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As a consultant, your body of work can take all kinds of different forms. With the flexibility and variety of running a consultancy, it is vital to have a business structure that aligns with your business aims and goals. Ultimately, what business structure is right for you will depend on what kind of consultant you are looking to be, which may change over time. This article will set out three considerations when thinking about your business structure as a consultant in New Zealand. These include the:

  • flexibility of a sole trader arrangement; 
  • possibility of partnering with other consultants; and 
  • underlying importance of long-term goals. 

Starting Your Consultancy as a Sole Trader

It is very common for new consultants to start their business, emphasising flexibility. This is particularly if they are doing so part-time while continuing to work in another role. If this is the case for you, a sole trader structure can make a lot of sense. Beginning work as a sole trader is very fast and cheap. You have complete control over your business. Likewise, you do not need to worry about the formalities or costs associated with other structures, such as forming a company. The flexibility of a sole trader structure can be helpful as you gauge whether consulting is right for you. 

There are still some downsides to operating as a sole trader to note. For example, you are personally liable for all debts that your business might accrue, unlike a limited liability company. This can place your personal assets at risk, such as your car or house if your business cannot meet its debts. There can also be tax advantages of other business structures that you cannot access as a sole trader. However, you can also change your consultancy business structure in the future. 

Partnering With Other Consultants

Some consultants may find that working closely with other consultants is the best way to get a successful consulting practice off the ground. Structuring your business accordingly, as a partnership, will have significant consequences for how your business develops. Of course, a partnership like this can have pros and cons. 

In a partnership, you will share ownership and control of the business with other partners. Hence, you can benefit from the skills, experience and resources the others can bring to bear. However, you will also be liable for their decisions in the business and financially liable if the partnership runs up significant debts that it cannot meet. 

Additionally, as a consultant working in a partnership, you should pay particular attention to the partnership agreement that will govern the business’ relationship and structure. You should make sure you reflect your interests in the document. Importantly, you want to be comfortable with working closely with the other partners. 

Consider Your Consultancy’s Long Term Goals

When thinking about the best structure for your consultancy, you should think about your long-term aims and goals. Contemplating your business goals is vital, even if currently, your business only consists of you doing some part-time consulting. 

Different structures will make sense depending on what you are looking to get out of your consultancy. For instance, if you think you will only ever do part-time consulting work, you may only need a flexible sole trader arrangement. On the other hand, you may have ambitious goals to grow your consultancy and take on outside investment and finance. In that case, a company is the right vehicle to position your business for that growth. There is no right or wrong answer – it will depend on your personal goals. 

Key Takeaways

A range of business structures can make sense for you as a consultant. The question of which structure is the best structure for you will depend on what you are looking for out of your consultancy work. For instance, if you are only starting with a little bit of consulting, you may only need a sole trader’s flexible and cheap structure. However, if you are looking for future growth and investment, a company structure may be best. Partnerships can also be a great option if you have partners you trust and are happy to go into business with. However, be sure to have a robust partnership agreement in place. 

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

Frequently Asked Questions

If I structure my consultancy as a sole trader, do I still need to pay GST?

Yes, you will need to pay GST as soon as you think your revenue will be over $60,000 over a 12-month period. If you are operating as a sole trader, these GST obligations are the same as other structures.

What are the advantages of partnering with other consultants in a partnership?

Other consultants will bring their skills, time and resources to bear in a strong partnership. This can give you additional perspectives and capacity to grow your business, and you can share the journey with others in the process.

What are the risks or challenges of partnering with other consultants in a partnership?

The key risk is that you are putting a lot of trust in your partners. You will be responsible for the debts that the partnership accrues in most cases. The partnership will only work if you can maintain a good and productive working relationship with the other partners.

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