How to Start a Business in New Zealand

Our Product Market Fit guide is a good starting point if you already have a product or service. If you don't, writing a business plan is a good place to start, and the excellent Xero business plan template guide helps you work through the essentials. Still, what’s on paper doesn’t really map on to the real world. To best evaluate your business idea, look at the potential competitors and see how they operate. You’ll need to know as much as possible about the specifics of what you’re operating and where it will be located.

For example, if you’re planning to open a café, spend a day or two making time to count the number of customers who visit other cafes in the area you want to open in. You need to measure footfall to get a reliable estimate of potential customers, as well as count the number of neighbouring parking spaces ascertained. To make an informed decision, you’ll need to know rent costs, the number of competing neighbours (i.e. other cafes), busy times (for staff planning) and countless other factors. Starting a new business takes considerable time and effort, and no decision should be rushed.

Bonus tip: No matter what your business is, an online presence is really important. You’ll want to be as close to #1 on Google as possible with a website.

Essential information: how popular is my business idea?
Before you go ahead, it’s useful to know how many people use Google each month to find a business like the one you’re proposing, and how much competition there is.

• The Google Adwords tool is free to use – just register and navigate on the ‘search volumes’ functionality, setting the location to ‘New Zealand’. You can then search by any keyword to see the volume. For example, ‘Screen Printing Auckland’ receives between 1,000 to 10,000 searches a month, whereas ‘Chiropractor Tauranga’ gets 100 to 1,000 a month.
• While this isn’t a science, it does help you plan if you’re planning to start a standard trade or service-based business.
• This excellent guide explains the entire process in detail.

Have passion, and perseverance will follow
To build a successful business, you need to have sales and passion for what you’re doing. If you’re going into real estate because you think that’s where the money is (but don’t care about homes and property), then it’s probably going to be hard to attract customers. The same applies to cafes – a passion and love for creating atmosphere and great food means you’ll enjoy what you do and strive to be the best. Starting a business to make money as the number one priority is, arguably, tricky to do.

Know this first - you don’t have to register as a company when you start a business. You can operate your business as a Sole Trader, Partnership or Limited Liability Company. A company offers the most protection, but it might not be necessary, depending on your business needs and plans. We’ve outlined the pros and cons of each business type below:

1. Sole Trader
Pros:

• Simple to set up, with no registration fees. You invoice your customers either in your name or the name of the business. 
• No company tax - PAYE is how you pay tax, and you can deduct relevant business-related expenses.

Cons:

• No limited liability - you'll be liable for all debts if your business fails
• Harder to raise money, take on business debt and expand

2. Partnership
Pros:

• Businesses as partnerships do not have to pay income tax; each partner files the profits or losses of the business on his or her own personal income tax return.
• Easy to establish.
• There is an increased ability to raise funds when there is more than one owner.

Cons:

• No limited liability - you and your partner will be liable for all debts should your business fail
• Partnerships aren't as easy to grow as companies if you need to borrow or bring in additional capital. 

3. Limited Liability Company
Pros:

• No liability for debts (unless personal guarantees are held over your business). Unlike a sole trader or partnership structure, you won’t be liable for the debts. Usually, when a business goes bust, their usual creditors are
• Professional presence – being called ‘McNeill & Co Plumbing Ltd’ is more professional than being known as ‘Matt McNeill the Plumber’.
• Easier to raise money and grow (compared to sole trader and partnership structures)

​Cons:

• More compliance; you’ll have to manage company accounts as well as make your own tax return. There is also an upfront registration fee (around $200) 
• Be aware that expanding your business using debt will mean you'll need to give personal guarantees. Per this Stuff.co.nz article, the true nature of the personal guarantees on things like bank debt, business contracts, property leases, car leases and even printer leases that have rendered the term "limited liability company" largely meaningless.

Once you've decided the best structure, register your company, partnership or sole trader operation. You can do that here:

• Sole Trader
• Partnership
• Limited Liability Company

​This is really important to protect your business name. The process is quite straightforward, but you need to get it right from the outset to save time, hassle and money. Once your trademark is accepted, it will be advertised and, if no one objects, it will be approved within about six months. Until then, you can use it as you would as if it has been approved.

But how do trademarks work, and how can you get one? We outline the process below:

Step 1: Decide on your business name and do a search
This will show you if your name is used by another business. It may not matter if it is – what you need to check is the ‘class’ it’s registered under. This is what matters when classifying your business's goods or services, as the IPONZ guide explains. For example, the trademark ‘MoneyHub’ is registered under 'providing online financial information from a computer database or the internet’. The 'class' is basically the area your business operates in. It is daunting to select the most appropriate class for your trademark, given the number of options and many overlaps. To explain it better, let’s work through some examples using the IPONZ tool:

Example 1: Registering a trademark for ‘SmartCat’, a cat GPS tracker for people to know where their cat is.
Our suggestion: Class 9: "GPS navigation device" and related goods and services

Example 2: Registering a trademark for ‘IceBlocka’, a frozen snack aimed at children.  
Our suggestion: Class 30: "frozen confections" and related goods and services

Example 3: Registering a trademark for ‘Farm Fresh Eggs’, a free-range egg company.  
Our suggestion: Class 29: Eggs and related goods and services (such as "hens eggs" and "birds' eggs and egg products")

Please note: The above examples do not constitute legal advice in any form.

Step 2: Register the trademark (or pay a fee for IPONZ to ensure there is no conflict)
Once you’re happy with the class you’ve selected, you can apply for the trademark to be approved ($100) or pay a fee for it to be checked ($50) before you apply. If you’re unsure about your selection, it’s best to pay the checking fee to give you certainty and avoid wasting money.

Step 3 – Wait for confirmation from IPONZ and use the trademark when it is tentatively approved
IPONZ will let you know if they tentatively accept or outrightly reject your trademark application. If they accept it, then you can use it right away. If it’s rejected, you can appeal or apply under a different category or different word.

If you’ve been tentatively accepted, after a few months your trademark will be formally accepted (if there’s no objection) and IPONZ will send you electronic copies of the trademark certificates. You will then need to renew the trademark every ten or so years, which can be done by paying a nominal fee.

Why is this important?
Owning a trademark gives your business a valuable asset which no one can challenge. You won’t have to change your business or product name (unless you want to) and you can use it on your website, marketing, signage and everywhere else without restriction.

Our story: When MoneyHub registered its trademark, we were initially rejected by IPONZ because there was a business called ‘WealthHub’. We appealed the rejection, arguing the names are distinctively different. After reconsideration, we were approved for the use of MoneyHub under "financial advice relating to pension planning", "providing online financial information from a computer database or the internet" and many others. 

But, sometimes the law doesn’t work in your favour, and a legal challenge can be a big hassle. For example, the Australian clothing company Showpo was previously known as 'ShowPony'. After building up a brand and millions of hits on the website, there was a legal challenge over a trademark for the word ShowPony. Ultimately, the clothing company was forced to re-brand. This means getting a new domain name, changing all the clothes tags and re-designing the website and social media channels, among other things. While it didn’t ruin the business, it’s an unnecessary expense and business disruption that can be avoided by registering a trademark right away.

​New Zealand, fortunately, doesn’t have a lot of red tape and compliance, so you’ll usually be able to run your business without too much hassle. However, there are some main pieces of legislation to get familiar with, including the Fair Trading Act, Consumer Guarantees Act and food preparation standards governed by the local council. Most businesses will never (knowingly) breach consumer-protection legislation, but being familiar with the basics is a good idea.

​The excellent Compliance Matters resource helps you find out what matters for your business.

MoneyHub has the latest guides to help you save money and find the best deals, covering:

• Business bank accounts (sole traders can use personal bank accounts, such as the Kiwibank FreeUp)
• Business credit cards
• ​Public liability insurance
• Business insurance
• ​Web design companies in Auckland, Tauranga, Hamilton, Wellington, Christchurch and Dunedin
  

​Most importantly, don't rush a decision on any of the above. A website is an expensive investment, and if you are setting up a services-based business, it may not be the best investment right away. However, a domain name and business email is an essential purchase and won't cost more than $100 per year in total. 

Social media is hyped up as 'essential' for businesses, but in many cases we don't believe the return justifies the return. The exception being Google My Business and Facebook, which are both free and well worthwhile.

Google for Business - this is essential for placing your business on the Google map. You can also attract reviews, list your opening hours and upload business photos. It's easy, free and instant, although you may have to wait a couple of weeks to verify your address. The earlier you complete it, the sooner you will be on the Google map.

Business Facebook Page - The best approach is to set up a business page, exactly as this guide outlines, to maximise the visibility. 

People have different opinions on the effectiveness of Instagram, Pinterest and Twitter - it really depends on your business industry as to how essential (or effective) they will be.

​You don’t need to register for GST unless you trade (i.e. sell) above $60,000. But, even if you don’t, registering for GST lets you claim back GST-inclusive expenses which can be suitable for some businesses more than others, so it may be worthwhile to register right away.

For example, if you’re starting a food truck business, there are lots of expenses subject to GST before you even sell your first $5 or $10. For example, you’ll need to buy the truck, fit it out (i.e. install cooking appliances), buy packaging materials and, when you’re ready to sell, buy the food product. All of these expenses have a GST element which you can claim back. For example, if your setup costs are $57,500, including GST, you’ll be able to claim $7,500 back in GST returns (which is 15% of $57,500).

But, if you’re going to work as a freelancer, work part-time or know you’ll turnover less than $60,000 per year, registering for GST may not be as beneficial. This is because you’ll also have to charge an additional 15% on your sales. If you’re setting up a business as a self-employed babysitter, tutor, graphic designer or something that doesn’t have a lot of expenses and unlikely to turn over $60,000 in one year, registering for GST probably won’t be worthwhile. If you do register, you’ll have to charge 15% of your sales as GST, meaning your services are relatively more expensive and less competitive as a result.

To know more about GST and register using your business details, look at http://www.ird.govt.nz/gst/

Tax seminars, workshops and videos
The IRD runs free seminars and workshops across New Zealand on topics like getting started in business, GST, and becoming an employer. For more details, visit the IRD's dedicated new business page.