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As an accountant, you have a lot of flexibility regarding how you want to work and set up your business. While you may be familiar with many large accountancy firms, there are a range of options available if you want to form your own business. These include operating as a sole trader and as a partnership with other accountants, which can offer different advantages compared to a company. This article will detail some considerations as to what business structure to choose as an accountant. It includes setting up as a sole trader, a partnership, and weighing up the different options. 

Accountants as Sole Traders

Suppose you are an accountant looking to work for yourself and take on clients with minimum fuss or administration. In that case, it may be most attractive to begin working as a sole trader immediately. Sole traders are a type of business that maximises flexibility and ease. As the name suggests, you have sole charge of the business and any profits. You also do not need to worry about the administrative burden of forming a company and making annual reports in the same way that a company does. For these reasons, many accountants find that a simple sole trader approach suits them and what they want from their business. 

On the other hand, there are also disadvantages to operating as a sole trader. It is important to note that you are personally liable for all debts that your business might accrue as a sole trader. This liability is unlike a limited liability company. Therefore, your personal assets, such as your car or house, will be at risk if things go wrong in your business. 

Additionally, while you control all profits, you are similarly responsible for all debts. Alternatively, a company is a better way of protecting your personal assets if you want to take on finance or outside investment for your accountancy. An added disadvantage of a sole trader is that it is tough to grow past a certain point without expanding your business and taking on additional stakeholders. However, this may not be a problem for many accountants.

Accountants in Partnership

A partnership is also an underrated way of operating as an accountant in New Zealand. A partnership structure will see you join forces with other accountants to start a business collectively. Note that there is no set requirement for the number of accountants you wish to partner with.

A partnership means that you will share responsibility and control of the business with other partners. Additionally, a partnership agreement will detail how each party will manage these responsibilities and resources. Therefore, it is imperative to have a partnership agreement that all the prospective partners agree with and are comfortable with.

Further, the benefit of a partnership structure is that getting a group or pair of people together can make it easier to start a successful business. This is because you can share the load and stress of getting a business off the ground. Likewise, each partner will also benefit from shared resources and skills. 

However, there are also some risks. For instance, in a partnership, you will be held personally responsible for any debt or liability in the business, similar to sole traders. Although in a partnership, you are also responsible for any debts or liability that other partners incur in the business. This liability can be problematic if something goes wrong with a partner or if one of your partners makes poor business decisions on the partner’s behalf. 

Other Business Structures

There are other business structures to also consider as an accountant looking to form a business. Companies are generally the standard type of business structure and offer advantages, particularly in limiting your personal liability. However, there is always the option to transition to a company structure later in your business’ lifespan. 

You should think about what your business goals are and how you want to work. Depending on the kind of accountancy you want to manage and how you want to work, different business structures will be more or less effective. There is no silver bullet solution for accountants due to the flexible nature of the work. 

Key Takeaways

As an accountant in New Zealand, you have several options regarding forming your business and operating in the future. A sole trader structure maximises your business’ flexibility and lets you get off the ground easily and with minimum fuss. A partnership structure is perfect if you have other accountants you want to go into business with and who you can trust. However, there are also situations where a company structure is the best option. Ultimately, the decision will depend on your long-term business goals. 

For more information about choosing the right business structure as an accountant, contact LegalVision’s business lawyers on 0800 005 570 or complete the form on this page.

Frequently Asked Questions

What is the right business structure for an accountant?

There is no right business structure for an accountant as the work and services required can be so diverse. Some accountants have very successful partnerships, while sole traders and companies can also flourish.

Can your personal assets be at risk in a partnership?

Yes, your personal assets can be at risk in a partnership structure if the business incurs too many debts or other liabilities.

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