Everything You Need To Know: Running A Business From Home

Whether you’re considering opening your own business or you want to turn a hobby into a full-time gig, running a home business in New Zealand can offer you more freedom and flexibility to pursue your passions while reducing overheads like commercial rent. 

This handy guide will take you through the key elements and answer a range of questions to set you up with what you need to know when starting a home business in New Zealand. 

What Is A Home Business?

If you run a business at or from your home in New Zealand, then you have a home business. It’s common for many small businesses – such as independent contractors, sole traders, and start-ups – to operate from a home base.

Running a business at home means you do most of the work at your home, which is also the place of business. Conversely, running a business from home often means the home serves as a base for the business, but the work may be conducted elsewhere.

Choosing Your Business Structure

The business structure you choose will affect all aspects of your business – from liability and tax obligations, to hiring employees and scaling up as you grow. Think of your business structure as the foundational frame of a house. Once you’ve started building, restructuring can be complex. So it’s crucial to select the best structure for your business needs.

In New Zealand, there are three main business structures to consider:

• Sole trader
• Partnership
• Company

Operating as a sole trader is typically the simplest and least costly business structure. As a sole trader, you run your business under your own name and IRD number, and you can employ others. However, you can be personally liable for business debts and losses.

A partnership involves two or more people (or entities) running a business together. Partnerships are relatively easy to set up, but carry the risk of personal liability for business debts and losses, as well as the actions of your partners.

A company is a separate legal entity formed by shareholders. This structure is more complex and costly to set up (for example, registering your company with the New Zealand Companies Office) but offers limited liability for business debts and losses. Companies are taxed separately from personal income and may access a lower corporate tax rate.

Deciding which business structure is right for you depends on your circumstances. Many start as sole traders and later form a company as the business expands. Choosing a business structure can be daunting, so it’s wise to consult a lawyer for advice tailored to your business.

Do You Need Council Approval?

In New Zealand, home businesses can often operate without local council approval if they meet specific criteria.

Your home business may not need council approval if:

• It doesn’t negatively affect neighbours or cause more disruption than a typical residential property, including noise, smells, traffic, and waste.
• You display no more than one business identification sign.
• Goods sold are produced by the business, with an exception for online sales.
• The business doesn’t involve activities that require specific council approval, such as childcare or food preparation.

Local councils have their own policies for home businesses, so it’s recommended to contact your council for guidance.

During the COVID-19 pandemic, home businesses may have specific restrictions on the number of employees. Check with the Ministry of Health for current guidelines.

If unsure about council approval, contact your local council or review their District Plan for home business requirements.

Licences And Registration

Register For An IRD Number

Depending on your business structure, you may need to apply for an IRD number. This unique number identifies your business for tax purposes in New Zealand.

Register Your Business Name

If you conduct business under a name other than your own, you must register it with the New Zealand Companies Office. Before registration, ensure the name isn’t already taken by searching the Intellectual Property Office of New Zealand (IPONZ).

Learn more about registering your business name here.

Licences

Certain types of businesses in New Zealand require specific licences. The New Zealand Business website provides information on the licences you may need.

What Are Your Tax Obligations?

Understanding your tax obligations can be complex. Consulting an accountant or tax advisor is recommended for advice specific to your situation.

All business structures require an IRD number to ensure correct taxation. You may need to register for:

Goods and Services Tax (GST)	GST is a tax of 15% on most goods and services in New Zealand. Registration for GST is mandatory if your turnover exceeds NZ$60,000 annually.
Pay As You Earn (PAYE)	If you have employees, you must deduct tax from their wages and remit it to Inland Revenue.
Fringe Benefit Tax (FBT)	If you provide non-cash benefits to employees, you may need to pay FBT on these benefits.

As a home business owner, be aware of potential tax liabilities and deductions, such as:

Liabilities

Home business owners may need to pay:

• Land tax
• Capital gains tax if selling the property used for the business

Deductions

You may claim deductions for business expenses, such as:

Running expenses	Costs related to business operations, like electricity, phone, and equipment depreciation.
Occupancy expenses	Costs for occupying the building, such as rent or mortgage interest, which may be partially deductible.

Learn more about home business deductions on the Inland Revenue website here.

Can You Put Up A Sign To Advertise Your Business?

Displaying a sign for your home business can attract customers. The sign can show your business details without advertising goods or services. Only one sign is permitted.

Your sign may include:

• Your name or business name
• Business type
• Contact information
• Operating hours
• Business logo

In residential zones, signs must not be illuminated. In business zones, signs may be illuminated between 7am and 10pm but cannot be animated or flashing.

Choose from building, wall, or window signs, each with specific requirements.

Type of sign	General requirements
Building signs	Area limit of 2m2, flat against an exterior wall, not protruding more than 30cm, and not above the building’s parapet or eaves.
Wall signs	Area limit of 1m2 in residential zones, attached to the building or boundary, and not above 2m from ground level.
Window signs	Area limit of 20% of the window or 2m2, inside the window, and not illuminated.

Can You Run Your Business From A Rental Home?

If you’re renting and want to start a home business, check your lease agreement for any restrictions. You may need your landlord’s permission to use the property for business purposes and to display signage.

Considerations for a home business in a rental property include:

• Altered rights under the Residential Tenancies Act if the property’s primary use isn’t residential.
• Potential bond issues if the property is damaged during business activities.

Do I Need Insurance?

Appropriate insurance can protect your business, customers, and livelihood. Review your home and contents insurance, as it may not cover business activities. Consult an insurance specialist like BizCover for suitable coverage.

Some insurance types are compulsory in New Zealand, such as:

• Workers’ compensation if you have employees
• Public liability for certain businesses
• Vehicle insurance if you own a business vehicle

What Do I Do If I Want To Close Or Sell My Business?

Closing or selling your business is a significant decision. Consult a lawyer to explore options like financial support, pausing, adapting, or succession planning.

Selling Your Business

For selling, assess your business’s value with a specialist and consider asset sales. You may need to pay GST or capital gains tax. Transfer the business name and licenses to the new owner.

Closing Your Business

When closing, cancel your business name and deregister with the Companies Office. Fulfil tax obligations, including GST adjustments and final tax returns. Notify Inland Revenue and take care of employee entitlements.

Where To Now?

Starting and running a home business in New Zealand is a significant undertaking. For tailored advice at any stage, our team of friendly lawyers is ready to assist.

Call us on 0800 002 184 or email [email protected] for a free, no-obligations chat.

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