Setting up a business
Congratulations! You’ve been inspired to set up your own small business and be mistress of your own destiny. It’s an exciting time – and it can be fun, too, if you know what to do, how and when to do it, and what pitfalls to watch out for.
The red tape and the work required to get started can occasionally make your head spin, but be inspired by the success of other businesswomen, many of who are mothers just like you. And like you, they had to start somewhere.
Basic steps to starting a small business in New Zealand
- Market research: Conducting market research will allow you to determine if there is a demand for your product. Read our Market Research article for more information on how to do this.
- Business plan: One of the most important steps when starting a business is Writing a Business Plan.
- Accountant: It’s always a good idea to get advice from an accountant before starting a business. Ask other small businesspeople to recommend a good one that specialises in your industry and/or small business.
- Finance: Make sure you have enough money to finance your small business during start-up. If you don’t already have the money to get started you may decide to borrow money from friends, family or a commercial lender, such as your bank. Alternatively, you may find someone who is willing to invest money for a share of eventual profits.
- Name your business: Put some thought into what your business, products and services should be called. For some great tips, read our article on Naming a Business.
- Register your business: If you’re planning on setting up as a sole trader or partnership you will need to notify the IRD so they can either record you are self employed or register your partnership. If you are planning to set up a company you must Register a Name and incorporate your company with the Companies Office of New Zealand.
- Open a bank account: Check out who offers the best rates and benefits for cheque and savings accounts. It’s best to go to a local branch so you can talk to someone in person and build a working relationship with them.
- Get an IRD number and register for GST: You can use your existing personal IRD number if you plan to operate as a sole trader or partnership. If you don’t have an IRD number you can apply for one though the Inland Revenue Department. Any New Zealand business that turns over more than $60,000 during any 12-month period must register for payment of the Good and Services Tax (GST). You can also do this through the Inland Revenue Department. You must register when your income exceeds $60,000, not when your profits reach that amount, otherwise you might have to pay fees and penalties later on. If you are planning on setting up a company, you’ll need a separate IRD number because a company is considered a separate legal entity and pays company tax. When you form a company with the Companies Office you can apply for a GST and IRD number at the same time.
- Fair Trading Act: Make sure you’re aware of your obligations under the Fair Trading Act. Go to the New Zealand Commerce Commission website for more information.
- Protect your idea: Ensure that you’re the legal owner of your idea. Read our article, Protecting your Idea, for more information.
- Marketing and Networking: Once you have the basics sorted you can move on to the more exciting things such as Creating a Website, Blogging and Social Media, Networking and Marketing.
Which business structure is right for you?
When it comes to choosing the right business structure it’s best to talk it over with your accountant before making a decision. The three main options are:
- Sole trader: This is the simplest and easiest option. There isn’t much paperwork and if you use your own name you don’t have to register the business name. There are tax advantages, too, which your accountant can explain to you. There are also less stringent reporting obligations compared to other structures. On the down side, you’re personally responsible for all debts, which means your personal property could be vulnerable.
- Partnership: This means there are joint owners of your business. It could be a friend, a family member or anyone else with the same goals as you. You are both responsible for decisions made on behalf of the business. To avoid arguments and other problems, it’s a good idea to have a partnership agreement that covers issues like the amount of money each of you contributes to the business, salaries, roles and responsibilities, and how the profits are divided.
- A Limited Liability Company: This type of company has one, two or multiple shareholders and is more expensive to set up and maintain. The big benefit is that you’re protected from personal liability. You’ll need an accountant and a lawyer, so take their fees into account.
For more information on the various business structures and the pros and cons of each, visit the website on Starting Up A Business from the New Zealand Government.
Running your own business is hugely rewarding in many ways; the ability to spend more time with your family, be your own boss and achieve financial independence are just a few of the many things you can look forward to!
For more information related to starting your own business, view our articles on How to Write a Business Plan and Naming a Business.