Home > Updates > Starting out in business? Get the basics right
Written by Melanie Thomson and Vanessa Gray
Starting a business is an exciting venture, whether you’re establishing a landscaping service, a local café, or building a consultancy practice, laying the right foundations is essential. It’s important to get the basics right from day one. A Chartered Accountant, as your trusted advisor, can help you with the key items you need to consider.
A Chartered Accountant can also help you understand your tax obligations, which is essential for managing your financial responsibly. They’ll help you avoid unexpected liabilities that will improve your chance of business success.
Choose the right business structure
Sole trader, partnership, trust, or company – each has unique tax rules and compliance requirements. Your structure affects funding options, growth strategies and reporting duties. Choose one that aligns with your goals, size and risk appetite.
Apply for an IRD number
You will need an IRD number for your business if you choose to operate via a partnership, trust, or company. If you choose to operate as a sole-trader, you will use your personal IRD number.
GST registration
If you expect your business to invoice more than $60,000 in a 12-month period, you will need to be GST registered. GST is a 15% tax added to most goods and services sold in New Zealand, so it’s important to understand how this will impact your business (e.g. pricing).
PAYE registration and employer obligations
Hiring staff? You’ll need to register as an employer and manage PAYE, KiwiSaver, Student loan, ACC and leave entitlements. You will also need to meet certain HR obligations, including employment contracts, so it’s wise to consult a Chartered Accountant, an HR specialist or your lawyer to ensure everything is set up correctly and you are aware of your obligations.
Keep accurate records
Good record-keeping is essential for running a smooth and successful business. Keeping accurate and up-to-date financial records helps you stay organised, make informed decisions, and meet all tax and reporting obligations. Using accounting software to track income, expenses, GST, and payroll makes the process very efficient and ensures you’re always prepared when deadlines arise.
Don’t underestimate how much time good recordkeeping can take; consider whether outsourcing this task to a bookkeeper or Chartered Accountant would be a better use of your time to free you up to focus on growing your business. It would ensure accuracy of data and can help to keep end of year compliance costs down.
Stay compliant
Ensure your business prepares accurate financial statements and files annual income tax returns. Depending on the structure and size of your business, you may need to follow specific guidelines set by Inland Revenue or apply recognised accounting standards.
Compliance goes beyond just filing tax returns (income tax, PAYE, GST, FBT, etc.), it includes planning ahead, so your business runs smoothly. For instance, if your income tax is over $5,000 in a year, you may need to pay provisional tax in instalments throughout the next year – not doing so can result in interest and penalties. Forecasting your business’ cash flow and budgeting for upcoming tax payments is therefore essential and helps you avoid last-minute stress and cash flow shortfalls.
Getting sound advice at the beginning will ensure you start out with the right systems which will ultimately save you time, money, and stress. Our team can help you navigate setup, tax registration, and ongoing compliance so you can focus on growing your business.
Nexia New Zealand is one of New Zealand’s leading full-service chartered accounting and business advisory consultancy firms, offering the full range of chartered accounting, business advisory, corporate advisory, tax, audit, insolvency, liquidation and receivership services.
Nexia New Zealand has four offices throughout New Zealand: Victoria Street in Christchurch, Albany on Auckland’s North Shore, Newmarket in the Auckland CBD and Hastings in Hawke’s Bay.
Reach out to one of our trusted Nexia Advisors. We have offices in Christchurch, Auckland and Hastings.
