{"id":217141,"date":"2022-08-25T11:52:47","date_gmt":"2022-08-24T22:52:47","guid":{"rendered":"https:\/\/legalvision.co.nz\/?p=217141"},"modified":"2022-10-24T19:38:52","modified_gmt":"2022-10-24T06:38:52","slug":"difference-sole-trader-self-employed","status":"publish","type":"post","link":"https:\/\/legalvision.co.nz\/business-structures\/difference-sole-trader-self-employed\/","title":{"rendered":"What is the Difference Between a Sole Trader and Being Self-Employed in NZ?"},"content":{"rendered":"\n<p>Many people in New Zealand dream of being self-employed, being their own boss, or owning their own business. While people may share this dream, individuals can do this in several different and distinct ways. Choosing the one that works best for you is essential when establishing your business. This article will outline the difference between being a sole trader and self-employed in New Zealand.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Should I Be Self-Employed?<\/h2>\n\n\n\n<p>Several individuals suit being self-employed. This includes:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>tradespeople;&nbsp;<\/li><li>entrepreneurs; or&nbsp;<\/li><li>anyone with a skill or ability they can market for a profit.&nbsp;<\/li><\/ul>\n\n\n\n<p>Becoming self-employed is a good step for people who want flexible work, can work independently and with initiative, and have a good set of goals. You can profit from a skill or passion of yours, so it can be highly rewarding to become self-employed.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What Business Structures Are Available to Me if I Want to Be Self-Employed?<\/h2>\n\n\n\n<p>If you feel that being self-employed is right for you, there are a few business structures that are available to you, including:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>becoming a sole trader;<\/li><li>starting a company; or<\/li><li>forming a business partnership.&nbsp;<\/li><\/ul>\n\n\n\n<p>You could also start a <a href=\"https:\/\/legalvision.co.nz\/business-structures\/operating-partnership-business-in-new-zealand\/\">business partnership<\/a> if you want to be self-employed. However, as this requires other individuals, few people use this business structure to become self-employed.&nbsp;<\/p>\n\n\n\n\n<a href=\"#content-next\"\n   class=\"block p-4 mt-10 text-xl font-bold text-center text-white no-underline bg-gray-800 rounded-t-xl\">\n    Continue reading this article below the form\n    <i class=\"text-xl fa-regular fa-arrow-down\"><\/i>\n<\/a>\n<div class=\"px-6 pt-10 pb-12 mb-10 text-center bg-gray-100 rounded-b-xl sm:px-12 test\">\n    <div class=\"mb-8 text-2xl font-bold text-orange\">\n        Need legal advice?\n        <br>\n        <span class=\"text-lg not-prose\">\n                            Call <a href=\"tel:+64800005570\" class=\"not-prose\">0800 005 570<\/a> for urgent assistance.\n                <br>\n                Otherwise, complete this form, and we will contact you within one business day.\n                    <\/span>\n    <\/div>\n\n    \n\n<div class=\"not-prose flex justify-center text-left gform_input_bg_white    \">\n    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You can be self-employed without being a sole trader. As shown above, you could be a self-employed person in several ways. Looking at the pros and cons of each type of self-employment will help you choose the best structure for your business.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What Does It Mean to Operate as a Sole Trader?<\/h2>\n\n\n\n<p>Becoming a sole trader means starting a business or contracting as yourself. You will not have registered as a company, so you have not created a separate entity. Instead, you are legally the business. Many small business owners operate as sole traders.<\/p>\n\n\n\n<p>Being a sole trader is a straightforward option for operating a small business, as creating a company requires significantly higher startup requirements. There are several benefits of working as a sole trader, including:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>low startup costs;<\/li><li>quick and easy setup; and<\/li><li>significant control over the business and its profits.<\/li><\/ul>\n\n\n\n<div  class=\"box box--icon box--info\">\n    <p>The business will pay tax through your own income tax, so you do not need to get a new IRD number. The primary step you have to take is obtaining a New Zealand Business Number (NZBN), which allows your business information to be collected efficiently.<\/p>\n<\/div>\n\n\n\n<p>However, there are some issues with operating as a sole trader. The main problem is that you are personally responsible for paying back the business\u2019s debts, resulting in your assets being put at risk if something goes wrong with your business. Additionally, you may face challenges obtaining investments or loans as a sole trader. Sometimes sole traders may seem less established than a company, as companies have a formal registration system and more extensive documentation.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What Does It Mean to Operate as a Company?<\/h2>\n\n\n\n<p>While operating as a sole trader is quick and easy, the personal liability that sole traders face is a significant concern for many people. Therefore, some people instead choose to register their <a href=\"https:\/\/legalvision.co.nz\/business-structures\/key-considerations-starting-company\/\">business as a company<\/a>. When you create a company, you are making a separate legal entity. This means you are no longer the company, as with a sole trader. Instead, the company is legally its own entity, with its own tax obligations. Therefore, you are generally not liable for any debts the company has unless you are negligent or have breached the law. <\/p>\n\n\n\n<div  class=\"box box--icon box--info\">\n    <p>Starting a company could be the way to go if you want to be self-employed and ensure that your personal assets are not on the line.<\/p>\n<\/div>\n\n\n\n<p>You will typically be a director of the company and likely be the company&#8217;s only or primary shareholder. Therefore, you will still maintain total control of the business, even if you are legally not the same.&nbsp;<\/p>\n\n\n\n<p>One downside of starting a company is the long and expensive startup process. There are high set-up costs and requirements to start a company. You will need to register with the <a href=\"https:\/\/www.companiesoffice.govt.nz\/\">Companies Office<\/a>, trademark your company name, and complete other registration tasks, including creating a shareholders agreement.&nbsp;<\/p>\n\n\n\n    <div class=\"my-7 lg:my-10 border-y-2 border-gray-100 py-7 lg:py-10 flex flex-col sm:flex-row items-start gap-10\">\n                    <img decoding=\"async\" class=\"w-52 mx-auto my-0! rounded\" src=\"https:\/\/img.legalvision.com.au\/wp-content\/uploads\/sites\/2\/2021\/12\/16124322\/performance-improvement-plan-wp-1.jpg\" alt=\"Front page of publication\"\n                 loading=\"lazy\" width=\"208\" height=\"298\">\n                <section>\n            <div class=\"text-2xl font-bold\"> Performance Improvement Plan<\/div>\n            <div class=\"body-text\">\n                <p>When your employee does not perform at the expected level, a performance improvement plan (PIP) may be required to get them back on track. Our free PIP template will assist. <\/p>\n            <\/div>\n            \n\n<a href=\"https:\/\/go.legalvision.co.nz\/performance-improvement-plan-NZ.html\" class=\" block px-5 py-3.5 max-w-fit bg-orange button__hover transition rounded text-white font-bold text-lg no-underline uppercase leading-tight text-center\" target=\"\" rel=\"\">Download Now<\/a>        <\/section>\n    <\/div>\n\n\n\n\n<h2 class=\"wp-block-heading\">Key Takeaways<\/h2>\n\n\n\n<p>If you think you are an excellent candidate to be self-employed, you must decide what business structure you want to choose. You could be a sole trader, start a company, or even start a partnership. Looking at the pros and cons of each form of business structure will help you decide which one is best for your business.&nbsp;<\/p>\n\n\n\n<p>If you need help starting a business, our <a href=\"https:\/\/legalvision.co.nz\/business-lawyers-lp-new-zealand\">experienced business lawyers<\/a> can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on <a href=\"tel:+64800005570\" class=\"AVANSERnumber dynamic-number\">0800 005 570<\/a> or visit our <a href=\"https:\/\/legalvision.co.nz\/membership\/\">membership page<\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Frequently Asked Questions<\/h2>\n\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1661380956440\"><h3 class=\"schema-faq-question\">Can I operate as both a sole trader and a company?<\/h3> <p class=\"schema-faq-answer\">No, as a company is a separate legal entity, while a sole trader is legally the same as the person operating the business. You will need to choose one business structure.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1661380977183\"><h3 class=\"schema-faq-question\">Can I be self-employed and a sole trader?<\/h3> <p class=\"schema-faq-answer\">Yes, being a sole trader is one business structure available for you when you are self-employed. You could also choose to start a company.<\/p> <\/div> <\/div>\n","protected":false},"excerpt":{"rendered":"<p>Many people in New Zealand dream of being self-employed, being their own boss, or owning their own business. While people may share this dream, individuals can do this in several different and distinct ways. Choosing the one that works best for you is essential when establishing your business. This article will outline the difference between<a href=\"https:\/\/legalvision.co.nz\/business-structures\/difference-sole-trader-self-employed\/\">Continue reading <span class=\"sr-only\">&#8220;What is the Difference Between a Sole Trader and Being Self-Employed in NZ?&#8221;<\/span><\/a><\/p>\n","protected":false},"author":13318,"featured_media":215508,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"1652,202864,209790,209723,209356,203135","_relevanssi_noindex_reason":"","editor_notices":[],"footnotes":""},"categories":[4],"tags":[23,30,62,110,1540],"class_list":["post-217141","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-structures","tag-start-a-business","tag-company","tag-business-structure","tag-sole-trader","tag-self-employed"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.6 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Difference Between Sole Trader and Being Self-Employed | LegalVision NZ<\/title>\n<meta name=\"description\" content=\"Do you wish to start your own business? 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