How To Start A Small Company

Most companies start off on a small scale. As a matter of fact, small companies and businesses dominate the business landscape. It’s not the ambition of every entrepreneur to run a large, corporate powerhouse. 

Moreover, small companies are often tiny but mighty. 

It doesn’t matter if your plan is to take your small company to the next level or if you just want a small, manageable venture. Almost every company has humble beginnings, making it imperative for all entrepreneurs to understand the legal aspects of starting a small company. 

That way, no matter what future goals you have in mind for your company – you’ll be giving it the best start possible. 

What Is A Small Company? 

There’s no strict and singular definition for a small company. When determining whether a company can be considered small, a number of different aspects need to be looked at. 

In New Zealand, a small business is generally defined as one with 19 or fewer employees, according to the Ministry of Business, Innovation and Employment. It can also be classified based on an annual revenue of less than NZ$30 million, as outlined by Inland Revenue. 

Therefore, when assessing whether a company is considered to be small, you’ll need to consider various factors specific to its operation. 

What Are The Challenges Of Starting A Small Company? 

When starting a small company, it’s not unusual for company owners to run into a few hurdles. The exact challenges you will face when starting a small company will depend on a number of different factors such as your industry, location, size and competition. 

For example, if you plan on opening a small cafe in your local area, you might find that zoning laws don’t permit cafes in your desired location. You may also encounter difficulties in securing financing or there might be several administrative hurdles to obtain the necessary permits and approvals. 

Despite potential challenges, these should not deter you from your goals. It’s advisable to seek expert help when navigating the complex world of business. Handling everything alone can be overwhelming and often counterproductive. Chances are, a professional has encountered similar challenges before and can provide much-needed clarity and guidance. For any of your legal issues, our expert legal team is here to help.   

Getting Started: Set Up A Small Company 

As mentioned earlier, most companies start in the same way. Starting a company requires accomplishing three basic tasks: research, registration, and legal protection. 

Let’s take a closer look at these below. 

Do Your Homework 

It’s imperative to conduct thorough research before starting a company. The more informed you are, the easier it will be to make the right decisions. Be sure to research your industry, materials, competition, marketing strategies, compliance measures and much more. 

Don’t forget to compile your research into a business plan, so it’s all in one place whenever you need to access it. 

Register Your Small Company 

Your next step is to register your company. In New Zealand, all companies must be registered with the Companies Office. During registration, you’ll need to decide matters such as who your shareholders will be, the directors of your company, how your company will be governed, and the type of company you’ll be running. After sorting out all these details, you can start the application process to register your company with the Companies Office. 

When registering your company, it’s wise to seek the help of a legal expert. The process can be complex, and it’s crucial to have someone knowledgeable about company registration by your side. The registration process not only allows your company to legally exist but also forms its foundation. Therefore, it’s imperative to ensure everything is correctly handled to avoid any future surprises.  

Your relationship with the Companies Office as the owner of a company doesn’t end once your company is registered. You’ll need to maintain communication for matters like fees, annual returns, and updating your company details. Familiarizing yourself with the Companies Office and its requirements is crucial to avoid fines or legal penalties. Consulting a legal expert can help you understand what’s expected of you in terms of compliance. 

We’ve written more about the process of registering a company in our article, Steps To Incorporate Your Small Business In New Zealand. 

Get Your Legals Sorted 

The final step in starting a small company is ensuring it has legal protection. To do this, you’ll need to use various legal instruments such as contracts and policies to safeguard your company from potential legal issues. 

The specific legal documents required will depend on the unique characteristics of your company. Therefore, it’s a good idea to consult with a legal expert. They can identify potential risks and help draft legal agreements to address those risks.

For now, we’ve listed a few core legal instruments that are important to have when managing different aspects of a company: 

• Shareholders Agreement
• Founders Term Sheet
• Company Constitution

Business Contracts:

• Service Agreement
• Distribution Agreement
• Supply Agreement

Employment: 

• Employment Contracts
• Workplace Policy
• Staff Handbook

Data and Privacy: 

• Privacy Policy
• Website Terms and Conditions
• Data Breach Response Plan

Confused on where to start? Chat to one of our legal experts today! 

What Else Do I Need To Start A Small Company?

Aside from registering your company the right way and making sure it’s legally protected, you will also need to understand the laws that impact your small company.

Every company needs to follow certain rules and regulations to ensure legal compliance. These laws could vary from safety regulations for employees, to fair customer practices as well as data privacy controls. 

Not complying with the laws that impact your company could lead to fines, legal penalties and a bad reputation for your business. So, instead of allowing that to happen, make sure you chat with a regulatory compliance expert. They’ll be able to let you know what laws your company needs to be following and the best way to ensure your practices are in line with them. 

Next Steps

To start a small company, there’s a number of legal considerations you need to take care of each step of the way. To summarise what we’ve discussed: 

• Most small companies begin modestly and require understanding of key legal aspects for a successful start, regardless of future growth ambitions
• Definitions of a small company vary, with metrics like employee count or annual turnover used to determine its size
• Starting a small company can present challenges such as zoning restrictions, financing difficulties, and the need for various permits, making expert guidance beneficial
• Essential early steps for setting up a small company include conducting thorough industry research, registering the company with regulatory bodies like the Companies Office, and ensuring legal protection
• Ongoing compliance with Companies Office regulations is crucial to avoid penalties 
• Legal protections for a small company should include contracts, policies, and agreements tailored to its specific needs to mitigate potential legal issues 
• Understanding and adhering to relevant laws and regulations is necessary to maintain legal compliance and avoid penalties, enhancing the company’s reputation 

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

---