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Starting a cleaning business in New Zealand can be a profitable venture if you structure things wisely and plan ahead. It is essential to think about the type of clients that you would like to target and the variety of services that you will offer to these clients. For example, will you focus on residential properties or office buildings? Will you provide carpet cleaning and window cleaning services, or will you recommend a contractor? These decisions will influence other vital areas, such as: 

  • how much finance you will need to startup your business;
  • whether you will buy or hire your equipment;
  • whether you will employ staff, hire subcontractors or work by yourself; 
  • how you will structure your business; and 
  • how you will protect your assets. 

This article will explain the main steps to start a cleaning business in New Zealand, as well as some of your legal and tax requirements as a business owner. 

Choose a Legal Structure 

If you will be doing most of the cleaning yourself, you may be tempted to operate as a sole trader because it is the easiest and cheapest legal structure to set up and manage in New Zealand. However, there are other common structures, such as companies and partnerships, which may be more suited to your business. 

For example, if you operate as a company, you can limit your personal liability towards the debts of the business and your tax rate is lower than personal rates. As a company, it is also easier to:

  • grow and sell your business in the future; and 
  • get funding and investment.

Set Up Your Cleaning Business 

From choosing a name to sorting out your finances, there are several tasks that you need to complete before you start a business in New Zealand. It is relatively easy and quick to complete these setup tasks using various Government’s websites. 

Choose Your Business Name 

Before you choose a name for your cleaning business, you need to make sure that it is available for use. If your name is the same or too similar to another business’, you could run into legal trouble. You can check whether your name is available by conducting a background check with ONECheck

ONECheck allows you to check the availability of your:

  • business name;
  • web domain;
  • trade mark; and 
  • social media usernames. 

If your business name is free for use, you can also use ONECheck to reserve it, register a domain name or get started with your trade mark.

Register Your Business

Once you have a name, you need to register your business with the NZBN Register or the Companies Office. While NZBN registration is not compulsory for sole traders, partnerships or trusts, it has some benefits. For example, it makes it easier to interact with your suppliers and customers and frees up time you would otherwise spend on administrative tasks.  

Companies are required by law to register with the Companies Office. To incorporate your company, you have to:

  • create an online services account;
  • reserve a company name; and 
  • pay a fee. 

As part of your registration process with either the NZBN or the Companies Office, you will receive an NZBN number. This unique identification number differentiates your business from others and makes it easier for you to liaise with other companies and government agencies. 

Sort Out Your Finances 

Your cleaning business startup costs can quickly add up when you factor in costs like marketing, website development, insurance premiums and legal and accounting advice. On top of these costs, you may also need to purchase a vehicle, equipment and cleaning products.

It is a good idea to work out how much money your business will need to survive until you start breaking even. You can use the business.govt.nz free template to create a business plan and apply for financing if your budget is limited. 

Before you start receiving payments from your clients, you will need to set up a business bank account. Many banks offer startup business packages that include a:

  • transaction account (to collect money into and make payments from);
  • savings account (to put aside your tax payments as you go); and
  • business credit card.

You will also need to register your business with Inland Revenue and get an IRD number for your business unless you operate as a sole trader and use your personal IRD. As a business owner, you are responsible for meeting your tax obligations which may include: 

  • filing annual tax returns;
  • paying provisional tax; 
  • registering and charging GST; and
  • registering as an employer and making PAYE and other deductions from your employees’ salaries such as Kiwisaver.

You are also responsible for keeping accurate records. You can use an accounting system to automate most of your record-keeping tasks and minimise the chances of making an error. This will also free up your time to focus on other areas of the business. You should talk to your accountant to help you choose a system that suits the needs of your business.

Protect Your Assets

It is also essential to get adequate insurance cover to safeguard your business assets. At a minimum, you should consider getting public liability insurance to protect you if you: 

  • suffer an injury that is not covered by the ACC; or 
  • accidentally damage your client’s property from spilling chemicals or solvents or breaking glass. 

Buy or Hire Your Equipment 

Depending on the type of cleaning business that you run, buying your equipment and products can represent a significant startup expense, once you factor in the purchase of a vehicle as well. If you operate as a sole trader, you may not be able to borrow money easily to finance the purchase of your equipment. However, you can hire them on an as-needed basis. 

When you hire your cleaning tools, you need to sign a hire purchase agreement. This allows you to use them for a period of time by paying in instalments, and you can sometimes buy them at the end of your lease. If you have the money to purchase your equipment, avoid over capitalising until you get a better understanding of your needs.

Your Service Agreement 

Before you provide services to a new client, it is crucial to agree on the expectations of each party and how to protect your business if these expectations are not met. You can do this by asking your client to sign a service agreement. By entering into a contract with your client, you can lock in the price that they will pay for your services, which makes things easier to resolve if any disputes arise.

When agreeing on the type of services that you will provide, you should specify the areas you will be cleaning, and the types of cleaning you will do. You should include as much detail as possible in this section, as having an unclear scope of work is often the cause of legal disputes. 

Key Takeaways 

From registering your business to sorting out your finances and getting your equipment, there are a few tasks you need to do when you start your own cleaning business in New Zealand. You should: 

  • check that your desired business name is not already in use and register it;
  • register your business with the NZBN or Companies Office and get an NZBN number; 
  • open a transactional and savings bank accounts;
  • understand your tax obligations and set up a system to keep accurate records;
  • decide whether to buy or hire your equipment; 
  • get insurance for your business; and
  • have a well-drafted legal contract in place to protect your business.

If you need help with setting up your cleaning business or reviewing your service agreement, contact LegalVision’s business lawyers on 0800 005 570 or fill out the form on this page.

FAQs

How do I start a commercial cleaning business? 

To start a commercial cleaning business in New Zealand, you need to choose a business name, decide on a legal structure and register your business with the NZBN or Companies Office. As a business owner, you are responsible for understanding and meeting your legal and tax obligations. These will depend on your business structure, whether you employ staff and how much revenue you expect to earn. Before you start providing your services, you will need to buy or hire your equipment and get insurance to protect your assets and yourself. It is best practice to set up separate business bank accounts and a system to keep accurate accounting records. 

What type of business is a cleaning company? 

You can structure your cleaning business as a sole trader, partnership or company. Each of these legal structures has its own advantages. You can limit your personal liability and have a lower tax rate when you operate as a company, share the control and management of your business when you start a partnership or minimise your startup costs and keep all the profits when you operate as a sole trader. However, make sure you factor in the disadvantages of each structure into your decision.

Do I need a licence for my cleaning business?

You do not need any specific licences or qualifications to become a cleaner in New Zealand. However, your clients may request police or medical checks, security clearances or regular drug and alcohol tests. You will also need a valid driver’s licence to travel to your clients’ residence or offices. You can choose to complete a New Zealand Certificate in cleaning at Level 2 or 3, but this is not required.

How do I get clients for my cleaning business?

Depending on the type of clients that you are planning to target (residential or commercial) and on the catchment area of your business, you should use a mixture of paid advertising (online and offline), email and mail campaigns, local promotions and referrals.

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