by far the most popular business legal entity in New Zealand is the limited
liability company or the LLC it's used by small mum and dad type businesses
right up to very large public companies so what is it how does it work and how
do you register yours
a New Zealand limited liability company is a separate
legal entity from its shareholders the company can deduct trading expenses from
its income and will pay tax on its profits if a company's expenses are more
than its income and it makes a loss it may not have to pay tax if the company
distributes profits to its shareholders shareholders will pay income tax on the
dividend but may also get tax credits back from the LLC to help offset those
payments as a typical limited liability company its shareholders cannot be held
liable for the total debts of the company but are only liable up to the
value of their shareholding now I'll talk more about that later on the New Zealand
Companies Act of 1993 regulates LLC's in this country as part of starting a
business in New Zealand you must choose a business structure or legal entity to
operate now these legal entities in New Zealand will dictate how your business
will be run what registration is required and some other legal
requirements now have a look at this video I think it's up here I talk
about three most popular business entities in New Zealand before we
outline registering your company we should talk about an LLC what is it and
cover some of the main points of a New Zealand limited liability company so the
first is limited liability a shareholders liability is limited to the
value of their shareholding number of shareholders the minimum number of
shareholders needed in an LLC is one number of directors an LLC can be
managed by only one director but that director must actually be a real
person so it can't be another company or entity share capital there is no minimum
share capital required identity the LLC must have a name different from
all other company names in New Zealand and it must have the abbreviation Ltd at
the end of their company name address every LLC must have a physical office
address not a post-office box
an LLC is a formal and legal entity and it's separate from its shareholders
and owners now as the name would indicate the individual shareholders
liability is limited to their share of ownership of the company now these days
limited liability companies really don't protect you as much as they did in the
past they do protect you from the debts that your company would owe if your
business should fail but only if you have not personally guaranteed them now
just bear in mind that this limitation of liability would not apply if the
company was deemed to be trading recklessly or while insolvent now in
that case the directors would still be liable for the debts of the company now
it's also worth noting that if your employee damages something you can be
held personally liable as a director now if your employee takes you to court for
unfair dismissal you can also be held personally liable but here's the good news
even though LLC's don't protect you as much as they used to in the past
there's something called public indemnity insurance and that does now
their insurance will cover accidental damage from your staff to anything
anywhere workplace accidents ACC disputes employee disputes and other
costs associated with those events so it certainly pays to have a good insurance
broker as part of your professional team of advisers now when it comes to
protecting personal assets from a business failure consider using a family
trust in conjunction with an LLC now it makes sense to use a
trust because trusts can protect assets from business failure in most cases
although there are some exceptions so you should speak to your lawyer and your
accountant before deciding which is the right entity for you as you have seen
assuming you've watched the video I pointed to earlier there are several
different legal entities in New Zealand that you can choose from however you
already know that you want to form an LLC in New Zealand so the next steps are
as follows
you'll need to draft
company bylaws as the first step to forming an LLC now these bylaws are the
constitution of your limited liability company simply put they define its
structure and how it will operate now to make things easier you can use an
existing set from another company and just change the details personalize this
for your own company now your lawyer or your accountant should be able to help
you here you should also include a shareholders agreement if there's more
than one of you setting out how the business will trade the roles and
expectations of the shareholders and most importantly how the entity will be
dissolved or valued even easier if you decide not to create your own
Constitution your company will automatically be governed by the New
Zealand Companies Act 1993 now that's a default situation it's probably not the
best so you should look at some personalised Constitution
you'll need to set up a realme login to register your business online now
once you have this you can check the availability of your desired company
name by searching the company's register you can reserve the name for your LLC
and then you can register your LLC now I'll include the website addresses and the
description below for both of these sites registering your LLC online will
automatically generate your New Zealand business number now that's an NZBN
this is a unique identifier for your business a kind of registration number
if you will now to register your business you'll need to have the
following documentation to hand when you form your company you'll need to have
full contact details through your LLC email addresses physical addresses and
any relevant mailing addresses if they are different you'll need to have full
details of your company directors and full details of your shares the number
of shares who has them and the shareholders
once you have registered your LLC online you'll need to obtain a tax number
through the Inland Revenue Department after you have that you can register for
GST and PAYE you'll need to do that if you become an employer shareholders have
the option not to take profits and let the LLC pay corporate tax or to receive
their share of the profits and be taxed as individuals via personal income tax
now you should speak to your accountant and find out which option is the best for you.
operating out of a business bank account
keeps personal and company finances separate opening an account can take a
while as New Zealand banks now have to comply with New Zealand's anti money
laundering and countering financing of terrorism law I know it's a mouthful
it's generally called the AML law under this law banks must make thorough checks
on individuals company shareholders and directors before opening a bank account
so make sure you have the following information
for the bank when you go to apply for a bank account so you'll need documents
detailing your business now you'll need brochures websites and voices contracts
etc you'll need some information who you suppliers who are your customers and
you'll need full identification in details of your LLC's shareholders and
their directors now that will include passports date of birth birth
certificates addresses things like that
a small privately owned New Zealand LLC is not required to file annual financial
documents or reports with the company's Registrar
now there are some exceptions to this however as soon as the LLC begins
trading it must keep full financial and transactional records now the accounting
year begins 1st of April and ends the following March 31st and every New
Zealand company must file an annual return with the company's office now
that will verify the LLC is still an active company it's also worth
remembering that all records filed with the company's office are available for
public inspection well you're now ready to go so have a look at my start a
business video here and see what else you'll need to get yourself up and
running New Zealand offers one of the most
straightforward company formation processes in the world
it's simple requirements nevertheless when forming your LLC you should
consider professionals who can help you make sound business decisions now I have
a strong roster of professionals that my clients have used in the past to help
them with their businesses and I'm happy to put you in touch with any
professional that you might need I know I sound like a bit of a broken record
and if you've looked at my previous videos you'll see I say the same thing
over and over again hey thanks again for watching if you liked the video and
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