Sole traders, partnerships and companies are the most common business structures in New Zealand, but there are other options. If you’re thinking about using one of these other structures, make sure you get professional advice.
The most common company structure is a Limited Liability Company, but other company structures exist.
The shareholders of an unlimited company have ultimate liability, meaning they must pay any debts the company can’t pay. This liability is included in the company’s constitution.
Unlimited companies are used to meet very particular, often foreign, legal requirements.
Co-operative companies are limited liability companies that are owned and controlled by the members.
Choosing a type of company for your business (external link) — Companies Register
A trust is created when a person (called the settlor) transfers property to named people (trustees) to be held for the benefit of people chosen by the settlor (the beneficiaries).
The settlor outlines how they want the property to be dealt with, and trustees have to follow those directions. Usually there are instructions around managing and protecting the property for the beneficiaries.
A trust is given a name, and is often referred to as though it’s a separate entity – like a company – but it’s not. Businesses aren’t normally run through a trust, but a trust can be part of a business structure. If you’re thinking of doing this, make sure you talk to a lawyer and accountant first – it’s complex.
Charitable trusts can be set up by any individual or group to benefit a charitable cause. You should get advice from a lawyer before deciding if this is right for what you want to do.
Charitable trusts (external link) — Companies Office
Incorporated societies are best for things like sports clubs, social clubs, music and cultural groups, special interest and purpose organisations.
An incorporated society is a group or organisation that has been registered under the Incorporated Societies Act 1908 and, when incorporated, is authorised by law to run its affairs as if it were an individual person. This means that the members are not personally liable for the society's debts, contracts or other obligations, and members do not have any personal interest in any property or assets owned by the society.
Incorporated societies (external link) — Companies Office
Limited partnerships are different from unincorporated partnerships because they involve general partners, who are liable for all the debts and liabilities of the partnership, and limited partners, who are liable to the extent of their capital contribution to the partnership.
What a limited partnership is (external link) — Companies Office
An industrial and provident society usually involves small business owners who operate independently but create the society for mutual benefits, for example, a co-operative taxi society with independent operators benefiting from a shared car insurance scheme.
About the Industrial and Provident Societies register (external link) — Companies Office
A friendly society is formed to help members and their families during sickness, old age or widowhood. Funds come from the voluntary subscriptions of members and/or donations.
About Friendly societies (external link) — Companies Office
A building society is a mutual organisation (owned by its members) that offers financial services, like mortgages, to its members. Funds are raised by selling shares to members, who usually pay for them by subscription over time.
About Building Societies (external link) — Companies Office
Credit unions are financial organisations owned by members, that provide savings and loan facilities for members. A common bond must exist among the members, eg living in a particular area or being employed by a particular employer. Members invest their savings and receive a dividend.
About the Credit Unions register (external link) — Companies Office