The business low down
According to Sir Richard Branson, all an entrepreneur really needs to enter a new industry is a willingness to learn.
Day-in, day-out here at Aspiring Law, we advise and support enterprises ranging from innovative start-ups to companies with decades of trading behind them. Wherever our clients sit on the business life cycle, though, an ability to embrace and ride the continuous learning curve is key – a dedication to ongoing upskilling, staying informed and an ability to adapt are attributes shared by all of our firm’s highest achievers.
So, you’ve had your own entrepreneurial lightbulb moment, but where do you start? First, turn your mind to structures. You want to be building your business on solid foundations, and the entity you choose will be a fundamental pillar that’ll either support your venture, or, conversely, leave it, and you, compromised.
While there are a few different vehicles that can be used to structure a business, setting up as a sole trader or limited liability company tend to be the two most common. A partnership or trading trust might also be considerations, but not all structures are created equal, so you’ll need to consult your advisers to make sure whatever you opt for is, in fact, the best fit for your particular circumstances and objectives.
Let’s talk about companies
One of the major benefits of setting up a company is it offers some protection should things go wrong. Your liability as a shareholder will be limited to the unpaid balance of your shares, instead of your unlimited liability as a sole trader. There are occasions, though, where you’ll probably be expected to put yourself up as personal guarantor – for example, if the company is borrowing money, or if the company leases premises.
In terms of boosting your business, a company makes it easy to scale. In other words, you can bring in shareholders, appoint new directors and grow organically. But there will also be higher compliance costs and reporting requirements. Whatever your business idea, as it takes shape, ensure you have a sound understanding of the ongoing obligations you’ll be taking on in your role as director and shareholder.
They say the only certainties in life are death and taxes, and, with that in mind, it’s wise to forecast and plan for your likely tax obligations. If you anticipate turning over more than $60,000 annually, be sure to register for GST and come to grips with what that entails. If you spend a lot of time outside of New Zealand, i.e. more than 183 days per year, don’t forget the need to have at least one New Zealand resident director. If you’re the sole director of your company, make sure this isn’t going to be an issue for you.
Your company might not be capable of conscious thought, but, remember, it is a separate legal entity, and as such, it needs to make “decisions”. Most decisions a company makes will need a board resolution; and, where the decision is a major transaction, a shareholders’ resolution will also be needed. What constitutes a major transaction? In short, any transaction that deals with more than half of the company’s assets. Think purchasing, guarantees or borrowing money.
Let’s not forget the all-important registers. Firstly, there’s the company’s share register. Remember, a transfer of shares isn’t effective until it’s been recorded in the company’s share register. And, no, the Companies Office website is not your company’s share register. You will also need an interests register. If a director is likely to receive a material financial benefit from a transaction with the company, i.e. is involved with another party to the transaction (such as a trust or as shareholder of another company), then the director’s interest needs to be noted in the interests register. You might also require “entitled person’s consent” for those transactions. If you don’t do this, the transaction can be avoided.
Sound complicated? Don’t worry – we’re here to help you navigate the process and procedure, and explain the finer points, when needed.
Don’t forget your IP
In the hectic start-up phase, one crucial area that often gets overlooked, or put on the backburner for when things settle down, is intellectual property protection. This should be a priority. During the planning stages, define what area your business operates in, and familiarise yourself with the Intellectual Property Office of New Zealand (IPONZ) website. This is a user-friendly resource that allows you to check whether your name and/or logo are already trademarked. Remember, you can put legal dibs on words, images or a combination of both. So, it’s best to trademark your name and logo as early as possible, even if your idea doesn’t end up flying.
Miss or delay shoring up your IP protection, and you wouldn’t be the first person to discover, all too late, that someone’s already trademarked your name or logo, sending you back to the (often expensive and frustrating) drawing board. Depending on what type of venture you’re setting up, this can be a tricky area of the law, so don’t hesitate to give us a call if you need a hand. Alternatively, pull up a chair, pour yourself a coffee and start working your way through the encyclopaedic 10th edition of the Nice Classification to determine which categories your goods/services will be in. Usually there will be more than one. As a footnote, if you’re going global, be sure to get some specialist advice up front, as IPONZ will likely only be the start of the help you’ll need if you’re venturing onto the international stage.
Stay safe
Once you have all of that sussed, make sure you’re crystal clear on how health and safety legislation affects your particular venture. There are some serious implications if you get this wrong, so you need to do everything you can to safeguard your business’ compliance. You might also be operating in an environment that’s regulated by the Government. Be confident you understand the laws, rules and regulations, so you don’t get caught out.
If you think you need a check-up, or would just like to know a bit more about the basics, feel free to give us a call, and, even better, sign up to our BizClub® initiative. It’s tailor-made for emerging business people like you, and offers a wealth of free resources, including access to personalised advice, workshops and legal templates.