Starting a company in New Zealand? Avoid these costly mistakes (and how an accountant can save you time and money)

Starting your own company in NZ is thrilling, but don't let the excitement overshadow the importance of getting the basics right. Even small errors can have big consequences down the road. ​

In this guide, we’re going to talk about the common mistakes to avoid when starting a company in New Zealand, and how an accountant can save you time and money.​

A company is a common business structure in NZ - it separates from its shareholders, owners, and directors. This means a company has its own rights and responsibilities, and the shareholders are not personally responsible for the company’s debts and liabilities beyond their investment in the company.​

Limited companies can offer tax advantages, increased credibility, and easier access to funding, making them a popular choice for businesses of all sizes. However, they also involve more administrative work and compliance requirements compared to other structures like sole traders. If you’re interested in this topic, we have a more in-depth blog on advantages and disadvantages of limited liability companies. ​

If you’re unsure about whether to start a company, it's best to consult your accountant, or talk to Beany if you're not working with one. Book a call​

*Company and limited company are used interchangeably in this guide.​

Let’s make sure you start your company on the right foot - from getting the right share structure, knowing all your tax obligations, to getting professional help.​

Imagine your company is a pie. Share structure is how you slice that pie and decide who gets which pieces. It might seem easy. But how you divide those slices can have a huge impact on your business now and in the future - such as how much control do you have? How profits are shared? How easy is it to get investment in the future?​

Many new business owners make mistakes with their share structure. They’re not clear about different types of shares, who has voting rights, and how dividends are paid out. Talk to an accountant, ask them to create a share structure that works for you so you can avoid problems down the road.​

When starting your company, tax can be complicated. Failing to understand what taxes you need to pay and when you pay may lead to missed deadlines, penalties and unnecessary stress.​

In NZ, the common company taxes are GST, income tax, and PAYE. If you’re unsure about what they are, always consult with an accountant to ensure you're meeting all your obligations.Also, mark key tax deadlines in your calendar and set reminders to avoid missing crucial filing dates.​

Read more: a guide to limited company taxes.​

Picking the right Business Industry Classification (BIC) code might seem like a minor detail, but it's actually important when you start your company in NZ. Think of it as a quick way to tell the government what your business is all about. And here's the thing: your BIC code can impact things like your ACC invoices. ​

Choosing a code that's too broad or doesn't really match your core business activity can create some unexpected headaches down the line. That's where an accountant steps in - they’re experts at navigating the ins and outs of BIC codes and can help you find the perfect match, saving you potential hassle and making sure you're getting charged correctly by ACC.​

It’s easy to assume a newly formed, non-trading company doesn’t need to file anything. IRD requires income tax returns from all limited companies, regardless of whether they're actively trading. While it might seem like a pointless exercise to fill in "0" on most lines, it's a legal requirement to avoid penalties and potential removal from the register.​

One of the common mistakes when starting a company is not having your finances in good order. For example, you may be mixing your personal and business finances, losing track of receipts, and relying on spreadsheets. ​

Accurate and organised books are the backbone of a successful business. This isn't just about staying compliant with IRD; it's about having a clear picture of your company's financial health. Without proper bookkeeping, you're essentially flying blind, unable to track profitability, identify areas for improvement, or make informed decisions about the future.  ​

An accountant can help you establish efficient bookkeeping systems and ensure you’re meeting the legal requirements.​

Read more: Bookkeeping top tips for business owners​

Running a company without a budget is like setting sail without a map or a destination in mind. You might enjoy your ride for a while, but you’ll get lost in the end. A budget is basically a forecast of how your business is expected to perform financially. It helps you secure funding, make smart spending choices, and track your progress along the way. Without one, you're relying on guesswork and hoping for the best. ​

Luckily, accountants are pros at creating realistic financial forecasts, tracking those all-important numbers, and helping you make data-driven decisions.​

It's tempting to think you can handle all your accounting and tax yourself, especially when you're starting out and every cent counts. You might be confident with numbers or have some basic bookkeeping knowledge. But beware – this seemingly cost-saving approach can quickly turn into a costly mistake. ​

Without an accountant, you may find yourself overwhelmed by constantly changing tax rules, regulations, and deadlines. This can lead to filing tax returns incorrectly, miscalculating taxes, missing out on valuable reliefs, allowances, and deductions, and wasting hours trying to figure out unfamiliar accounting software. An accountant is your strategic partner, they’re more than a number cruncher. We have a blog on finding the right accountant for your small business.​

While setting up a company alone is possible, an accountant is your co-pilot for a smoother journey. Their expertise can save you time, money, and headaches, letting you focus on what you do best, building your business. Book a call with one of our team members for a chat on how we can help with your accounting and tax.​