{"id":937,"date":"2020-12-08T03:23:52","date_gmt":"2020-12-08T03:23:52","guid":{"rendered":"http:\/\/nz.legalvision.com.au\/?p=937"},"modified":"2025-11-27T13:10:03","modified_gmt":"2025-11-27T00:10:03","slug":"partnership-and-company-new-zealand-business-structures","status":"publish","type":"post","link":"https:\/\/legalvision.co.nz\/startups\/partnership-and-company-new-zealand-business-structures\/","title":{"rendered":"Partnership vs Company Structure in NZ"},"content":{"rendered":"\n<p><span style=\"font-weight: 400\">How you decide to structure your business is one of the most important considerations when you are getting things set up. The structure you choose, whether it is a sole trader, partnership, or company, affects your legal obligations, tax responsibilities, ability to raise capital, and personal risk exposure.<\/span><\/p>\n\n\n\n<p>In New Zealand, the three most common business structures are:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400\"><a href=\"https:\/\/legalvision.co.nz\/business-structures\/operate-business-as-sole-trader-new-zealand\/\">sole trader<\/a>;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">partnership; and<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">company.<\/span><\/li>\n<\/ul>\n\n\n\n<p><span style=\"font-weight: 400\">Each of these structures has different advantages and disadvantages, and are catered to different circumstances. It is important to consider what your business circumstances are and what structure would be of benefit to you. To help in that process, this article will compare two of those structures:<\/span><\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><span style=\"font-weight: 400\">partnerships; and&nbsp;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">companies.&nbsp;<\/span><\/li>\n<\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">What is a Company?<\/span><\/h2>\n\n\n\n<p>A company is a legal entity separate from the people who own or manage it. This means it can own property, enter into contracts, and be sued all in its own name. Because it is a separate legal entity, the company itself is responsible for its debts and obligations, rather than its shareholders or directors (unless they act unlawfully or negligently).<\/p>\n\n\n\n<p>A company must have at least one director and one shareholder. Directors manage day-to-day operations and ensure the company meets its legal obligations, while shareholders own shares and receive profits through dividends.<\/p>\n\n\n\n<p><a href=\"https:\/\/legalvision.co.nz\/business-structures\/company-structure-new-zealand\/\">Forming a company<\/a> is particularly useful if you plan to:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>grow your business or seek external investment;<\/li>\n\n\n\n<li>employ staff;<\/li>\n\n\n\n<li>protect personal assets from business risks; and&nbsp;<\/li>\n\n\n\n<li>establish a professional, long-term business presence.<\/li>\n<\/ul>\n\n\n\n<p>However, a company also entails costs and ongoing compliance obligations. You have to register your company at the Companies Office, where it goes on a public register that anyone can look up. You also have to file annual returns and pay an annual registration fee, and you are bound by company law. There may also be higher administrative costs associated with running a company because you have additional regulations that you have to follow.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Benefits of a Company<\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400\">Benefits to <a href=\"https:\/\/legalvision.co.nz\/business-structures\/choosing-structure-new-zealand-business-sole-trader-partnership-or-company\/\">structuring your business<\/a> as a company include that:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400\">you are not personally liable for risk &#8211; the company itself is;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">it is easier to keep your business assets and personal assets separate;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">your tax rate is lower than individual rates;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">it is easier to sell a company because it is a separate legal entity; and<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">the company is not tied to one person, so it can grow even after that person is not involved anymore.<\/span><\/li>\n<\/ul>\n\n\n\n<div  class=\"box box--icon box--info\">\n    <p><span style=\"font-weight: 400\">For example, if you run an e-commerce or technology startup planning to scale nationally or internationally, setting up a company helps structure your ownership and protect personal assets while attracting investors.<\/span><\/p>\n<\/div>\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        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The relationship between partners is governed by a partnership agreement, which sets out:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>each partner\u2019s contribution (capital, time, or skills);<\/li>\n\n\n\n<li>how profits and losses will be divided;<\/li>\n\n\n\n<li>how decisions are made and disputes resolved; and<\/li>\n\n\n\n<li>what happens if a partner wants to leave.<\/li>\n<\/ul>\n\n\n\n<p>Unlike a company, a partnership is not a separate legal entity. This means partners are personally liable for the debts and obligations of the business. Each partner is also an agent of the partnership, so they can enter into contracts that legally bind all partners.<\/p>\n\n\n\n<p>Partnerships are often used by professionals such as architects, lawyers, accountants, or consultants who share resources and clients but want a straightforward structure without complex reporting.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Benefits of a Partnership<\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400\">Some benefits of running your business as a partnership include that:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400\">it is relatively simple and cost-effective to run;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">there are usually fewer financial reporting obligations;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">you can offset some losses against other sources of personal income;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">there are fewer administrative fees to set up a partnership;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">costs and responsibilities are shared between partners; and<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">you can share the load of running a business and therefore specialise according to each partner\u2019s strengths.<\/span><\/li>\n<\/ul>\n\n\n\n<p>However, partners must carefully manage risk. Because all partners are jointly liable, one partner\u2019s mistake or debt can affect everyone. For this reason, many partnerships eventually convert into companies as they grow or take on greater financial commitments.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Comparison Between a Partnership and a Company Structure<\/span><\/h2>\n\n\n\n<figure class=\"wp-block-table is-style-stripes\"><table><tbody><tr><td><strong>Comparison<\/strong><\/td><td><strong>Company<\/strong><\/td><td><strong>Partnership<\/strong><\/td><\/tr><tr><td><strong>Liability<\/strong><\/td><td><p><span style=\"font-weight: 400\">Companies have to complete annual returns for the Companies Office and make regular financial reports to Inland Revenue. This includes tax returns, ACC invoices for the company, and updating their business information on the NZBN register.<\/span><\/p><\/td><td>\n<p><span style=\"font-weight: 400\">Partners are personally liable for all business losses, and personal assets may be at risk.<\/span><\/p>\n<\/td><\/tr><tr><td><br><strong>Set-Up Requirements<\/strong><\/td><td>\n<p><span style=\"font-weight: 400\">A company has to register at the Companies Office, register a name and pay the associated fees.&nbsp;<\/span><\/p>\n<\/td><td>\n<p><span style=\"font-weight: 400\">Partnerships need to apply for an IRD number, get an NZBN and should enter into a partnership agreement.<\/span><\/p>\n<\/td><\/tr><tr><td><strong>Annual Reporting Requirements<\/strong><\/td><td><p><span style=\"font-weight: 400\">Companies have to complete annual returns for the Companies Office and make regular financial reports to Inland Revenue. This includes tax returns, ACC invoices for the company, and updating their business information on the NZBN register.<\/span><\/p><\/td><td>\n<p><span style=\"font-weight: 400\">Partners need to file annual tax returns for the partnership and each partner, make ACC payments for each partner and update business information on the NZBN register.<\/span><\/p>\n<\/td><\/tr><tr><td><strong>Shutting Down<\/strong><\/td><td>\n<p><span style=\"font-weight: 400\">Companies require a shareholder resolution to close and need to inform both IRD and the Companies Office.<\/span><\/p>\n<\/td><td>\n<p><span style=\"font-weight: 400\">Partnerships need a partnership resolution to close and need to inform IRD.<\/span><\/p>\n<\/td><\/tr><tr><td><strong>Selling On<\/strong><\/td><td>\n<p><span style=\"font-weight: 400\">You can change shareholders and investors of a company by selling shares, without having to close the company itself.<\/span><\/p>\n<\/td><td><p><span style=\"font-weight: 400\">Companies have to complete annual returns for the Companies Office and make regular financial reports to Inland Revenue. This is in addition to tax returns, ACC invoices for the company, and updating their business information on the NZBN register.<\/span><\/p><\/td><\/tr><\/tbody><\/table><\/figure>\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\/2023\/06\/09144127\/NZ-Due-Diligence-Guide-Cover.jpg\" alt=\"Front page of publication\"\n                 loading=\"lazy\" width=\"208\" height=\"298\">\n                <section>\n            <div class=\"text-2xl font-bold\">Due Diligence Guide for Purchasing a NZ Business<\/div>\n            <div class=\"body-text\">\n                <p>This guide will walk you through the due diligence process when purchasing a NZ business.<\/p>\n            <\/div>\n            \n\n<a href=\"https:\/\/go.legalvision.co.nz\/nz-due-diligence-guide.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\"><span style=\"font-weight: 400\">Key Takeaways<\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400\">Partnerships and companies are both viable business structures if they suit the nature of your business. If your business is small and you are not planning on massive growth, a partnership may be more suitable for you. <\/span>However, i<span style=\"font-weight: 400\">f your business has multiple owners and you are planning on growing with further investment, a company may be more appropriate. <\/span><\/p>\n\n\n\n<p>I<span style=\"font-weight: 400\">f you would like more information or help with your business structure, <\/span>our experienced <a href=\"https:\/\/legalvision.co.nz\/business-lawyers-lp-new-zealand\">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-1606880228344\"><strong class=\"schema-faq-question\"><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong>What is a company?<\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong> <p class=\"schema-faq-answer\">A company is a way that you can structure your business. You create a separate legal entity and name it, and that company holds your assets and gains profit. A company is managed by directors and owned by shareholders.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1606880258379\"><strong class=\"schema-faq-question\"><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong>What is a partnership?<\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong> <p class=\"schema-faq-answer\">A partnership is when you and another person or organisation partner together and run a business. This is usually set out in a partnership agreement, and you split the profits and debts accumulated through your commercial dealings.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1606880271477\"><strong class=\"schema-faq-question\"><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong>What is better, a partnership or a company?<\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong> <p class=\"schema-faq-answer\">Both business structures have their benefits and can be useful in different ways, depending on the nature of your business. If you intend for your business to grow and gain investors, and there are multiple owners, then a company would be more suitable. If your business is smaller and only a couple of you own it, then a partnership may be better for you.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1606989773267\"><strong class=\"schema-faq-question\"><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong>Can a partnership become a company?<\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong> <p class=\"schema-faq-answer\">You can decide to change your business from a partnership to a company. First, you would need to dissolve the partnership, and then go through the registration process of creating a company.<\/p> <\/div> <\/div>\n","protected":false},"excerpt":{"rendered":"<p>How you decide to structure your business is one of the most important considerations when you are getting things set up. The structure you choose, whether it is a sole trader, partnership, or company, affects your legal obligations, tax responsibilities, ability to raise capital, and personal risk exposure. In New Zealand, the three most common<a href=\"https:\/\/legalvision.co.nz\/startups\/partnership-and-company-new-zealand-business-structures\/\">Continue reading <span class=\"sr-only\">&#8220;Partnership vs Company Structure in NZ&#8221;<\/span><\/a><\/p>\n","protected":false},"author":13550,"featured_media":813,"comment_status":"open","ping_status":"open","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":"","_relevanssi_noindex_reason":"","editor_notices":[],"footnotes":""},"categories":[4,10],"tags":[24,30,62,101,201],"class_list":["post-937","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-structures","category-startups","tag-startup","tag-company","tag-business-structure","tag-partnership","tag-company-structure"],"acf":[],"yoast_head":"<!-- This site is optimized with the 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You create a separate legal entity and name it, and that company holds your assets and gains profit. A company is managed by directors and owned by shareholders.","inLanguage":"en-NZ"},"inLanguage":"en-NZ"},{"@type":"Question","@id":"https:\/\/legalvision.co.nz\/startups\/partnership-and-company-new-zealand-business-structures\/#faq-question-1606880258379","name":"What is a partnership?","acceptedAnswer":{"@type":"Answer","text":"A partnership is when you and another person or organisation partner together and run a business. This is usually set out in a partnership agreement, and you split the profits and debts accumulated through your commercial dealings.","inLanguage":"en-NZ"},"inLanguage":"en-NZ"},{"@type":"Question","@id":"https:\/\/legalvision.co.nz\/startups\/partnership-and-company-new-zealand-business-structures\/#faq-question-1606880271477","name":"What is better, a partnership or a company?","acceptedAnswer":{"@type":"Answer","text":"Both business structures have their benefits and can be useful in different ways, depending on the nature of your business. If you intend for your business to grow and gain investors, and there are multiple owners, then a company would be more suitable. 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