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19 May 2012
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Starting a Company

Starting a Company

For people wanting to start a new business, New Zealand is a smart choice. We’re ranked as the easiest place in the world to start a business, according to the 2010 World Bank survey. And we’re second only to Singapore for ease of doing business.

There are few restrictions on establishing, owning and operating a business here, however the process is among the simplest and easiest in the OECD.  Starting a business can take as little as three days here in New Zealand.

Business structures in New Zealand

Businesses in New Zealand generally operate under one of the following three structures:

1. Sole Trader

A sole trader operates a business on his or her own.  The trader controls, manages and owns the business and is entitled to all profits but is also personally liable for all business taxes and debts.

Usually a sole trader can establish the business without following any formal or legal processes and can employ other people to help run the business.

Many New Zealand businesses start as sole traders and then progress to a company structure as the business grows.  Others form companies right from the start to take advantage of the protection and other benefits offered by the company structure. 

2. Partnership

Partnerships are most common among professional people and in the farming industry. This can be an effective way to share business operation costs where, for example, several professional people operate out of a joint office.

Many partnerships are established with a formal partnership agreement. The partnership itself does not pay income tax.  Instead it distributes the partnership income to the partners.  The partners then pay tax on their own share. 

Once the standard business structure of professional people such as lawyers, doctors and accountants, partnerships are no longer as popular as in the past since the company structure is now open to professionals and arguably offers better protection.  A well thought out partnership agreement is essential to cover contingencies and possible conflicts.

3. Limited Liability Company

A company exists as a formal and legal entity in its own right and is separate from its shareholders or owners. 

The shareholders' liability for losses is limited to their share of ownership of the company except when company directors have given personal guarantees for company debts or where a company has been trading while insolvent or is considered to be ‘trading recklessly’.

In New Zealand, companies can be registered (incorporated) online through the Companies Office website for a fee of NZ$160.

The limited liability company has proven to be the most popular and successful form of business structure in New Zealand. It has the advantage of helping foster confidence in the businesses by governing the relationships between investors (shareholders), directors and creditors and by giving stakeholders a clearer picture of who and what they are dealing with.

 

4. Publicly listed companies

The New Zealand Stock Exchange operates two markets, the NZSX market with more than 200 listed issuers including  many of New Zealand's long-established heritage companies; and the NZAX, the alternative marketplace designed for small to medium-sized, fast-growth businesses seeking a safe and efficient alternative capital raising facility.

The NZSX is ideally suited to companies with existing boards, large numbers of shareholders, and revenue in excess of NZ$50 million per annum. NZAX listings are most suited to companies with turnover of more than NZ$5 million per annum.

Companies seeking to list on either exchange need to meet NZX Listing Rules which are available at www.nzx.com.

Other possible business structures include:

Loss Attributing Qualifying Company (LAQC)This variation of a company structure involves applying to have your company recognised by the Inland Revenue as a Loss Attributing Qualifying Company.  This gives you a special tax status that allows you to offset any losses incurred in running your business against your personal income from other sources (such as investments).  However, other taxation implications are quite complex, so discuss this option with your accountant or solicitor before making any decisions. 
 

For more information on LAQC companies visit Inland Revenue's website at  www.ird.govt.nz.

Trading Trust

Trading Trusts can offer benefits, but they are complicated and require expert advice.  Discuss this option with your accountant and your lawyer to see if it is more appropriate for your needs than the business structures outlined above.

 

Co-operative

A co-operative business is owned and democratically controlled by its shareholder/members. The shareholders/members contribute the prime capital for the business and share in the profits of the business in proportion to their participation: the greater the participation, the larger the proportion of profits.

An example of a co-operative enterprise is a group of craftspeople banding together to jointly market their various craft products through a co-operatively owned and staffed studio or retail shop.

How to start a business in New Zealand

It is generally quick and easy to start a business in New Zealand. For sole traders and partnerships, it can simply be a matter of setting up premises or a home office and getting on with it. For limited liability companies there are more formal steps to complete, which are outlined below.
 
Along with establishing the structure of your business, there are several other steps you’ll need to take, including:
 

Identify the market

Before starting your business in New Zealand, you will need to know more about the market profile and opportunities. Statistics New Zealand has a wide range of online information and tools that can help. In particular, the Table Builder tool enables you to extract and customise specific information from large tables of data. See:

Check local authority rules

Before setting up the premises for your business, check your intended business activities with your local council. Each council has its own rules and regulations about what business activity is allowed in different areas. For instance, in a residential area it is unlikely that you’ll be able to run an automotive repair business.
 

Set up tax numbers

Depending on the business structure you use, you will either need individual tax numbers or a company tax number. See:

Get a lawyer, accountant and bank

All New Zealand banks can assist you with bank accounts for your business purposes, and many can also help you with transferring funds from overseas and other specialist services for migrants.  See:
You may also want to take legal and financial advice, and lists of New Zealand lawyers and accountants are available at:

Check the name

Before committing to logos, signage and stationery for your new business, search the Companies Office and the Intellectual Property Office to ensure the name you want is not already protected.  There is no register of trading or business names in New Zealand. See:

Choose the business structure

Other specific steps you may need to take depend on the business structure you will use.

  • Sole trader

    Usually a sole trader can establish the business without following any formal or legal processes and can employ other people to help run the business

  • Partnership

    Many partnerships are established with a formal partnership agreement which can be prepared by a lawyer. No registration is required to start a partnership

  • Limited Liability Company

    A company exists as a formal and legal entity in its own right. You may want to take advice from a lawyer and financial advisor or accountant when setting up a limited liability company. Companies can be registered (incorporated) online through the Companies Office website for a cost of NZ$160. See www.companies.govt.nz

  • Publicly listed company

    Generally, listed companies will have been in business before listing on either the NZX or NZAX.  When your company decides to list, a specific NZX Listing Team will be appointed to work with you one on one, to ensure that the listing process runs smoothly and your business objectives for listing are met.

For more details, and Listing Rules, see www.nzx.com
 
Want to know more about our business immigration policies in relation to starting a company in New Zealand? Click here.
 
 
 

 


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