So you have decided or are thinking about being in business yourself. Or perhaps you have seen an existing business that takes your fancy and have decided to purchase it.
Well here is a simple guide to some of the key things that you need to consider when starting your own business.
There are four basic ownership structures (sole trader, partnership, limited partnership and company) that you need to consider.
While each has it's own merits, the one that is right for you depends on several factors e.g. business type, industry etc. It is always advisable to discuss this with us.
Also, while the bookkeeping for all is relatively the same for a small business, the accounting for each is a little different.
GST Registration & GST Returns
Most businesses register for GST.
The tax law in New Zealand states that you do not have to register for GST if your revenue per year is less than $60,000.
While this maybe true for your business - there are other considerations to be taken when deciding whether you want to register or not. Some common questions to ask yourself are:
- does my business look less professional if it's not registered for GST?
- do my customers expect a GST invoice?
- is the increased administrative cost for GST worth being registered?
- will my revenue during the year go above $60,000?
- am a I buying a significant asset which might mean I get a GST refund?
If you are registered for Goods and Services Tax (GST) you must account regularly to the Inland Revenue Department (IRD). The "accounting basis" is the method by which you account for GST. There are three options from which to choose:
- the invoice basis
- the payments basis
- the hybrid basis
Salaries Versus Drawings
We always get questions about whether the owner should draw the money from the business or whether he/she should become an employee of the business and get regular wages.
There are advantages and disadvantages to each which we have highlighted in the article below.
Employees or Contractors
Being an employer has certain obligations to your employees as well as to the IRD.
Along with registering with the IRD as an employer, there is also a matter of offering contracts to staff and filing respective Employee Deduction returns with the IRD monthly including PAYE, Kiwisaver, Child Support, Student Loan etc.
Annual Income Tax Returns
Every business needs to have annual income tax returns prepared and filed on time with the IRD regardless of your ownership structure. If it's a company then a company income tax return as well as personal shareholder returns will need to be filed for a small business.
Along with the requirement to file a return, it's also very important to have a set of Annual Financial Statements for your business prepared by an Accountant.
Your income tax liability for the year is determined by the profit / loss you have filed annually. That is why we use our expert knowledge to make sure that you pay the least tax possible for the year while offering you an affordable service.
Certain industries have specific requirements that you need to be aware of.
Quite often these are in the form of Industry Certificates which you might need to obtain before you can begin trading.
Click read for links to specific industry requirement websites