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Whether you are starting a marketing agency to provide creative and digital services to your clients or a real estate agency to sell your clients’ properties, it is essential to consider your legal responsibilities as an agent. As an agent, you may act on behalf of others. Knowing the rules can help you avoid any potential legal disputes with your clients. 

When you start a new agency in New Zealand, you will have to make decisions such as: 

  • which services to offer; 
  • how to structure your agency; and 
  • how to charge your clients. 

This article explains the main steps to get your business off the ground and some of your legal and tax obligations as an agent.

What Is an Agency?

An agency is a business that provides one or more services to others. In some instances, agents act on behalf of a person, a group or another organisation. 

For example, some common types of agencies include: 

  • marketing and advertising agencies;
  • recruitment agencies;
  • modelling agencies;
  • real estate agencies; and
  • travel agencies.

Define Your Agency Service Offering  

Before you start making marketing or resourcing decisions, you need to think about how your agency fits in the marketplace and how you will differentiate yourself from your competitors. 

For example, will you operate as a full-service digital marketing agency, or will you specialise in social media? Will you serve clients from all industries, or will you focus on a specific niche like professional services?

An essential step in defining your service offering is creating a business plan. This document will help you: 

  • explain your business idea, goals and strategy to potential investors and other stakeholders; and 
  • manage each stage in the life of your business. 

As part of your analysis, you will need to:

  • identify opportunities in the marketplace; 
  • understand your competitors and target market; and
  • determine the profitability of your niche. 

Choose Your Business Model 

Your agency’s business model will depend on your industry and how you charge your clients for your services. 

Real estate agencies typically charge their clients a commission of the property’s final sale price. Marketing and advertising agencies often use a labour-based fee model to structure their pricing. Under this pricing model, you will calculate an hourly fee, based on the number of full-time employees that you will need to complete the project. This calculation should factor in the cost of the employee and your agency’s profit margin. You can also choose to charge a flat rate and offer your services at a monthly or yearly rate. This is particularly useful for clients that are in a retainer. 

When you start a new business in New Zealand, you have to complete a list of setup tasks, including:

  • choosing a name for your business; 
  • protecting your name and brand by registering a trade mark with IPONZ;
  • deciding on a legal business structure (company, sole trader or partnership) and registering your business with the NZBN or Companies Office;
  • getting an IRD number for your business and complying with your tax obligations such as filing a tax return every year and registering for GST if you estimate to earn NZ$60,000 in any twelve-month period; 
  • getting insurance for your business; and
  • complying with any other industry-specific regulations. 

Decide on a Location for Your Agency

Depending on the nature of the services that you provide, you can choose to work remotely or to have a physical location. 

For example, if you want to start your digital marketing agency on a small scale, you may want to consider working remotely to enjoy the benefits of:

  • lower overheads;
  • better work-life balance; and
  • access to a global pool of talent.

If you decide to run your business from home, you will have different obligations.

For example, you will need to: 

  • design procedures to ensure that they can manage their health and safety when working from your or their home if you employ staff;
  • keep accurate records if you plan to reduce your tax liability by claiming a portion of your household expenses; and
  • comply with local zoning and signage regulations that may apply to your home-based business.

Hire Skilled Labour and Know Your Employer Obligations

To run your agency successfully, you will need to hire skilled labour. You should start with a small team that meets the core areas of your service offering and expand it as your business grows. 

As an employer, you have essential legal and tax responsibilities towards your employees. These include: 

  • providing written employment agreements;
  • offering correct terms based on their employment type (permanent, fixed-term or casual);
  • making certain deductions from your employees’ salaries (PAYE, student loan, child support and KiwiSaver) and pay these to IRD; and
  • working with your team to implement procedures that minimise any work-related health and safety risks in your home or theirs.

Understand Your Legal Agreements

In addition to your employment contracts, other legal agreements are vital to your agency’s day-to-day operations. 

For example, if you have a modelling agency, you will act on behalf of your models to enter into agreements with other businesses. Therefore, you need to ensure that your relationship with your models and the companies you work with are clearly outlined and understood in your agency agreement.

If you are running a digital agency, your service agreement will be one of the key legal documents for your business. This agreement details how and on what terms you will be providing services to your clients. You need to outline your obligations and what work you will complete in as much detail as possible. 

Create a master services agreement that you can use for all your clients and simply adapt the statement of work (the list of what particular services you will be providing and the timeline for these) each time. 

Real estate agents may choose a sole agency or general agency agreements to set out the terms of their relationship with their clients. When you sign a general agency agreement, you can market multiple properties for various clients, but you will only receive a commission if you sell a property. A sole agency agreement, on the other hand, gives you the exclusive right to market and sell a property.

Key Takeaways

From choosing a business structure to understanding your legal obligations, there are several essential tasks to complete when you start an agency in New Zealand. These include: 

  • defining your service offering and profiling your potential clients; 
  • choosing your business model and pricing strategy; 
  • registering your business and getting an NZBN; 
  • deciding on a location for your business; and
  • understanding your legal requirements. 

If you need help with setting up your agency or drafting your service agreements, contact LegalVision’s commercial lawyers on 0800 005 570 or fill out the form on this page.

FAQs

How do I start my own agency?

To start your own agency in New Zealand, you need to complete several tasks. These include defining your service offering, choosing a business model and pricing structure, registering your business as a sole trader, partnership or company and getting an NZBN, choosing a location for your business and registering with Inland Revenue.

How do agencies charge their clients?

Your fee structure depends on the type of agency. For example, real estate agencies typically charge their clients a commission of the property’s final sale price. Marketing and advertising agencies, on the other hand, generally charge an hourly or flat rate to complete specific projects.

What is a general agency agreement?

This agreement is typically used by real estate agencies to set out the terms between the seller and the real estate agency that sells the property. It gives the agency the right to market the property for sale.

How do you cancel a sole agency agreement?

If your sole agency agreement is for a residential property, you or the vendor can cancel the contract any time after 90 days. If you sell the property before the agreement expires, you are entitled to receive a commission, as set out in the agency agreement.

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