For the past 3 weeks, we have looked into steps to take to start a business in New Zealand. The country of New Zealand makes it easy to complete these steps with online tools and information that can be found in our last 3 articles. One of the first steps in setting up a business in this country is deciding which business structure fits your proposed business the best. In a previous article, we promised to look more closely at the choices of business structures in New Zealand. We will do that in this article. Most businesses here are either known as a sole trader, a partnership, or a limited liability, as explained by New Zealand Now.
Sole Trader Business Structure
The sole trader, just as it sounds, is someone who operates their business all by themselves. Although they are allowed to hire employees, the sole trader is in full control of the business as the manager and owner of the business. Any profits brought in are the sole property of the trader, however, he or she is also liable for all of the costs, including debts and business taxes due. No paperwork is usually needed to establish a sole trader business, but they will typically become limited liability businesses when they grow. There are more benefits and protections offered to those who start off as companies, so some may choose to do that instead.
Partnership Business Structure
For those who are either farmers or business professionals, New Zealand now explains that partnerships are the most common business structure. This allows the entrepreneur to share the expenses of running a business in New Zealand when many people are working out of the same office. Any business which is registered as a partnership does not have to pay income taxes but distributes all of the profits to each of the partners who then pay their own taxes.
A formal partnership agreement is used to establish most partnership business structures. Any potential conflicts and contingencies should be covered by this agreement in case there is ever a dispute about what the partners all agreed on. An entrepreneur does not need to register in order to start a partnership business in the country. Although this is still a common structure, many now choose to register as a company, once again for the benefits.
Limited Liability Business Structure
With a limited liability business structure, your business would be a legal entity by itself with its own rights that are separate from those of its owners and shareholders. The liability for any loss for the shareholder is limited by how much their share of the company is. There are exceptions to this rule, however. Considered the county’s most successful business structures, limited liability is popular among those who are starting a business in New Zealand. For more information, be sure to check out the New Zealand Now website and read more about starting a business in New Zealand on the Ministry of Business site.
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