yourself.

• SHA. Under the Social Health Insurance Fund, people outside salaried work contribute 2.75 percent of their declared or assessed household income, with a minimum of KSh 300 a month. Keep paying, because a lapse can leave you without cover just when the business has no spare cash.
• NSSF. Your NSSF account stays yours. You can keep contributing voluntarily so your retirement savings keep growing even without an employer.

See how to check your SHA registration status and the latest NSSF contribution rates.

Step 7: Separate business and personal money

Open a separate bank account or M-Pesa till for the business from day one, and pay yourself a fixed monthly amount rather than taking cash whenever you need it. This makes tax filing easier, shows lenders a clean record and tells you quickly whether the business is really making money. Set aside a percentage of every sale for tax so the Turnover Tax payment due by the 20th of the following month never catches you short.

Step 8: Leave on good terms

Give the notice your contract requires, hand over your work properly and collect your final dues, certificate of service and P9 form. Former employers and colleagues are often a new business’s first clients and referees. If the business does not work out, a good exit also makes it easier to return to employment.

If you decide you need a salary for a while longer, or want part-time or contract work to fund the business, browse current openings on jobinkenya.co.ke.

Frequently asked questions

How much money should I save before quitting my job to start a business?

Plan for six to twelve months of household costs, kept separate from the working capital the business needs.

How much does it cost to register a business in Kenya?

BRS charges KSh 950 for a business name and KSh 10,650 for a private limited company, paid on eCitizen.

What tax will my small business pay?

Businesses with turnover between KSh 1 million and KSh 25 million usually pay Turnover Tax at 1.5 percent of gross sales, unless they elect to pay income tax on profits.

Do I still pay SHA after leaving employment?

Yes. Self-employed people contribute 2.75 percent of declared or assessed income, with a minimum of KSh 300 a month.

Can I run a business while employed?

Often yes, but check your contract for clauses on competing work, use of company resources and declaring outside interests.

Sources: Business Registration Service fee schedule and FAQs; KRA Turnover Tax guidance; Social Health Insurance Fund contribution rules as summarised by KRA’s SHIF calculator and PKF’s Kenya quick tax guide.