Starting a Business

Starting Up a Business
If you are in business or are planning to start a business in New Zealand, this section is for you. We have written it to help you meet the challenges of having your own new or existing business, so that your venture runs as smoothly and successfully as possible.

When setting up a business you should make sure you pay the correct amount of tax, as well as claim the business expenses and deductions that you are entitled to receive.

Be clear on the business structure you will use to run your business under so you can obtain the best advantages for tax purposes as well as operate your business in such a way as to provide maximum protection for your private assets.

You also need to understand which tax forms and tax records you will need to complete and maintain and whether you require to register as an employer or to register for GST.

There are therefore a number of matters to consider and they are briefly covered here.

Most areas are more fully explained in the various sections of TAX within StartRunGrow.

Purpose - To Make a Profit
For taxation purposes a business is carried on for profit. The important point is that a business operates with the sole purpose of making a profit.

The operation must be carried on to such an extent or in such a manner that it could be reasonably expected that the operation will make a profit within a reasonable time. In the initial stages a loss may result. It is assumed that sooner or later a profit must result.

Consistent losses could point to an activity which would not be classified as a business, perhaps because no one in their right mind would operate a business if year after year it did not achieve profits.

The Tax Law Position
All profits or gains derived from any business are subject to tax.

Business is defined in the act as – “any profession, trade, employment, vocation calling, manufacture or undertaking carried on for pecuniary profit, including the sale of property acquired to make a profit”.

It is possible to carry on a business and yet not be motivated by the purpose of making profits.

The courts have held that a business is not carried on unless there had existed not only the intention of making a profit but also a reasonable prospect of doing so. Another feature looked at is the element of continuity of transactions of a similar type.

Ready to Start
The time has come and you’re thinking of starting up a business. For many people this is a wonderful opportunity because the rewards can be significant. However, don’t get too excited or too carried away because you need to understand what it takes to start up on your own.

Even though starting and running a business can be rewarding, it can also be demoralising if it doesn’t work out. Your success may hinge on simple things such as proper planning or having enough money to start up and operate for the initial months.

There are many questions you’ll need to ask yourself because the answers would confirm whether you are suited to being self employed and whether the time is right for you to start up.

The answers may indicate that you need to do more market research or that you should wait a little longer until you’ve saved up more capital or that you need to take a business course to learn about managing a business or that your accountant needs to do a feasibility exercise to see if you would make money or not.

You may not be ready. On the other hand all the indications may be good and it was clear you were ready to start.