Business Structures in New Zealand

Understanding different business entity types and their implications

Sole Trader

Simplest business structure where you operate as an individual

Advantages

  • ✓ Easy to set up
  • ✓ Complete control
  • ✓ Simple tax obligations
  • ✓ Low compliance costs

Disadvantages

  • ✗ Unlimited personal liability
  • ✗ Limited growth potential
  • ✗ Difficulty raising capital
  • ✗ Business ends with owner

Partnership

Business owned by two or more people sharing profits and responsibilities

Advantages

  • ✓ Shared responsibilities
  • ✓ Combined skills and resources
  • ✓ Simple structure
  • ✓ Shared financial burden

Disadvantages

  • ✗ Unlimited liability
  • ✗ Shared profits
  • ✗ Potential conflicts
  • ✗ Joint responsibility for debts

Limited Company

Separate legal entity with shareholders and directors

Advantages

  • ✓ Limited liability protection
  • ✓ Easier to raise capital
  • ✓ Perpetual existence
  • ✓ Tax advantages

Disadvantages

  • ✗ More complex setup
  • ✗ Higher compliance costs
  • ✗ Public disclosure requirements
  • ✗ Double taxation potential

Trust

Legal arrangement where trustees hold assets for beneficiaries

Advantages

  • ✓ Asset protection
  • ✓ Tax planning benefits
  • ✓ Succession planning
  • ✓ Privacy protection

Disadvantages

  • ✗ Complex structure
  • ✗ High setup costs
  • ✗ Ongoing compliance
  • ✗ Limited flexibility

Key Considerations

Liability

Consider your personal liability exposure and asset protection needs

Tax Implications

Different structures have varying tax obligations and benefits

Compliance Requirements

Some structures require more reporting and administrative work

Growth Plans

Consider how easy it will be to expand or bring in investors

Control

Determine how much control you want to maintain over decisions

Choosing the Right Structure

Selecting the appropriate business structure is crucial for your success. Consider factors such as:

  • Your business goals and growth plans
  • The level of personal liability you're comfortable with
  • Tax implications and planning opportunities
  • Compliance requirements and administrative burden
  • Ability to raise capital and bring in partners

Getting Professional Advice

Business structure decisions have long-term implications. It's advisable to consult with:

  • Business lawyers for legal implications
  • Accountants for tax considerations
  • Business advisors for strategic planning

Need Help Choosing a Business Structure?

Our business lawyers can help you select the right structure for your needs.

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