Ben is a law graduate and admitted lawyer in Queensland. Ben has worked in legal, marketing and tech in London, Shanghai and Brisbane and now writes about business topics for Sprintlaw.
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If you’re starting a business in New Zealand (or you’ve already started and you’re now thinking “should this be a company?”), you’re not alone. “Company” is one of those words people use all the time, but the legal meaning is a bit more specific than “my business”.
This updated guide reflects the current way companies are commonly set up and run in New Zealand, including the modern realities of online trading, data collection, and brand protection. We’ll break down what a company is, how it’s different from other business structures, and what you’ll need to think about if you want to set up a company the right way from day one.
Let’s demystify it.
What Is A Company In New Zealand?
In plain English, a company is a legal structure where your business becomes its own separate “legal person”. That means the company can:
- enter into contracts in its own name
- own assets (like stock, equipment, vehicles, intellectual property)
- employ staff
- borrow money and grant security
- sue and be sued
Most everyday “companies” you hear about are limited liability companies registered under the Companies Act 1993. When people say “I’m going to start a company”, they usually mean they want to register a limited liability company on the Companies Office register.
Important: a company is not just a brand name, a website, or a social media page. It’s a formal structure with legal responsibilities.
Company vs Business: Why The Difference Matters
Your business is what you do. Your company (if you have one) is the legal vehicle you use to do it.
For example, you might run an online store called “Kōwhai Homeware”. The business is the online store. The company could be “Kōwhai Homeware Limited” (or a different registered name) that owns the brand, contracts with suppliers, and takes customer payments.
Once you understand that separation, a lot of the legal “why” starts to make sense.
How Is A Company Different From A Sole Trader Or Partnership?
Choosing a structure is one of the biggest early decisions you’ll make, because it affects tax admin, liability, ownership, and how easy it is to raise money or bring in co-founders later.
Here’s a practical breakdown.
Sole Trader
As a sole trader, you are the business. There’s no separate legal entity.
This often means:
- simple to start and low-cost
- fewer admin obligations
- but you’re usually personally responsible for business debts and risks
If something goes wrong (for example, a contract dispute or a customer claim), it can become personal because legally it is personal.
Partnership
A partnership is where two or more people run a business together, typically sharing profits and decision-making.
Partnerships can work well, but they can also get messy if expectations aren’t clear. If you’re going into business with someone else, it’s usually worth having a proper Partnership Agreement in place so you’re not relying on assumptions when things change (and they usually do).
Company
A company is a separate legal entity, which is why people often choose it for:
- limited liability (in many cases, your personal assets are more protected)
- credibility when dealing with suppliers, customers, and investors
- ownership flexibility (shares, shareholders, different share classes in some situations)
- growth planning (bringing in co-founders, staff equity, or investors)
That said, “company” doesn’t automatically mean “safe”. Directors still have legal duties, and personal liability can arise in certain circumstances (for example, if you personally guarantee a lease or loan, or you breach director duties).
What Does “Limited Liability” Actually Mean?
“Limited liability” is one of the biggest reasons people choose a company structure, but it’s also one of the most misunderstood concepts.
Limited liability generally means that if the company owes money, the shareholders’ liability is usually limited to what they’ve invested (or agreed to invest) in the company.
In other words, the company is responsible for its own debts, not you personally.
When Limited Liability Might Not Protect You
There are some common situations where business owners get caught out because they assume “I have a company, so I’m fine.” In real life, it can be more nuanced.
Examples include:
- Personal guarantees (for example, for a commercial lease or business loan)
- Director duties under the Companies Act 1993 (directors must act in the best interests of the company and meet various legal obligations)
- Misleading conduct (for example, advertising claims that breach the Fair Trading Act 1986)
- Health and safety obligations under the Health and Safety at Work Act 2015 (these are serious and apply regardless of structure)
- Tax obligations (like GST, PAYE, and keeping proper records)
Limited liability is still valuable, but the safest approach is to treat it as one layer of protection - not the whole plan.
Who Owns And Runs A Company: Shareholders vs Directors
A company has two key “roles” at the top: shareholders (owners) and directors (people responsible for governance and decision-making).
Sometimes you’re both (especially if you’re a founder), but legally they’re different hats.
Shareholders (Owners)
Shareholders own shares in the company. Ownership usually entitles them to things like:
- a right to share in profits (if dividends are paid)
- a say in major decisions (depending on the law and the company’s documents)
- a share of value if the company is sold
If you have more than one shareholder, it’s smart to document the rules of the relationship early - before there’s pressure, conflict, or a big opportunity on the table. That’s where a Shareholders Agreement is often critical.
Directors (Decision-Makers With Legal Duties)
Directors are responsible for running the company. They must comply with director duties set out in the Companies Act 1993 (and other laws, depending on what the company does).
Even in a small business, director decisions matter. For example:
- signing contracts
- approving budgets and payments
- deciding when to hire staff
- making sure the company can pay its debts
Good record-keeping is part of good governance too. When decisions need to be formally recorded, a Directors Resolution is often used (especially for things like issuing shares, appointing directors, or approving major transactions).
Do You Need A Constitution?
A company can operate with the default rules in the Companies Act 1993, but many businesses choose to adopt a constitution to tailor how the company runs.
A Company Constitution can set rules around things like:
- how shares can be issued or transferred
- how meetings and voting work
- director appointment/removal processes
- decision-making thresholds for key actions
This can be especially helpful when there are multiple founders, investors, or you’re planning to scale.
How Do You Set Up A Company (And What Should You Do Before You Register)?
Registering a company in New Zealand is relatively straightforward, but setting it up properly takes a little more thought. The “legal foundations” piece is what saves you headaches later.
Step 1: Choose The Right Structure For Your Goals
Before you commit to a company, it’s worth asking:
- Are you planning to bring in a co-founder or investor?
- Will you be hiring staff soon?
- Will you be signing higher-risk contracts (leases, supply deals, big client contracts)?
- Do you want to separate ownership and management?
If you’re unsure, getting tailored advice early is usually cheaper than fixing things later (especially if you’ve already taken money, issued shares informally, or signed contracts personally).
Step 2: Decide On Ownership And Control
It’s not just “who’s involved”, but how they’re involved. You’ll want clarity on:
- who the shareholders are (and what percentage each owns)
- whether there will be one director or multiple directors
- what happens if someone wants to leave
- how decisions are made day-to-day
This is where a Shareholders Agreement and constitution can work together to prevent misunderstandings.
Step 3: Register The Company And Get The Admin Right
Company registration typically includes:
- choosing a company name
- providing a registered office address and address for service
- appointing directors and shareholders
- getting an NZBN (New Zealand Business Number)
You’ll also want to think about your tax registrations (for example, GST if you meet the threshold), and setting up systems to keep company and personal finances separate.
Step 4: Put The Right Contracts In Place From Day One
This is where many new companies stumble. You can register a company quickly, but if you then operate with handshake deals, unclear co-founder arrangements, or missing website terms, you’re exposed.
Depending on what you’re doing, this might include:
- customer terms and conditions
- supplier or manufacturing agreements
- service agreements (especially for B2B work)
- contractor agreements if you engage freelancers
- employment agreements if you hire staff
If you’re hiring, getting the right Employment Contract in place early helps set expectations around pay, hours, duties, confidentiality, and IP ownership.
And as tempting as it is to grab a free template online, contracts usually need to be tailored to your business model, risk level, and what New Zealand law actually requires.
What Laws Do Companies Need To Follow?
Companies don’t just have “company law” obligations. Once you start trading, advertising, hiring, and collecting information, you’ll be dealing with several legal areas at once.
Here are some of the big ones for most NZ businesses.
Company Law (Companies Act 1993)
This covers how companies are governed, director duties, shareholder rights, and key administrative requirements. If you have co-founders or investors, compliance here becomes even more important because it sets the framework for how decisions are made.
Consumer And Advertising Law (Fair Trading Act 1986 And Consumer Guarantees Act 1993)
If you sell products or services to consumers, you generally need to make sure:
- your advertising isn’t misleading or deceptive
- your pricing claims are accurate (including any “was/now” discounts)
- you honour consumer guarantees where they apply (for example, goods must be of acceptable quality)
These laws apply whether you’re a one-person startup or a well-established company - so it’s worth setting up compliant marketing and refund processes early.
Privacy Law (Privacy Act 2020)
If your company collects personal information (for example, customer names, addresses, emails, payment details, or even IP addresses via your website), you need to handle that information responsibly.
In practice, that usually means having a clear Privacy Policy and making sure your internal processes match what you’re telling customers you do.
Employment Law
If your company employs staff, you’ll need to comply with things like:
- the Employment Relations Act 2000 (good faith obligations and employment process)
- the Holidays Act 2003 (leave entitlements and pay calculations)
- health and safety obligations
Even if you start with contractors, make sure the relationship is genuinely contracting - misclassification risks can be expensive.
Health And Safety (Health And Safety At Work Act 2015)
If you run a workplace (including a retail shop, warehouse, office, or even certain types of home-based work), you’ll need to take reasonable steps to keep people safe.
This is one of those areas where “we’re small” isn’t a defence. The good news is you can usually manage your obligations with good systems, training, and documentation - and it’s much easier to do that early than after an incident.
Key Takeaways
- A company is a separate legal entity that can own assets, enter contracts, employ staff, and take on obligations in its own name.
- Many New Zealand businesses choose a company structure for limited liability, clearer ownership rules, and growth potential - but it doesn’t remove all personal risk, especially where personal guarantees or director duties are involved.
- Shareholders own the company, while directors run it, and it’s important to document decision-making and responsibilities clearly as you grow.
- If there’s more than one founder or shareholder, having a Shareholders Agreement (and often a Company Constitution) can prevent major disputes later.
- Setting up a company isn’t just about registration - you also need the right contracts (like Employment Contracts and supplier/customer agreements) to protect you from day one.
- Companies typically need to comply with several key legal areas, including company law, consumer and advertising law, privacy law, employment law, and health and safety obligations.
If you’d like help setting up your company properly (or reviewing your structure, constitution, shareholder arrangements, or contracts), you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.
