Top 9 things to think about when setting up a company in NZ

Setting up a company is an exciting step towards your dream. However, it's important to be well-informed and prepared. ​

In this guide, we'll walk you through the top things to consider, from choosing a company name to understanding your legal and tax obligations.​

Your company name is one of the most important things you should think about when setting up a company. Your company name (the one you register) doesn't have to be the name your customers know you by. You can use a different "trading name" for your day-to-day business.​

Think of your registered company name as being similar to your legal ID – it needs to be unique and follow the rules. For example, you can’t use the same (or very similar) name to another unrelated company. It’s also not allowed to contain any specific sensitive, abusive, offensive or illegal words, and it must end in limited or ltd. Just remember to use your registered name on all official paperwork.​

On the other hand, your trading name is more flexible, allowing you to create a brand that resonates with your customers.​

The shareholders are the owners of the company. They invest money in the company, and in return they get a share of the profits. This share of the profits is called a 'dividend'.​

Shareholders can also be allocated a shareholder salary at the end of the financial year, for payment of work performed. This is an option instead of becoming an employee of your company.​

When choosing how many shares to allocate, make sure you are issuing enough so you can share these as required, but not too much to overcomplicate things. The majority of small companies start off with 100 shares.​

Also, think about having a shareholder agreement. This will help to combat any future conflict between shareholders as you have clear guidelines and expectations to follow.​

Read more: Understanding dividends and imputation credits in New Zealand​

Directors are the people who manage the day-to-day running of the company. They make the decisions and ensure the company is operating smoothly.​

Being a Director should not be a decision made lightly. A director is legally responsible for ensuring the company follows all laws and regulations and is able to meet its financial obligations.​

It's important to note that one person can hold both roles. You can be a shareholder (owner) and also a director at the same time. Or, you could be just one or the other.​

When setting up a company, registering it with the Companies Office is typically a straightforward process. To get started, you'll need to have your company name ready and put through a name application. Once the name is approved, you can continue with your company set-up. You will need to provide the details of your directors and shareholders (date of birth, IRD numbers, full name and address). Also, you'll need to disclose what industry your company will be trading in. You can apply for an IRD number at this point as well!​

Once the Companies Office has processed your application, they will issue you with a Certificate of Incorporation. Keep this handy as you will need it further on.​

Ready to take the next step? Let Beany guide you through the company set up process, ensuring everything is done correctly and efficiently. Register today.​

Once your company is set up, there are some important tax registrations you'll need to complete with Inland Revenue, regardless of whether you're making a profit yet. If you didn’t apply for an IRD number when registering your company, you will need to do this first. IRD has info on how to apply for an IRD number.​

Your company will automatically be set up for Income Tax, but other taxes to consider are:​

Read more: 10 common GST mistakes small business owners should avoid​

Read more: A guide to company taxes​

We highly recommend opening a separate company bank account after you set up your company. This is because a company is a separate legal entity from yourself, even if you own it and run it. Any money the company makes or spends should come out of this bank account - it makes your company’s finances so much cleaner and easier, especially during the tax season! You will need to take your Certificate of Incorporation from the Companies Office with you to be able to set this up. ​

Read more: Should you class your business as a sole trader or a company?​

There is so much value in using accounting software, such as Xero or MYOB, from the outset. A key benefit is that you can clearly see how your business is doing, and more specifically which products or services are doing particularly well or not so well. ​

Read more: How Xero accounting software enriches your business​

We all know the saying fail to prepare and you’re preparing to fail. This couldn’t be more relevant for a company.​

Before you jump in, it's crucial to do your homework. Understand your customers, your competitors, and the overall market. Then, create a clear plan outlining how you'll reach your goals.​

Also, it’s important to make a budget. This helps you keep track of your spending and spot any problems early on. Think of it like a roadmap for your finances – it keeps you on track and helps you avoid getting lost.​

Read more: What is a budget?​

There is so much to think about when setting up a company in New Zealand, but if you do it right it can be a super exciting journey. If it’s completely new to you then it’s a good idea to get a professional, like an accountant (e.g. Beany) involved. They can help with everything from checking if the company structure actually suits your needs, company registration, to filing tax returns.​

Need a helping hand with setting up a company in New Zealand? At Beany, we specialise in making accounting and tax a breeze. Our team of experts can handle your tax compliance so you can focus on what you do best – running your business. Let Beany be your trusted accounting partner. Get in touch with us or register today.​