Advantages and Disadvantages



Advantages and Disadvantages of a Company

The Advantages of a company are:

  • Limited liability - This means that the liability the shareholders have to contribute to the business where things go wrong is limited to the unpaid amount on their shares.

  • A company need only have one share and need only be operated by one shareholder and one director.

  • Because a company has shares, it is much easier to withdraw from the company by selling your shares, or taking a further interest in the company by buying more shares. This flexibility is very important.

  • The directors and officers of the company are not personally responsible for the debts of the company, as the company is responsible for its own debts. The exception is if the officers have been negligent or fraudulent.

  • The company continues even if the shareholders leave and can only be extinguished or "put to death", as it were, by formally liquidating it or by having it struck off the Register of Companies.

  • A company has a continuous existence, which means that, even on the death or insanity or withdrawal of any of the owners, the company still carries on.

  • Most lenders are happy to lend to a company rather to the other types of business structures, such as sole trader or partnerships.

  • There are certain tax advantages available by running your business through a company.


The Disadvantages of a company are:

  • You have to comply with requirements of regulations and company law.

  • Costs more to set up than other structures.

  • You will have less privacy because the documents of the company are available for public scrutiny at the Companies Office.

  • There is quite a bit of time involved with the myriads of forms that have to be completed, such as the Annual Returns at the end of each year.



Registered Office
Every company must have a registered office in New Zealand. The registered office address must be notified to the Registrar on the application for incorporation. The registered office must be a physical address. It cannot be a post office box or document exchange.

If a company wishes to change its registered office, the change and the date upon which it is to take effect must be notified to the Registrar on the prescribed form - Form 12. This date must be at least five working days after the notice is registered.

Address for Service
Every company must have an address for service in New Zealand. This may be at the same address as a company's registered office or it may be elsewhere, but it must not be at a postal centre or document exchange. A company's address for service is first notified to the Registrar on the application for incorporation.

If a company wishes to change its address for service, the change and the date upon which it is to take effect must be notified to the Registrar on the prescribed form - Form 13. This intended date of change must be at least five working days after the notice is registered.