Starting a company, whether as a small business or a contractor, is a significant decision. Legally, it involves separating your business from yourself, leading to new responsibilities such as tax payment and government agency relations.
If you’re considering starting a company or are unsure about the process, you can find useful tips and information to assist you.
Starting a company can occur at varying stages of business and for a variety of reasons. For some, it’s a passion to launch multiple businesses throughout their career. For others, it’s the next step in a journey that began as a sole trader or a contractor recognising the benefits of operating as a registered company.
Prior to commencing, ensure you have a clear understanding of why you’re starting a company and whether it’s the optimal structure for your business. Use our tips and tools to evaluate your business concept and determine if this is the right choice for you.
Step-by-step guide to starting a company — Companies Office
Key questions for your business idea before starting
10-step guide to starting a business
The Choose Your Business Structure tool can be a helpful resource in making the most informed decision.
In New Zealand, starting a company is relatively straightforward compared to other nations, yet specific legal obligations and processes must be followed. The first step is to incorporate your company by registering it with the Companies Office.
You can easily accomplish this online:
1. Log in to the Companies Office website using your RealMe® credentials. If you don’t have a RealMe login, you will need to establish one.
Get a RealMe login — RealMe
*RealMe® is a registered trademark of the New Zealand government and New Zealand Post
2. Register your company:
- Verify that your preferred company name is available
- Reserve the name if it is available
- Proceed with registering your company
Upon successful registration, your company will automatically receive an NZBN (New Zealand Business Number), a distinct identifier that all New Zealand businesses can have. Using this number will expedite your interactions with the government, suppliers, customers, and other businesses, such as sharing invoicing details.
Applying to incorporate your company — Companies Office
What’s an NZBN? – New Zealand Business Number
Registering with government agencies
All companies operating in New Zealand are obligated to file an annual return with the Companies Office every year to verify that they are still operating as a company. Failure to file the annual return annually may result in your company being removed from the national Companies Register.
An annual return is not a tax return and comprises the following information:
- The company’s address(es)
- The names and addresses of its directors and shareholders
- Information about its ultimate holding company, if applicable
- General filing details, such as the month in which the company submits its annual return.
There is a fee of $57.20 for filing an annual return, and you can do so online on the Companies Office website. To register for a Companies Office account, you must have a RealMe® login if you haven’t already done so.
How to file your annual return — Companies Office
Annual returns — Companies Office
Get a RealMe login — RealMe
*RealMe® is a registered trademark of the New Zealand government and New Zealand Post
It is crucial to consider intellectual property (IP) early on, which comprises your company name, logos, and trademarks. By securing your IP, such as by creating a trademark for your brand or company name, you are protecting the resources, time, and money invested in your business.
Before registering your business name, it is essential to verify that no one else has already claimed the trademark. The ONECheck tool can assist you in looking up business names, web domains, trademarks, and social media usernames.
IP protection is a critical aspect that will remain relevant throughout your business’s lifespan. Therefore, it is vital to comprehend what IP entails and its significance.
Simple steps to protect your IP
Regardless of the number of individuals involved, each company requires directors. It is necessary to inform the Companies Office about your company’s directors and provide their particulars.
Company directors — Companies Office
Ownership of a company can either be individual or shared among other investors, who are referred to as shareholders.
Every company must have at least one shareholder and share, which should be recorded in the company’s share register.
In some instances, a single individual or a group, such as a family, may own all the shares, while other companies list their shares on the stock exchange for purchase by the public and other corporations.
If you intend to sell the company or take on investors, you can do so by selling some or all of the shares.
Regardless of the number of shareholders, you must determine the number of shares your company will issue and provide this information to the Companies Office during registration.
It is advisable to establish these details in a shareholder agreement, with the assistance of a specialist lawyer or advisor.
A company’s constitution outlines the responsibilities, authorities, and obligations of the company, its board, directors, and shareholders. Although not mandatory, having a constitution may be beneficial in the future as your company evolves, such as seeking investments by issuing additional shares. You can always create a constitution at a later time if needed.
When drafting or amending your company’s constitution, seeking legal guidance is recommended.
Initially, many companies operate solely with their owners’ involvement. However, to expand the business, hiring employees may become necessary. If you do decide to recruit staff, you must register with Inland Revenue as an employer.
Companies with employees have a responsibility to fulfil government requirements such as managing ACC and taxes, as well as adhering to obligations to employees like ensuring their health and safety and providing legal employment agreements. The resources below provide guidance, tools, and information for every aspect of being an employer.
Registering with government agencies
Entrepreneurs frequently establish businesses based on their expertise in a specific field. Nevertheless, managing all aspects of a business, such as day-to-day financial matters and business planning, can be overwhelming, particularly if it is not your area of specialisation.
It is advisable to seek advice from professionals such as accountants, mentors, and lawyers from the outset. Doing so can assist in overcoming challenges and maximising your business’s potential.
How business advisors can help
It is common for accountants or lawyers to request to verify your identification to comply with anti-money laundering regulations.
Managing a company’s finances involves numerous considerations and can be challenging to keep track of. Prior to establishing your company, explore financial management options such as utilising online accounting software and/or enlisting the services of a bookkeeper or accountant. Some online accounting software may offer free trials, and some bookkeepers and accountants may offer an advisory session to assist you in determining whether their services are suitable for your requirements.
A limited company is a type of legal structure where the shareholders’ liability for company debt is restricted to the value of their shares. This is reflected in the name of the company, with “Ltd” denoting a limited company, such as Sweet as Candy Ltd.
The income that remains after deducting expenses from your company’s earnings is known as profits. These profits are subject to a 28% tax rate under the company tax regime. In addition to this, shareholders who receive dividends from the company are taxed on their personal income. However, any taxes paid by the company on its profits can be credited against the dividend tax. Shareholders in smaller firms may be eligible to borrow from the company in the form of drawings. If they are employed by the company, they may also receive a salary as shareholder-employees, which they will be responsible for paying taxes on.
If a company incurs more expenses than income, resulting in a loss, it will not be taxed on its earnings.
By claiming eligible expenses, your company can reduce its tax bill under the company tax regime. It is important to understand which expenses can be claimed to maximise the tax reduction, as the amount of expenses claimed directly impacts the tax reduction.
Business finance: An introduction
An Overview of Taxes and Levies
It is necessary to maintain precise and thorough work records for a minimum of seven years. These records must comprise banking information, proof of all types of income (including cash income), expenses, as well as cashbooks.
As soon as you establish a company, you will receive ACC personal injury cover right from the beginning. There is no need to pay for this cover until after you have filed your initial tax return. The cost of this cover will depend on the business activity of your company.
For business — ACC
Record-keeping and identification obligations must be met by some financial service providers.
These obligations are imposed to prevent money laundering and terrorist financing and apply to a range of professionals, including real estate agents, conveyancers, numerous lawyers and accountants, and other relevant individuals.
Look-through companies
If your company satisfies particular prerequisites, such as having five or fewer shareholders, you can request Inland Revenue to classify it as a look-through company. In such a scenario, your company will be taxed similarly to sole traders or partnerships, with shareholders paying tax on the company profits at their respective tax rates.
In case of losses, shareholders can have them assigned to reduce their tax liability, or the look-through company can carry forward the losses to the subsequent financial year.
As a look-through company, it is mandatory to file a tax return (IR7) every year.
Look-through companies — Inland Revenue
Are you struggling with accounting and business management for your business? We are here to help! Get in touch with us to discuss how our expert services can support your business’s success. Contact us today to schedule a free consultation and see how we can add value to your operations.
