Foreign entrepreneurs must respect the provisions of the Company Law when they decide to open companies in New Zealand
. Among the provisions of the law is also choosing a type of structure
which represents the commercial activities of the business on the New Zealand
market. When choosing the right type of business in NZ
, investors will take several issues into consideration, including but not limited to the number of business owners for the company.
The main types of companies in NZ
the sole trader or proprietorship which is the simplest business form in this country;
the partnership is a usual type of structure for those who want to set up small businesses;
the limited liability company which is the most employed business form in New Zealand;
the co-operative company which is a business form created for promotion or support purposes;
the unlimited company which is not very often employed as it implies the unlimited responsibility for investors.
Foreign companies can also operate on the New Zealand market through subsidiary companies, branches, and representative offices.
As seen above, there are three main structures or types of business entities available for incorporation in New Zealand: the sole trader, the partnership and the corporation (a category that includes several distinct forms, such as the unlimited company and the limited liability company). Each of these business forms has different characteristics and it is useful for investors to know and understand them in order to make an informed decision. Issues such as the size of the future business or the number of shareholders/partners are useful to take into consideration before committing to a choice. The following should be taken into consideration when deciding between the company types in NZ:
The number of business owners: the first usual choice is made according to whether or not the business will have just one owner or multiple owners;
Future plans: when there are multiple owners, the choice between the company and the partnership can be made mased on whether or not the founders plan to look for investors and/or sell the type of business in NZ at some point in the future;
The costs: when the business is one that will need additional funding, such as loans, choosing a company is the sensible thing to do in most cases;
Risks: the level of risk on personal assets that the founders are willing to take is another important issue when deciding between a company and a partnership;
Ease of incorporation: each of the types of companies in NZ has requirements for set-up and for some these are more complex, for example there are more steps to open a company than to form a partnership.
Other issues, although not apparent at the time of the incorporation, may be taken into consideration. These have to do with the steps to shut down the business. Again, it is simpler to shut down a partnership compared to a corporation.
Apart from these issues, when choosing between the company types in NZ investors should also be mindful of the compliance requirements during the lifetime of the business. Each year they will be required to perform a set of submissions, and these are fewer in the case of the partnership and the sole trader, compared to the company.
While the company has the most compliance requirements, it also allows for a separation between the founders and the business itself, which is not the case for other business forms. Investors in New Zealand are invited to keep in mind this risk/liability issue when they choose a type of business in NZ.
New Zealand company formation requirements
It is very important to choose the right business form when registering a company in New Zealand. When making this choice, the requirements for each type of company are very important.
Foreign investors who want to set up a company in New Zealand should consider the following:
- a resident company must have at least one shareholder who can be a natural person or another company;
- there are no specific nationality requirements imposed on the shareholders of a New Zealand company;
- the company must have at least one director who is a New Zealand national or resident;
- the company must also appoint a secretary for the New Zealand business.
All company types in NZ
are required to comply with the law inf force for keeping the company records, making the reports to the Companies Office, holding company meetings and submitting the financial statements. Some investors will also wish to take further steps to protect their trademark, meaning that they will need to register for IP rights with the Intellectual Property Office of New Zealand
When choosing to set up a company, the company name will be an essential part of the business identity and reserving the name is also a step that needs to be followed by investors. The name proposal is reviewed by the Companies Register and, if approved, no other company in New Zealand will be allowed to use it in the same form or in a similar form. Likewise, name proposals will not be approved if they are identical or similar to those of already registered various types of companies in NZ. Our team of company formation agents can give you more details on the guidelines for choosing a name that will be approved.
New Zealand company taxation
All company types in NZ are subject to taxation and reporting requirements. As previously mentioned, the chosen business form will determine the level of complexity for these requirements and it is common knowledge that the corporation has the highest level of requirements, although all business forms are asked to property register and submit statements regarding their New-Zealand derived income.
We present a list of the most important taxes for companies below:
- 28%: the corporate income tax;
- 0% or 33%: the withholding tax on dividend payments for resident companies;
- 0% or 15%: the reduced and the standard value added tax.
Employers are required to pay a fringe benefits tax on the value of these benefits provided to their employees (with rates between 43% and 49.25%). New Zealand does not impose the following taxes: payroll tax, capital duty, stamp duty, transfer tax, new wealth or worth tax and no inheritance or estate tax.
The company registration steps outlined in this article can be presented in more detail by our local advisors. We can also guide you through the company formation procedure in New Zealand, including making a choice between the available types of companies in NZ
. Do not hesitate to contact us