How To Start A Prototyping Business

Getting a prototype is an important step when designing something new. A prototype business specialises in providing that service to businesses and designers throughout New Zealand, enabling them to refine and perfect their inventions. 

In this article, we’ll explore what a prototype business is and the steps involved in establishing one in New Zealand. We’ll discuss the essentials of starting a business, navigating the online business landscape, key laws to be aware of, and necessary agreements to have in place. 

Keep reading to learn more. 

What Is Prototyping?

When a business conceives a new idea, they often require the assistance of a prototyping service to materialise their concept for testing and evaluation. This preliminary version is known as a prototype. 

Prototypes can take various forms, such as a 3D print, a video, a sketch, a model, or a virtual reality representation. 

Example  A company specialising in food storage devises a new type of glass container aimed at extending food freshness. Once they have a design, they need a prototype to test and refine their product.  Upon submitting their design to a prototype business, they receive a model and proceed from there.

What Is A Prototype In Business?

A prototype business offers the service of transforming design concepts into tangible prototypes. Such a business may provide a wide range of services or specialise in particular methods, like 3D printing. 

How To Start A Prototyping Business

Launching a prototyping business in New Zealand requires careful planning, including the creation of a business plan. 

Like any business, it must undergo the registration process for tax purposes and other legal considerations. 

Business Plan For Your Prototyping Business

Developing a business plan is advisable for all entrepreneurs. Documenting the details, objectives, and research related to your business is an effective way to stay organised and on track. 

It outlines your goals, strategies to achieve them, and important milestones to ensure your business performs as expected. 

Choose A Business Structure For A Prototyping Business

Deciding on the business structure is crucial. In New Zealand, businesses typically operate as a sole trader, partnership, or company. 

The requirements for each vary – a sole trader is an individual running the business, while a company is a separate legal entity with its own obligations and may require directors and shareholders. 

Your choice of business structure should align with your long-term goals and current situation. For instance, a sole trader structure is simpler and less costly, suitable for small-scale operations. Conversely, a company structure is better suited for businesses planning to scale and take on more risk. 

Register Your Prototyping Business Or Company 

To register your business or company in New Zealand, you’ll need to engage with the Companies Office. For business registration, you’ll require a New Zealand Business Number (NZBN).

Open A Bank Account For Your Prototyping Business

Opening a separate bank account for your business transactions is essential. Mixing personal and business finances can lead to complications, so maintaining distinct accounts is advisable. 

Apply For Licences Or Permits

Depending on the nature of your prototyping business, you may need to apply for specific licences or permits. While there is no general licence required for prototyping, industry-specific businesses (e.g., medical or beauty products) may have particular requirements. 

Starting An Online Prototyping Business

The online marketplace is bustling and offers many opportunities for businesses. However, it’s crucial to understand the legalities of operating online to avoid potential issues that could arise from not having the appropriate legal documents in place.

Online Agreements 

Establishing the right online agreements is fundamental to protecting your business. The key agreements to consider include: 

• Website Terms and Conditions – these set the rules for using your website and limit your liability
• Privacy Policy – legally required when collecting personal information, informing users about the handling of their data
• Cookie Policy – asks for permission to track user activity, promoting transparency

At Sprintlaw, we can assist with implementing these policies on your website. Contact us to learn more. 

How Do I Protect My Intellectual Property?

Intellectual property (IP) is vital for your business’s marketing and brand recognition. Protecting your IP is essential to maintain your competitive advantage and prevent others from exploiting your brand assets. 

Securing your intellectual property ensures you retain exclusive rights to what you’ve developed for your business. 

Copyright

Copyright is automatically granted to original works created by an individual. It allows the copyright owner to license their work for profit. If someone uses your work without permission, you have the right to take action. Knowing your copyright rights is important if your business owns original content. 

Conversely, if you’re using someone else’s work, ensure you have explicit permission to avoid infringement issues. 

Trade Marks

Trade marks can be registered for distinctive features of your business, such as logos, sounds, phrases, or even colours. If you have a unique brand element crucial to your business identity, consider registering it with IPONZ, the Intellectual Property Office of New Zealand. 

Patents 

Patents provide exclusive rights to inventions, such as devices, substances, processes, or methods. For a patent to be granted, the invention must be new, useful, and show an inventive step. In a prototyping business, you may frequently encounter patents as your clients might hold or be pursuing them. While you typically won’t need to register patents for your clients, you should inform them if their prototype is patentable. 

If your business uses patented methods or examples, consider registering them with IPONZ to prevent others from copying your innovations. 

What Laws Apply To My Prototyping Business?

Being aware of the main regulations that could affect your business is crucial for legal compliance. You want to operate within the law, not in violation of it! 

Privacy Act 1993

As previously mentioned, privacy is a significant aspect of the online policies your business should have, particularly a Privacy Policy. Under the Privacy Act 1993, New Zealand businesses that collect personal information must have a Privacy Policy in place. 

If you collect personal details such as names, addresses, or payment information, you need a Privacy Policy that informs customers about the use, collection, and storage of their data. 

Companies Act 1993

If you’re setting up a company, you must comply with the Companies Act 1993. This legislation outlines how companies in New Zealand should operate, including aspects such as: 

• Annual reporting
• Company structure
• Director’s duties
• Management of shares and shareholder rights
• Authorised signatories for the company
• Liabilities

The Act can be complex, so if you need assistance understanding your rights and obligations, don’t hesitate to contact us. 

Consumer Guarantees Act 1993

The Consumer Guarantees Act 1993 outlines the rights of consumers when they engage in transactions. As a business provider, your clients are protected by this Act. 

You have a legal obligation to ensure that consumer rights are met, including not misleading or deceiving customers, addressing warranties and liabilities, delivering the promised product, and avoiding hidden fees or costs. 

Consumers have the right to seek redress if they believe their rights have been breached under the Act. Compliance is not only a legal requirement but also crucial for maintaining your business’s reputation. 

What Agreements Do I Need For My Prototyping Business?

The strength of a business often lies in its legal agreements. Here are some of the essential contracts to consider for your prototyping business.

Should I Have NDA’s And Confidentiality Clauses?

Given that clients will entrust you with potentially sensitive designs, it’s prudent to assure them of confidentiality. Non-Disclosure Agreements (NDAs) or Confidentiality Clauses in contracts can alleviate concerns about their designs being disclosed without consent. 

These clauses prevent unauthorised access or use of specified information. Additionally, consider including confidentiality clauses in employee contracts to maintain the same level of secrecy. 

Employment Agreements For Prototyping Businesses

If you plan to hire staff for your prototyping business, Employment Agreements are necessary. These contracts outline the rights, responsibilities, work hours, remuneration, leave entitlements, termination conditions, and other relevant details. 

Having clear agreements in writing helps prevent misunderstandings and potential legal disputes. 

Contractor Agreements In Prototyping Businesses

If you engage external help on a short-term basis or for specific projects, Contractor Agreements are also essential. 

These agreements are crucial as they clarify that the individual is an external contractor, with rights and obligations reflecting this status, to avoid potential liabilities associated with treating them as internal employees. 

Supply Agreement 

Should your business require materials or resources, a Supply Agreement with your supplier is important. It legally formalises aspects such as payment terms, liability, delivery dates, and the products supplied, ensuring mutual understanding. 

Our legal team can assist in drafting a Supply Agreement tailored to your business needs. 

Key Takeaways

Starting a prototyping business involves several steps, but with the right approach and legal support, it need not be overwhelming. To recap: 

• A prototyping business realises client designs into physical prototypes 
• Registering a prototyping business in New Zealand requires an NZBN
• Establishing the right agreements, such as Employment Contracts or Supply Agreements, is crucial 
• For online operations, ensure you have Cookie Policies, Privacy Policies, and robust Terms and Conditions in place
• Comply with relevant privacy, consumer, and business regulations 

If you would like a consultation on starting a prototyping business in New Zealand, you can reach us at 0800 002 184 or [email protected] for a free, no-obligations chat.

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