Starting your own business in New Zealand is an exciting journey, and registering as a sole trader is often the first step many entrepreneurs take. Before we begin let’s get one thing straight, technically you don’t need to register to become a sole trader. When you start earning self-employed income you are automatically a sole trader – there is no registration step.
However, there are a few things which are important to get right to ensure you’re set up for success. At Solo, we understand the importance of making this process as smooth and straightforward as possible. Here’s a step-by-step guide on how to register as a sole trader, designed to get you up and running in no time.
Step 1: Decide on Your Business Structure
First things first, confirm that becoming a sole trader is the best structure for your business. As a sole trader, you’ll have complete control over your business. It’s the simplest form of business to set up and requires less paperwork, making it a popular choice for many new business owners. For more information about the sole trader business structure, check out our guide Sole Trader vs Limited Company: Making the Right Choice.
Step 2: Choose a Business Name
Pick a name that reflects your business identity. As a sole trader, you can trade under your own name or choose a business name. If you decide on a business name, it’s a good idea to check the Companies Office register to ensure it’s not already in use or too similar to an existing name.
Step 3: Register for an IRD Number
If you don’t already have one, you’ll need to get an IRD number for tax purposes. Your IRD number is crucial for all your business transactions, taxes, and dealings with Inland Revenue. If you already have an IRD number for personal use, you’ll use the same number for your business. That’s it, just an IRD number. You don’t need to register as a sole trader with IRD.
Step 4: Understand Your Tax Obligations
As a sole trader, you’ll pay taxes on your business’s income by filing an IR3 individual income return each year. It’s also a good time to register for GST if your business earns over $60,000 annually. Understanding and setting up your tax obligations early on can save you a lot of hassle and ensure you’re compliant with New Zealand tax laws. Check out our beginners guide to self-employed tax in New Zealand to master your taxes.
Step 5: Set Up Your Record Keeping
Proper bookkeeping is essential for managing your business finances and staying compliant with New Zealand tax laws. As a sole trader, you are required to keep accurate records of all your business transactions, income, and expenses. Solo has been created specifically for New Zealand sole traders to make managing your tax simple, quick and affordable.
Step 6: Open a Business Bank Account
While not a legal requirement for sole traders, opening a separate bank account for your business is highly recommended. It makes tracking your business finances easier and more transparent, especially when it comes to doing your taxes. This does not need to be a ‘business’ bank account and can simply be a seperate personal account.
Step 7: Keep Learning
The business world is always evolving, so it’s important to stay informed about any changes to tax, industry regulations, and best practices. Luckily, Solo includes all the latest New Zealand tax rules for sole traders, so you’re always up to date.
Check out our beginners guide to self-employed tax in New Zealand for a complete understanding of your self-employed taxes.
Starting your journey as a sole trader is an exciting step towards entrepreneurship. By following these steps, you’re laying a strong foundation for your business. Remember, you don’t actually need to register as a sole trader to get started. The key to success is not just in beginning but in staying informed and adaptable to change. Welcome to the exciting world of business ownership in New Zealand!