Sole trader or company? Choosing a business structure

Sole trader

You and the business are the same person. Profits are taxed at your personal rates, there is no registration beyond IRD and GST, and the accounts are simple. The trade-off is unlimited personal liability, and all profit is taxed in your name even if you leave it in the business.

Company

A company is a separate legal entity registered with the Companies Office and taxed at a flat 28%. Shareholders are usually paid a salary, and remaining profit can be retained or paid out as dividends with imputation credits attached. A company limits your personal liability, looks established to customers and lenders, and makes it easier to bring in partners or sell later. It also brings directors’ duties, an annual return and a little more accounting.

Partnerships and look-through companies

A partnership shares profit between the partners, who each pay tax on their share. A look-through company has the legal protection of a company but passes income and losses through to its shareholders, which can suit property and smaller ventures.

Trusts

Trusts are about asset protection and succession, not tax savings. Trustee income over $10,000 has been taxed at 39% since 1 April 2024, and trusts carry their own compliance and record-keeping duties.

What usually suits

• Starting out with modest profit and low risk: sole trader.
• Growing profit, staff, contracts or risk: company.
• Two or more owners: company or partnership, with a written agreement either way.

GST, KiwiSaver and payroll obligations apply whatever structure you choose. You can change structure as the business grows, and we set up the new one and move everything across cleanly.

General information only. Talk to us about your own situation before acting on it.