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New Zealand is a nation full of entrepreneurs and innovators, many of whom are looking to start their own business. Having a good business idea is the first step. The next is turning your business plan into a real, active business. This article sets out some of the key steps to starting your own small business in New Zealand. 

Choosing a Business Structure

When you are starting a small business, you will need to decide how to structure your business. There are different types of business structures available. Likewise, each structure has its own unique legal, financial and tax obligations. You should choose a structure that is the best option for your particular business model. Three of the most popular business structures for small businesses in New Zealand are sole traders, companies and partnerships.

Business Structure Sole Trader Company Partnership
Description An individual running a business A separate legal entity running a business Two or more people (or entities) running a business
Advantages
  • cheap and easy to establish;
  • you have full control and financial benefit of the business; and
  • you can offset losses against other income.
  • limited liability for the shareholders;
  • the corporate tax rate is lower than personal tax rates;
  • scalable and flexible to expand; and
  • able to receive investment.
  • relatively low set-up and maintenance costs;
  • partners can share the load of running a business; and
  • partners can offset losses against other income.
Disadvantages
  • you are liable for all debts, so your personal assets may be at risk; and
  • it is difficult to expand.
  • greater set-up and maintenance costs; and
  • increased complexity and greater regulation for companies.
  • each partner is jointly and severally liable for the partnership’s debts. Hence, each partner’s personal assets may be at risk, and you may be responsible for other partners’ debts.

Securing a Business Name

You will likely be running your business under a business name or trading name. This is the name that potential customers and clients will use to identify your business, services or products. 

Firstly, you should conduct a ONECheck search to see if your business name is available. Once you decide on a business name, you should register that business name on the Companies Office (if you are operating a company) or with NZBN (if you are a sole trader or a partnership).

Domain Names and IP

Registering a business name is not enough to secure your brand and its IP. Searching ONECheck will also show you whether domain names, trademarks and social media usernames related to your business name are available. 

Additionally, you should register domain names and social media usernames for your business. You should also consider registering a trademark for your brand name and logo so that you can protect your brand. 

You may be running your business through a company. In this case, you should enter into an IP assignment agreement with the company. This agreement will make clear that the company will own any IP you personally create that relates to the business and has rights to use this IP for the business.

Business Registrations

Once you have established your company structure, you should also register for a New Zealand Business Number, the unique identifier for every New Zealand business. 

You will also need an IRD number so that your business can do its tax reporting.

You should also consider whether other business registrations are required. For example, you will need to register for GST if your business is earning more than NZ$60,000 each year.

Consider Any Regulations Which Apply

Depending on your industry or region, particular regulations will apply to your business’s operation. These may include fair trading regulations, consumer guarantees, privacy, food and drink licensing and health and safety regulations.

Consider Any Relevant Legal Documents

Furthermore, you will need various legal documents to conduct your business. What documents are necessary will depend on what type of business you run and who you are contracting with. Some legal documents that your business may need include:

  • customer terms and conditions;
  • website terms of use;
  • privacy policy;
  • supplier agreements;
  • employment agreements; and
  • contractor agreements.

It is essential that you have the correct legal documents for your business. Likewise, it is best practice to engage a professional to assist in preparing these documents so they can be tailored specifically for your business. Having robust contracts which manage your business risk is one of the best ways to prevent claims and disputes arising.

Key Takeaways

Starting a small business for the first time is a daunting but very exciting task. There are a lot of steps to establishing your new business and protecting its brand. Therefore, it is important to get legal advice to establish your business structure correctly and that the right contracts are in place to protect your business.

If you need assistance with starting a small business, you can contact LegalVision’s New Zealand business lawyers on 0800 005 570 or fill out the form on this page. 

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. From just $119 per week, get all your contracts sorted, trade marks registered and questions answered by experienced business lawyers.

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