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