Getting started
People start companies for different reasons and at different stages of business.
Some people thrive on launching businesses and will do so several times over their careers. For others, it may be the next step in a journey that started as a one-person, sole trader business, or you may be a contractor who sees the benefits of operating as a registered company.
Before you start, make sure you know:
- why you’re starting a company
- if it’s the best structure for your business.
Registering your company
Starting a company is a simple process in New Zealand compared to many other countries, but there are legal obligations you must meet and processes to follow.
You must register your company with the Companies Office. This is known as incorporating a company.
To register your company online:
- sign in to the Companies Office website with your RealMe® login – if you don’t have a RealMe login, you can create one
- check the company name you want is available
- reserve the name you want
- register your company.
When you register a company, it will automatically get an New Zealand Business Number (NZBN). This is a unique identifier. Using it will speed up your interactions with government, suppliers and customers and other businesses – for example, when sharing invoicing details.
Keeping your information up to date
Your company must file an annual return with the Companies Office each year to confirm it’s still operating as a company.
If you don’t file your annual return each year, your company risks being removed from the Companies Register.
An annual return is not a tax return or a financial statement. It includes the:
- company’s address
- names and addresses of its directors and shareholders
- details of its ultimate holding company, if applicable
- general filing information – for example, month the company files its annual return each year.
There’s a small fee to file an annual return. You can file online on the Companies Office website (you’ll need a RealMe® login).
People in your company
Directors
Every company must have directors, even if there is only one. You must tell the Companies Office who your company’s directors are and provide details about them.
Shareholders
You may own the whole company or share ownership with other people who’ve invested in it. Every company must have at least one share and one shareholder, with a record of this on the company’s own share register.
In some companies, one person or a group may own all the shares. Other companies list their shares on the stock exchange where the public and other companies can buy them.
If you take on investors or decide to sell the company, you can do this by selling some or all the shares. No matter how many shareholders your company has, you must decide how many shares the company will have.
You must give this information to the Companies Office when you register your company. It’s a good idea to set out these things in a shareholder agreement. An advisor can help you do this.
Staff
Many companies start out with only the owners working in the business, but you may need to hire people to help you grow.
If you hire staff, you must register as an employer with Inland Revenue.
A company with staff has obligations to:
- government – for example, handling ACC and tax
- its employees – for example, health and safety and legal employment agreements.
Company constitutions
A company constitution sets out:
- the rights, powers and duties of the company
- its board, director and shareholders.
You don’t have to have a constitution, but it may be useful in the future as your company changes. You can always adopt a constitution later.
It’s a good idea to get legal advice when creating or changing your company’s constitution.
Anti-money laundering rules
You might need to meet rules to detect and prevent money laundering and the financing of terrorism if you’ll be doing one or more of these tasks:
- managing money or assets for clients
- providing trust or company services
- selling real estate
- providing conveyancing services
- handling large amounts of cash.
These rules affect the records you need to keep and how you must identify customers.
Sorting your company's finances and legal obligations
Set up the right tools to manage your money
There’s a lot to keep track of when it comes to your company’s finances. Before you get started, look into tools that can help such as online accounting software or working with a bookkeeper or accountant. Many offer free trials or a one-off advice session so you can figure out what’s right for your business.
Know what it means to be a limited company
When you set up a company, it becomes its own legal entity. That means your personal liability is limited to the value of your shares. You’ll often see “Ltd” at the end of company names. This structure helps protect your personal assets if the business runs into trouble.
Understand how company tax works
Your company pays tax on its profits, that’s your income minus expenses, at a flat rate of 28%.
If you pay out profits to shareholders as dividends, they’ll pay tax on that income too, but they can use the company’s tax as a credit.
If you’re a shareholder in a small company, you might also take drawings (a loan from the company) or pay yourself a shareholder-employee salary. You’ll need to pay tax on that income yourself.
If your company makes a loss, it won’t pay tax for that year.
Claim business expenses to lower your tax
You can claim many of your day-to-day business costs to reduce your company’s tax bill. The more you claim, the less tax you’ll pay so it’s worth knowing what you can and can’t claim.
Keep good records
You need to keep accurate and complete business records for at least seven years. That includes things like bank statements, proof of income (including cash), receipts for expenses, and your cashbooks.
Getting advice when starting a company
People often start a business because they want to make a living from certain skills they have. However, you can’t be an expert in all areas of business, for example, day-to-day finances or business planning, as well as your specialist area — and you shouldn’t have to try to be. Think about getting advisors, for example, accountants, mentors and lawyers, to help you from an early stage.
ACC
When you start a company, you automatically get ACC personal injury cover from day one.
You don't need to pay for this until after you submit your first tax return.
What you pay will be based on your company's business activity.
Look-through companies
If your company meets certain requirements – for example, five or fewer shareholders – you can ask Inland Revenue to become a look-through company.
This means your company will be taxed like sole traders or partnerships. Shareholders pay tax on the company profits at shareholders’ tax rates.
Losses can be assigned to shareholders to reduce how much tax they must pay, or the look-through company can carry the losses forward into the next financial year.
Look-through companies must file a tax return (IR7) every year.
Learn more about