Starting up a new business?
Sole Trader
Usually used for trades people such as painters, electricians etc
- Use personal bank account
- Use of your own tax/IRD number
- Net profit taxed at individual tax rates
- Doesn’t involve any legal requirements
- Sole traders become personally liable for all debt etc
- Due to the business not being set up legally you can directly be sued by customers
Partnership
Usually used for people who wish to join assets & skills into the same business e.g. rental properties etc
- 2 or more people
- Requires bank account
- Requires IRD number
- Have an unlimited liability business agreement
- Profits shared between partners
- Partners must return their share of profit in individual tax returns
- Low cost set up costs
Net profit taxed at individual tax rates
Companies
Usually used for those wishing to attract investors & keep their personal assets separate
- GST registration
- Requires bank account
- Requires IRD number
- Is a separate legal entity
- Must be incorporated with the companies office
- Profit can be distributed to shareholders or stay in company and be taxed @ 28 cents in a dollar
- Establishing a company can safeguard it’s investors/shareholders
- More costs involved to set up
Can some times require legal advice
Trusts/Estates
Usually formed to transfer an asset or money set aside for children, grandchildren etc
- Requires a bank account
- Requires IRD number
- A settlor, trustee & beneficiaries are nominated
- Legal costs involved, these can be ongoing costs