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Have you ever dreamed of being your own boss? Have you ever wanted to do a job that plays a vital role in sustaining communities around New Zealand? Are you a passionate, hard worker with a good idea? If so, starting a small business may be for you.

You may be wondering what the difference between a start-up, large business and small business is. Unlike larger businesses, small businesses usually have less than 20 people. Additionally, small businesses do not have an entrepreneurial idea but intend to enter a pre-existing market. This is different from a start-up, which is typically centred around an entrepreneurial idea.

New Zealand is a nation that thrives on small businesses. They play an essential role in sustaining communities and the economy overall. However, starting a new business is never an easy task, and you will face many challenges throughout your journey. Nevertheless, being prepared to do market research and starting strong can be hugely beneficial for the success of your new business. Read on for some tips to help with your dream of starting a small business

Finding Your Unique Selling Point

When creating a small business, you will be entering a pre-existing market. Thus, there will be plenty of competition. Make sure that you have a unique selling point for your business. Summarise it into a few sentences, and make sure that you communicate your business idea clearly to potential customers and investors.

A clearly-defined unique selling point will also be handy for your social media presence. Businesses benefit greatly from having an excellent social media presence, as it expands your reach and grants you control over the way you display your business. Making sure that your unique selling point is part of your social media brand is a fantastic way to gain traction. 

Choosing a Business Structure

When starting a small business, you will need to think about what business structure you want. Your business structure will affect how you pay tax, who you need to register with, and what costs you may have to register your business. The best business structure depends on who is involved and what works best for you and your business.

If you want to start your business as an individual, you may consider becoming a sole trader. Importantly, if you are working as a sole trader, you do not need to register your business for tax.

If two or more people are involved with running the business, you may want to consider becoming a partnership.

Finally, if you want to register your business as a separate legal entity, you should consider registering as a company with the Companies Office. Operating a company means that creditors will not use your personal property to pay off your company’s debts and liabilities.

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Understanding Your Obligations 

When starting a small business, you will need to register for several things. It is best to get onto these early so that you have everything started when you begin operating. 

When you decide on your business’s name, you should do a ONECheck to ensure that no other business is currently operating with that name. Once you have decided on your name, you should register with the Companies Office (if you are a company) or the NZBN (sole trader or partnership).

Suppose you are operating a partnership or company. In that case, you should also make sure that you register your business with Inland Revenue to ensure that you can do your tax reporting. On the other hand, if you are a sole trader, you can use your existing IRD number.

Certain types of businesses will have additional licensing requirements. For example, if you are selling alcohol, food or drink, you will need additional licensing. Check with your local council to see which regulations apply to you.

Funding Your Business

Starting up a small business is an expensive venture. You will likely need to buy equipment and stock, hire staff and pay for a workspace. Additionally, you will need to pay for compliance and regulatory costs. Working out where you will get your money from is an essential part of beginning a business, but can be highly challenging. There are a few different ways to get financing for your small business.

Most commonly, people think their best funding avenue is through the bank. However, often banks view small businesses as very risky. Therefore, they are reluctant to lend to small businesses.

If they do, they may ask for property or other significant goods as collateral. Putting up property as collateral is a challenging decision for small business owners, as if your venture fails, you may lose your personal property.

If you choose this route, make sure you develop a robust business plan and keep records of your business and finances. This will give banks a good idea of your projected success as a business and mean that they are more likely to give you a fair loan.

Furthermore, some small business owners wish to fund small businesses with their own money. This could be a good idea if you are in a partnership, where there will be multiple people involved with the business who can help with funding.

Using your finances means you will not have to repay the money or any other investors in your business, and you will retain total control of your business. If you think that this is the best avenue for you, it is good to start saving early.

Additionally, some government agencies, philanthropists and companies provide funding to help small businesses if you fit their criteria. Thus, you should research online and on government agency websites to see which would be suitable for you.

Key Takeaways

Starting a small business is an exciting but highly challenging venture. You will need to make sure that you are well prepared when starting your business and have thought about some essential things. Understanding what structure your business will take and how you will fund your business are significant first steps. Ensuring that you comply with tax and other regulations is vital before starting your business. Most importantly, make sure that you have a unique selling point for your business and that you can use this to bring in new customers and investors.

If you need help with starting a small business, our experienced business lawyers 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 0800 005 570 or visit our membership page.

Frequently Asked Questions

Do I need an IRD number for my business if I am operating as a sole trader?

No. If you are a sole trader, you and your business are the same entity. So, you can use your personal IRD number as your business identification number. 

Are banks the only way that I can receive funding for your small business?

No, banks are one way that you can finance the beginning of your business. But, they are likely to need significant collateral as part of your loan. Therefore, you can also look into other types of funding from government agencies or philanthropists. Finally, you can also use your personal capital to help set up your business. 

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