A quick overview on the 3 common types of business structures in New Zealand.
A sole trader is a person trading on their own. The sole trader:
As a sole trader you can usually begin the business without following any formal or legal processes to establish it. You may employ other people to help run the business.
In a partnership, two or more people run a business together. Each partner:
Many partnerships are established with a formal partnership agreement.
The partnership itself does not pay income tax. Instead it distributes the partnership income to the partners. The partners then pay tax on their own share.
Income, tax credits, rebates, gains, expenditure or losses allocated to a partner in an income year will generally be allocated in proportion to each partner’s share in the partnership’s income under the partnership agreement.
A limited partnership exists as a formal and legal entity in its own right. It is separate from its partners.
A company exists as a formal and legal entity in its own right. It is separate from its shareholder(s) or owner(s).
Assets and liabilities
The shareholders’ liability for losses is limited to their share of ownership of the company.