Starting a business in New Zealand requires making several important decisions, and one of the most crucial is selecting the appropriate business structure. This choice affects everything from your tax obligations and personal liability to your ability to raise capital and how you’ll manage the day-to-day operations of your venture.
With more than 500,000 businesses operating across New Zealand, most fall into three main structural categories: sole trader, partnership, or company. Each offers distinct advantages and considerations that can significantly impact your business journey.
When establishing a business, it’s essential to choose a structure that aligns with your goals, resources, and the nature of your operations. The structure you select will have far-reaching implications for the legal standing of your business, your tax obligations, and your personal responsibility for business debts and liabilities.
The sole trader structure remains the most straightforward option for many New Zealand entrepreneurs. As a sole trader, you and your business are considered the same legal entity, which offers both advantages and potential drawbacks.
Operating as a sole trader means you maintain complete control over all business decisions and operations. You can use your personal IRD number for tax purposes, and there are minimal paperwork or registration requirements to get started. This makes it an attractive option for those testing a business concept or working in freelance capacities.
However, this structure comes with unlimited personal liability. This means your assets—including your home, car, and savings—could be at risk if your business encounters financial difficulties or legal troubles. Additionally, as the sole decision-maker, you might find it challenging to take time away from the business or access larger amounts of funding for expansion.
Many tradespeople, consultants, and creative professionals opt for this structure during their initial business phases due to its simplicity and low setup costs. It’s particularly well-suited for businesses with lower risk profiles or those not requiring significant capital investment.
A partnership involves two to 20 people sharing responsibility for a business. Under this structure, partners contribute skills, resources, and capital while sharing in profits, losses, and decision-making according to their partnership agreement.
This structure offers the advantage of pooled expertise and resources, which can be especially valuable when partners bring complementary skills to the table. Like sole traders, partnerships are relatively straightforward to establish and run from an administrative perspective, though they do require a separate IRD number for the partnership itself.
Each partner pays tax individually on their share of the partnership’s income, which can offer some flexibility in distributing income. However, in standard partnerships, each partner bears unlimited liability for the business’s debts—even those incurred by other partners. This means one partner could potentially be held accountable for the entire business’s obligations.
Partnerships often work well for professional service firms like accounting practices, legal offices, or consulting groups where practitioners want to combine their expertise while maintaining a relatively straightforward business structure.
A company structure creates a separate legal entity distinct from its shareholders and directors. This separation provides the key benefit of limited liability, protecting your assets from business obligations in most circumstances.
Companies in New Zealand must register with the Companies Office and comply with various statutory requirements, including having at least one share, one shareholder, and one director. This director must either reside in New Zealand or live in Australia and be a director of an Australian company.
The company structure offers significant advantages for businesses planning substantial growth or seeking external investment. It’s easier to raise capital by selling shares, and ownership can be transferred more readily than in other business structures. Companies also tend to have more credibility with customers, suppliers, and potential business partners.
However, establishing and maintaining a company involves higher costs and more administrative requirements. Companies pay tax at the corporate rate of 28% on their income, and shareholders pay tax on any dividends they receive. There are also ongoing compliance obligations, including filing annual returns and financial statements.
Many growing businesses transition to a company structure once they’ve established market viability or when they require additional investment to expand. It’s particularly suitable for businesses with higher risk profiles or those planning significant growth.
When deciding which structure best suits your business, consider several key factors:
It’s worth noting that your initial choice isn’t permanent—many successful New Zealand businesses evolve their structure as they grow and their circumstances change. What begins as a sole trader might transition to a partnership as the founder brings on a business partner, and later convert to a company structure as the business expands further.
Given the significant implications of your choice, consulting with an accountant or legal professional before making your decision is highly recommended. They can provide tailored advice based on your specific circumstances and objectives.
The right structure should support both your current operations and your future ambitions, creating a foundation upon which your business can thrive in New Zealand’s dynamic business environment.
Companies Office of New Zealand. (2025). Before you set up a company.
Business.govt.nz. (2025). Choose your business structure.
Inland Revenue. (2025). Business income tax.
New Zealand Institute of Chartered Accountants. (2025). Business Structures Guide.
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