{"id":965,"date":"2020-12-08T22:55:50","date_gmt":"2020-12-08T22:55:50","guid":{"rendered":"http:\/\/nz.legalvision.com.au\/?p=965"},"modified":"2024-05-21T15:28:07","modified_gmt":"2024-05-21T02:28:07","slug":"operating-partnership-business-in-new-zealand","status":"publish","type":"post","link":"https:\/\/legalvision.co.nz\/business-structures\/operating-partnership-business-in-new-zealand\/","title":{"rendered":"How to Start and Operate a Business Partnership in NZ"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">If you want to set up a business with one or more partners, there are a few options available to you. You should carefully consider how to best structure your business, as this can save you time and money in the future. Notably, you should think about whether a partn<\/span>ership<span style=\"font-weight: 400\">:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400\">i<\/span>s the<span style=\"font-weight: 400\"> right <\/span>business structure<span style=\"font-weight: 400\"> for you;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">i<\/span>s the<span style=\"font-weight: 400\"> the best way to handle your taxes; and<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">what is involved in setting up o<\/span>ne in New Zealand<span style=\"font-weight: 400\">.<\/span><\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">This article walks you through the pros and cons of entering into a partnership to help you decide whether it is right for you. It also lists some of the <a href=\"https:\/\/legalvision.co.nz\/startups\/startup-partnerships\/\">legal and financial implications<\/a> of choosing this business structure in New Zealand.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">What is a Partnership?<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">In a partnership, you share the ownership, control and profits and losses from your business with at least one other person. Partners often have an equal share in the business, unless this has been structured differently in your partnership agreement.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This<span style=\"font-weight: 400\"> structure is appealing to businesses that operate in industries like:&nbsp;<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400\">law;\u00a0<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">accountancy; and\u00a0<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">farming.\u00a0<\/span><\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Is it Best to Have a General or Limited Partnership?<\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">Whether you should establish a general or limited partnership will primarily <a href=\"https:\/\/legalvision.co.nz\/business-structures\/manage-partnership-challenges\/\">depend on your circumstances<\/a>. In a general partnership, partners:&nbsp;<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400\">generally own and run the business themselves; and\u00a0<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">are personally liable for the debts of the business.\u00a0<\/span><\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">You can also have sleeping partners who invest in the business but do not take part in the everyday decision-making process.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">Limited partners, on the other hand, contribute capital to the b<\/span>usiness<span style=\"font-weight: 400\"> but do not take part in managing i<\/span>ts<span style=\"font-weight: 400\"> operations. In a limited partnership, you are only liable for debts up to the amount that you invest in the business. As with companies, you have:&nbsp;<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400\">to register your limited partnerships with the New Zealand Companies Office; and\u00a0<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">different legal and tax obligations.<\/span><\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Do You Need a Written Partnership Agreement?&nbsp;<\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">As in any relationship, partnerships can turn sour pretty quickly and resolving a dispute can be costly. Therefore, it is a good idea to create a <\/span><i><span style=\"font-weight: 400\">partnership agreement<\/span><\/i><span style=\"font-weight: 400\"> before you start carrying out your business activities. This document sets out clear rules for all partners, including:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400\">what each partner\u2019s responsibilities are;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">the share each partner holds in the business;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">how you will distribute income to each partner;\u00a0<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">what property the business owns (such as intellectual property, client lists and premises);<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">how to resolve disputes between partners; and<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">how one or all partners can exit or sell the business.<\/span><\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">Unlike a general partnership, you are legally required to have an agreement for limited partnerships. T<\/span>hese<span style=\"font-weight: 400\"> can be complex documents, so it is a good idea to seek help from a business lawyer.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Is a Partnership Right for You?<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">Before you enter into a partnership, you should consider whether you:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400\">want to share the responsibilities of owning and running the business with others;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">are comfortable with putting your personal assets at risk;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">ddo you plan to sell your business in the future; and<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">will require any large loans or debts for your operations.<\/span><\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">For example, suppose you are an accountant looking to start a business, which is unlikely to involve any large costs or debts. If you would like to share the responsibilities of owning and running the business with others, <\/span>setting up your practice with one or multiple partners<span style=\"font-weight: 400\"> could be beneficial for you. You will need to accept personal responsibility for any losses and you may need legal help if you decide to sell your business in the future.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">If you are uncertain as to any of the considerations listed above, you should get advice from a lawyer or accountant that specialises in this area.&nbsp;<\/span><\/p>\n\n\n\n<div class=\"box box--info box--icon\">\n<p><span style=\"font-weight: 400\">Tip: If you manage assets or provide financial services for your clients, you might need to follow new rules designed to detect and prevent money laundering in New Zealand.&nbsp;<\/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 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However, it is the b<\/span>usiness<span style=\"font-weight: 400\">, rather than individual partners, who claim any operational expenses you incur.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">Partners are subject to personal income tax on their share of the partnership profit. New Zealand individual tax rates are progressive or gradual, which means they increase as your income increases. The top personal tax rate is currently 33% for income over $70,000<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">From a tax perspective, a general partnership structure may be riskier than a limited o<\/span>ne<span style=\"font-weight: 400\"> or a<\/span> <span style=\"font-weight: 400\">company. This is because, as a general partner, you are personally liable for any partnership debts which puts your personal assets at risk. However, depending on your circumstances, you can mitigate this risk through:&nbsp;<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400\">looser financial reporting and compliance requirements; and\u00a0<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">the ability to offset losses against other personal income.\u00a0<\/span><\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">A tax lawyer can help you answer these questions and structure your business in the most cost-effective way.&nbsp;&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">At the end of each financial year, all partners have to file an individual tax return (IR3) with Inland Revenue (IRD). Additionally, the b<\/span>usiness<span style=\"font-weight: 400\"> has to file a partnership tax return (IR7).&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">As with sole trader and company structures, you have to register your partnership and pay GST if you expect to earn more than $60,000 a year.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">These requirements can change with updates to government policy. When deciding whether you need to register for GST, always refer to the <a href=\"https:\/\/www.ird.govt.nz\/gst\/what-gst-is\">IRD website<\/a> or talk to your tax lawyer.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">How to Set Up a Partnership<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">There are a number of key tasks that you need to do to set yourself up as a partnership. These include:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400\">choosing a business name and protecting your IP (you can check if your business name, web domain, trademark and social media usernames are available with <\/span><a href=\"https:\/\/www.business.govt.nz\/onecheck\"><span style=\"font-weight: 400\">One Check<\/span><\/a><span style=\"font-weight: 400\">);<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">creating a thorough l<\/span>egal<span style=\"font-weight: 400\"> agreement;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">applying for a <\/span><a href=\"https:\/\/www.nzbn.govt.nz\/get-an-nzbn\/get-your-nzbn\"><span style=\"font-weight: 400\">New Zealand Business Number<\/span><\/a><span style=\"font-weight: 400\"> (NZBN) (there is no additional cost associated with this, all you need is an IRD number and proof of identity);<\/span><\/li>\n\n\n\n<li>s<span style=\"font-weight: 400\">ett<\/span>ing<span style=\"font-weight: 400\"> aside funds to cover your tax obligations, including GST if you earn over $60,000 a year (the b<\/span>usiness<span style=\"font-weight: 400\"> will need to register for its own IRD number);<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">registering with IRD as an employer if you hire staff (your spouse, de-facto partner or civil union partners require further approval to work in the business);<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">registering with ACC (your levy depends on the type of work that each partner will be doing and there are additional charges for employees);\u00a0<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">setting up a business bank account to avoid getting your personal and business expenses mixed up; and<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">deciding on the best system to manage your finances.\u00a0\u00a0<\/span><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Key Takeaways<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400\">Setting up and running your business as a partnership in New Zealand is relatively easy. However, before you choose a structure, consider whether this is the best outcome for you by thinking about the legal and financial implications of your choice. Notably, when you <\/span>chose this business<span style=\"font-weight: 400\"> structure, you share the ownership and control of your business with your partners. You will need to decide whether to structure your partnership as a general or limited o<\/span>ne<span style=\"font-weight: 400\">. Finally, it is a good idea to s<\/span>ign a legal<span style=\"font-weight: 400\"> agreement to clearly set out the rules for all partners. This will help to avoid disagreements later down the track. If you need help deciding on your company structure or setting up a partnership, contact <a href=\"https:\/\/legalvision.co.nz\/business-lawyers-lp-new-zealand\">LegalVision\u2019s business lawyers<\/a> on 0800 005 570 or fill out the form on this page.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">FAQs<\/span><\/h2>\n\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1606880228344\"><h3 class=\"schema-faq-question\"><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong>What does <strong><strong>business <strong><strong>partnership<\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong> <strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong>mean?<\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/h3> <p class=\"schema-faq-answer\">A partnership is a business structure that allows you to share the ownership, control and profits and losses with other people. A partnership is an alternative to setting up your business as a sole trader or a company.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1606880258379\"><h3 class=\"schema-faq-question\"><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong>What is an example of a business <strong><strong>partnership<\/strong><\/strong>?<\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/h3> <p class=\"schema-faq-answer\">A partnership structure generally appeals to businesses operating in industries like law, accounting and farming.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1606880271477\"><h3 class=\"schema-faq-question\"><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong>What are the advantages of operating a business <strong><strong>partnership<\/strong><\/strong>?<\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/h3> <p class=\"schema-faq-answer\">A partnership structure is beneficial if you want to share the responsibilities and costs of running a business with other people. This also allows each partner to focus on their specialty and bring in new business.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1606989773267\"><h3 class=\"schema-faq-question\"><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong>How do I set up a business as a partnership?<\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/h3> <p class=\"schema-faq-answer\">You can set up a partnership by choosing a business name and applying for an NZBN. You can then register with IRD and notify them that you will hire staff. Finally, you will need to register with ACC and set up a business bank account. It is also a good idea to create a thorough partnership agreement.<\/p> <\/div> <\/div>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n","protected":false},"excerpt":{"rendered":"<p>If you want to set up a business with one or more partners, there are a few options available to you. You should carefully consider how to best structure your business, as this can save you time and money in the future. Notably, you should think about whether a partnership: This article walks you through<a href=\"https:\/\/legalvision.co.nz\/business-structures\/operating-partnership-business-in-new-zealand\/\">Continue reading <span class=\"sr-only\">&#8220;How to Start and Operate a Business Partnership in NZ&#8221;<\/span><\/a><\/p>\n","protected":false},"author":13217,"featured_media":869,"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":"205128,213097,218280,204715,209499,207042","_relevanssi_noindex_reason":"","editor_notices":[],"footnotes":""},"categories":[4],"tags":[24,25,101,111],"class_list":["post-965","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-structures","tag-startup","tag-small-business","tag-partnership","tag-partnership-agreement"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Operating as a Partnership in New Zealand | LegalVision New Zealand<\/title>\n<meta name=\"description\" content=\"Are you looking to start a partnership in New Zealand? 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