How To Register as a Sole Trader in NZ

13 February, 2024 | Tam Irvine

Registering as a sole trader in New Zealand is a straightforward process, beneficial for those looking to start their own business with minimal formalities. This article provides a comprehensive guide on how to register as a sole trader in New Zealand, outlining the steps involved and the considerations to keep in mind.

Understanding the Sole Trader Structure
Before registering, it’s important to understand what being a sole trader entails. A sole trader operates a business as an individual and is solely responsible for the business’s liabilities. It’s the simplest business structure, offering flexibility and control, but it also means that your personal assets could be at risk if your business faces financial trouble.

 

Choose a Business Trading Name
Select a unique business trading name. As a sole trader your business trading name could simply be your own name or alternatively it could be “your name, trading as (whatever name you decide to trade as)”. While trade mark registration of your business name isn’t mandatory in New Zealand, it’s recommended. Ensure the name isn’t already in use or trademarked by using the ONECheck service. There you can check whether the name is already registered with the New Zealand Companies Office, trademarked at the New Zealand Intellectual Property Office (IPONZ), assess what domain names are available and also social media usernames.

For more information on choosing a good name – check out our article here.

 

Register as a sole trader with the Inland Revenue Department (IRD)
As a sole trader, your IRD number will be your personal IRD number. Before you start trading, you will need to let IRD know that you are going to operating as a sole trader. You can do this through the myIR website portal.

If you don’t already have an IRD number, you’ll need to apply for an IRD number online through the IRD website.

 

Register for GST
If your income is over $60,000 per annum, you must register for Goods and Services Tax (GST). Registration can be done online via the IRD website. If your income is below this threshold, GST registration is optional.

 

ACC
Once you’ve successfully registered as a sole trader with the Inland Revenue Department (IRD), your details will be shared with the Accident Compensation Corporation (ACC). ACC will automatically enroll you in the ACC CoverPlus program. ACC will issue an invoice for your coverage, ensuring you’re protected under their program.

 

Once you have completed the step of registering with IRD that you will be operating as a sole-trader, there are no other mandatory steps. The following steps are highly recommended.

Get a RealMe®
The New Zealand Government recommends businesses get a RealMe®

In New Zealand, RealMe® is a secure online identity verification service, functioning as a single login that lets users access a range of government and private sector services online. It’s a crucial tool for sole traders, as it not only streamlines the process of interacting with government agencies like the IRD and ACC but also enhances the security and efficiency of these interactions. For a sole trader, having a RealMe® account is beneficial for tasks such as submitting tax returns, applying for licenses, or accessing important business-related services, making it an essential component of managing their business digitally and securely.

There are no fees to pay to register for RealMe®

 

Register for an NZBN (New Zealand Business Number)
You do not have to register for an NZBN but having one can help you get easier to access information and assistance from Government Agencies and their websites. You will need a RealMe® login to set up your NZBN.

Once you’re registered with an NZBN your business will be searchable in the database of New Zealand businesses, which can make your business seem more trustworthy. There is no cost to register for an NZBN.

 

Open a Business Bank Account
While not a legal requirement, it’s highly recommended to open a separate bank account for your business transactions. This helps in keeping personal and business finances distinct, which is crucial for tax purposes.

 

Keep Accurate Records
Maintain accurate and detailed records of all business transactions, including income, expenses, GST, and other tax obligations. This is crucial for compliance with the New Zealand tax laws.

 

Understand Your Tax Obligations
As a sole trader, you’re responsible for paying income tax on your business profits. You’ll need to file an individual tax return each year, including your business income and expenses. You may also need to make provisional tax payments during the year.

 

Comply with Legal Regulations
If you are selling goods and services – that includes contracting to other businesses, you are required by law to meet all of the legal requirements of a business. This means that you have health and safety obligations (both to keep yourself safe, but also anyone your business interacts with), and other various legislative and local council requirements covering things like fair trading, employment laws if you hire staff, licenses and permits to carry out certain types of work., etc. It is your responsibility as a sole trader to ensure you understand and fulfil your obligations and responsibilities.

 

Consider Business Insurance
Given the personal liability involved in a sole trader structure, consider getting business insurance to protect your personal assets.

 

Seek Professional Advice
Finally, consider seeking advice from a lawyer or accountant. They can provide guidance tailored to your specific situation, ensuring compliance and optimal financial management.

 

Registering as a sole trader in New Zealand is a relatively simple process, but it’s important to be thorough and compliant with all legal and tax obligations. By following these steps and staying informed about your responsibilities, you can establish a solid foundation for your business.

Ready to embark on your journey as a sole trader but need expert guidance? We’re here to help your business venture succeed. Contact Tam Irvine today for personalised assistance with your sole trader enterprise. Tam’s expertise in business law will ensure that your venture is set up for success from the start. Reach out now and take the first step towards a thriving business.

Tam Irvine
Phone: 09 837 6837
tam.irvine@smithpartners.co.nz