When it comes to starting a business, apparently we have it the easiest in the world! New Zealand repeatedly hits the number one spot in the annual World Bank Economy rankings, so it doesn’t come as a surprise that almost 60,000 new businesses were registered in 2017. A figure that is rapidly increasing year on year. A Kiwi entrepreneurial journey may have less hurdles than the rest of the world, but there are still legal obligations.
As with any new business venture, it is recommended that you seek the help of a lawyer and accountant who have a good knowledge of the local legal, accounting and taxation structure. This article looks at the main legal obligations faced by new business owners, but will only touch the surface. For personalised advice, contact MBC Law.
Choosing the correct business structure is very important, and is certainly not a one-size fits all scenario. In New Zealand, there are three main structures: Sole Trader, Partnership and Limited Liability. There are different tax rates for different structures and they will each afford you different benefits. It is important that you understand your business goals and long-term plan so you can choose a structure that will be most beneficial, and offer the most protection. Your lawyer will act as an objective adviser to help you identify the pros and cons specific to your situation.
All corporate businesses or companies must register their name with the Companies Office. This process can be done online for a small fee. Your company name does not have to be the same as your trading name. For example, you could have number of eateries trading under different names, umbrellaed under the same company name. Your company name is a legal entity so needs to be written in full on all documents. For more information on business names and trademarks, check out our article.
As a business owner, you must pay tax. New Zealand is a desired business opportunity because of the lack of payroll, social security and capital gains tax, but income tax, ACC and GST returns are no exception. Register your business with the Inland Revenue and know your tax obligations. If you are operating as a sole trader, you may wish to use your personal IRD number. Tax can take a while to complete and approve, but is essential before you start operating as a business.
New Zealand employees have more rights than most countries, and as well as employment rights, employers need to be well versed in occupational health and safety. A strong contract must be upheld between the employer and employee to protect both parties. Employers can easily find themselves in hot water by not following the correct protocol. Your lawyer can help with your employment agreements and help you keep on top of employment laws.
Your industry will have its own set of legal obligations, regulations and best practice that must be adhered to. Depending on your line of work, you may need specific qualifications or licenses before you trade. The Auckland Council have a list of business licenses here. If you are operating from a premise, you may have to apply through your local council to approve your business activity. Each authority will have its own rules and regulations.
Following correct protocol and best practice will hopefully avoid any major legal action taken against your company. If you are offering a product or service, you must understand and uphold New Zealand consumer laws.
Social media has allowed businesses to access a market like never before, but unfortunately, it also has the potential to damage a reputation in seconds. It is important for all business to follow a procedure to minimise any damage caused by online reviews and avoid any online battles which may result in a legal dispute.