Once you’ve decided how you’ll make a difference in the world, you’ll need to set things up. Your set-up will affect how your business runs and what sort of funding you can get. Your set-up will be like the foundation for a house: sitting out of sight but holding everything up.
Kiwi businesses can have different structures, each with different legal and financial obligations. Businesses that want to make a difference can have any legal structure, but the two most common choices are charitable trust and limited liability company. Both allow you to register for charitable status (which means becoming a charity) if that’s right for your business.
A charitable trust is a good way to look after your business assets (eg income or property) so they’re always used for doing good. A legal document sets out what the trust’s assets can be used for. This means your overall purpose is embedded in how your business is legally set up.
To become a charitable trust, your business must exist mainly to do one of these things:
This structure might be for you if you’ll get half or more of your income from grants and donations. Talk to a lawyer or your accountant to decide. You’ll also likely need legal help to set up and manage the trust.
About charitable trusts (external link) — Companies Office
A limited liability company (also known simply as a ‘company’) is a good structure if you:
This legal structure limits what shareholders are responsible for.
A limited liability company can have a constitution. This is a legal document that sets out the rights, powers and duties of your company, your directors and your shareholders. You can use this document to set out how your business will do good. This means your overall purpose is embedded in your core legal document.
You’ll need to register your limited liability company with the Companies Office.
Starting a company(external link) — Companies Office
The right business structure will determine how your business operates and what sort of funding you can get. Talk to an accountant, a lawyer, or both to ensure you make the best choice.
Jessica Palalagi, Capability Enabler at Ākina Foundation
Twins Maria and Marta want to create clothing that has a positive impact on the world. They intend every part of their tee shirt business to be as ethical as possible. This means sourcing sustainable materials, preventing pollution and reducing waste during production. They also decide to employ teenage parents to sew the tee shirts, to give youth in their local area jobs and experience.
Maria and Marta weigh up the pros and cons of different types of business structures. Because their business is of benefit to the community, they consider a charitable trust. This would work well if they wanted to seek funding through grants, which they feel sure they could find. It would also mean they may not need to pay any tax. On the other hand, it would stop them from getting investment by giving away shares of their business.
The twins want to prove that businesses can be truly ethical and positive while also being profitable. They know a growing number of consumers are making ethical choices, and will pay more for ethically made tee shirts. And they know some investors want to put their money where it can make a difference. The twins are keen to look for shareholders.
Maria and Marta set up a limited liability company. They’ll use their purpose to market their business to possible shareholders and their tee-shirts to customers. They hope their story will inspire other businesses to do good too.
A good name summarises what your business is about and sticks in customers’ minds. Take time to choose something that represents you well. Make it unique and easy to say.
Being a registered charity has many benefits and a few obligations. Think carefully about whether charitable status will help or hinder your ability to fulfil your overall purpose.
If your business structure is:
Talk to an accountant, a lawyer, or both if you need help deciding.
Charitable purpose(external link) — Charities Services
Benefits and obligations of being a registered charity(external link) — Charities Services
Apply for registration(external link) — Charities Services
Make sure your most important documents set out the impact you want to make. This makes your good intentions core to how your business operates, so you stay on track.
A constitution is a legal document that sets out the rights, powers and duties of your company. You don’t have to have a constitution, but if you do you must follow it.
Writing or changing a constitution(external link) — Companies Office
Shareholders are people who own parts of your business. If you have shareholders, you’ll need an agreement that sets out how they operate and interact.
Consider how you’ll report on the difference you make in the world. Reporting helps to keep you on track and shows commitment to your purpose. It also helps investors see the value of their investment.
Knowing what and how to measure is the first step to clear reporting.
A New Zealand Business Number (NZBN) is a unique identifier for your business. It’s a single place to record all your key info, like your trading name, phone number and email address.
If you register as a limited liability company with the Companies Office, you’ll automatically get an NZBN. If you have any other sort of business structure, you can register for an NZBN online. It’s free.
Talk to your bank to find out what’s available. Be sure to keep your business banking separate from your personal banking.
Your business will need to comply with regulations relevant to your industry. It’s important to get familiar with all your responsibilities, eg for hiring and managing staff, paying tax, keeping people healthy and safe and protecting consumers’ rights.
Browse the rest of business.govt.nz for other advice. Or use our Compliance Matters tool to narrow things down by topic, industry and business structure.
The insurance you need depends on the nature of your business. No policy covers everything, so think carefully about the sort of risks you face. Talk to an insurance broker if you need help deciding.
These can help you gain knowledge and credibility, plus connect with like-minded people.