Accounting For You
|Posted on 29 May, 2015 at 1:59||comments ()|
Q: I'm thinking about turning my hobby into a business. Do I have to form a company?
A: No, you don't have to form a company to start a business. There are three basic business structures: Sole Trader, Partnership, and Limited Liability Company. Most businesses start out as sole traders and then progress to becoming a partnership or LLC later.
Q: Are there any rules around how I name my business?
A: The primary rule with regard to naming a business is that the name hasn’t already been registered by another business and that it isn’t a legally protected trade mark. There are also some banned words or phrases that can’t be used when choosing a business name.
As soon as a business name is reserved on the companies register, it is impossible for others to reserve the same or a similar name within the next 20 days. That name protection becomes permanent once the company is registered.
Unlike companies, sole traders and partnerships don’t have any protection over their business names. However, they can apply for a trade mark from IPONZ (Intellectual Property Office of New Zealand) for their brand or logo to give them exclusive rights to use it in a unique way.
Q: How do I check if someone else is using my preferred name?
A: ONECheck is an online search tool that combines a company name, domain and trade mark search all in one place. It is designed for people who are looking at starting a new business, renaming their current business or just wanting to check their existing business name is secure. ONECheck packages all the relevant information in one place, so you don’t have to work from three different websites.
For names not protected as register company names or trademarks check by searching online and searching local business directories. If all these avenues show no one is using your preferred business name, you should be in the clear to go ahead. If by some unfortunate chance someone else is using the same name, you can at least show that you made a serious attempt to find a match.
Q: Must I register my business before I start up?
A: A company needs to be registered with the Companies Office as it starts up but sole traders and partnerships do not need to be registered. However, a partnership will need to register with the IRD as a partnership will need its own IRD number.
Q: If I'm starting as a sole trader, should I open a separate bank account?
A: Although there is no legal requirement for a sole trader to have a separate bank account for their business it is much better to do so. This will make life much easier for you and for your accountant, because it allows you to separate your business income and expenses from your private income and expenses. This separate business account will typically be named something like Sharon Williams trading as Accounting For You, for example. Your business’s bank statements are usually the prime source of information for your accountant when they put together your accounts at the end of your first year in business.
Q: Should I use an accountant or lawyer?
A: Although you can file your own tax returns an accountant should be able to save you money and stress by advising on what you can claim and how.
It's also a good idea to consult a lawyer about your business intentions, particularly if you intend to sign a lease or any legal document. Depending on your business, a lawyer might advise you to take out public liability insurance or other forms of protection.
Q: Should I approach the Internal Revenue Department?
A: Part of the Internal Revenue Department’s (IRD) job is to offer help and information, including to new businesses. You'll find the Internal Revenue Department’s website useful for answering your basic questions about setting up a business and you can phone to ask business tax questions. The IRD website also lists various helpful publications you can order, pick up from your local IRD office, or download.
Q: How do I register a limited liability company, and can I do it myself?
A: In order to register your company yourself you will first need to register as a user of the Companies Office website. Once you have done this you will then need to reserve your business name with the Registrar of Companies. You can then use the online application process in order to register your company. The Companies Office will send out Shareholder and Director Consent forms and these will be need to be returned within 20 days. Once these forms have been returned the company registration is finalised. At this stage you will also be given the option to register as appropriate with the IRD.
Q: Should I write a Business Plan for my business?
A: Creating a Business Plan is a good idea, for several reasons. First, the research and thought you'll have to put into writing the business plan will help you to sharpen and/or adjust your ideas. In addition, any lending institution that you approach for funds, such as a bank, will want evidence that you've done your homework and thought through your business concept.
Finally, the business plan provides a road map for your business. It lays out what you intend to do, how you intend to do it, the resources you need, and your action deadlines for each stage. The business plan forms a 'living document' that you can then revisit at regular intervals and modify according to your progress or changing circumstances.
Q: Do I need business skills or experience to start a small business?
A: While the most important ingredient you need to succeed is enthusiasm, persistence and a determination to achieve your goals no matter how much hard work is involved, you'll greatly improve your chances of success if you have good business skills. These include the skills to market your business in a creative and sustained way and the skills to build and manage efficient business systems that enable the business to operate smoothly.
Many people start small businesses because they're good at something or can offer specialist knowledge in a particular area. They often fail because their other business skills are poor, or they spend too little time on the ‘boring’ aspects of their business. It seems more fun to do what you enjoy doing than to keep the book work up to date, chase debtors, invoice promptly, do a cash flow forecast, or manage tax liabilities, so these tasks are neglected, and the business suffers.