Company




Forming a Company
The following are the 3 steps if you want to incorporate a company:

Step 1: Reserve a Name
The first thing to do is reserve a name for your proposed company. You can download the necessary forms from the NZ Companies Office web site (www.companies.govt.nz) or you can buy the necessary forms from various stationers. All you need to do is complete the application form and return it to the NZ Companies Office with the appropriate payments. You can apply electronically by going to the NZ Companies Office web site.

Step 2: Register the Company
When you go to register your company you have to lodge the following documents:

  • An application for registration.
  • Consents of the directors and shareholders that they are prepared to act as directors and shareholders in the company.
  • Non-disqualification certificates for the directors.
  • The name reservation notice you have received from the NZ Companies Office.
  • A constitution if you are setting up your own.
  • A fee of $100. (If you are registering electronically it will cost you $70 and payment will be by credit card.)
  • All these documents are available as templates from the NZ Companies Office.

Step 3: Finalise Incorporation
The whole process can be done by post, by personal delivery, or electronically. If you are registering electronically the application will be sent electronically via the NZ Companies Office web site and you will have to fax through to them the signed directors and shareholders consent forms. Once the NZ Companies Office receives this, the documentation is processed and your company will be incorporated. Then an incorporation certificate will be sent to you online, or by post.


Advantages and Disadvantages
The main advantages and disadvantages of limited liability companies are:

Advantages

  • Can be owned and operated by one shareholder and director
  • Much easier to attract funding because of the company structure
  • Tax advantages, if structured correctly
  • More flexible as to bringing in more shareholders etc
  • Continues on its life even if some of the shareholders die or leave.
  • Limited liability for owners
  • Has a higher acceptance as to credibility by business community

Disadvantages

  • It is costlier to set up than the other structures
  • Directors can be liable for reckless or fraudulent trading
  • Higher compliance costs because reports have to be filed annually
  • Required to comply with the Companies Act 1993 requirements
  • More paperwork for compliance with filing of reports and returns such as Annual Returns etc


Company Tax Rate

Profits derived by a company are taxed at the company tax rate of 33 cents in the dollar.

Companies can distribute money in three ways:

  • Shareholder-employees can periodically draw money from the company. At the end of the year, the company calculates a salary amount on which the shareholder will have to pay income tax.

  • Shareholders who are also employees of the company can be paid a salary with PAYE taken out in the normal way. These salaries are deductible as a business expense for the company.

  • The company can pay dividends to shareholders out of the profits that remain after tax. It may also attach tax credits to these dividends called imputation credits.

You can find the income tax rates for all years since 1995 with the Income tax rate calculator in our Calculator section. The calculator can also work out tax on taxable income for you.