How To Start An Online Company In New Zealand

There are numerous advantages to starting your company online. Accessibility, cost efficiency, flexibility, and scalability are just a few of the benefits an online company can offer you. Globally, consumers are increasingly turning to e-commerce for their retail needs.

If you’re considering starting a company, then launching it online makes a lot of sense. Even if you aspire to open a brick and mortar store in the future, beginning online could be the first step in building your brand towards that goal.

There are many reasons to start an online company. However, there’s also a fair bit of preparation that goes into launching a company online. Legally protecting your company and ensuring it is compliant is essential for every business.

When it comes to an online company, there are a few additional considerations. Let's explore them in more detail below.

What Kind Of Company Can I Start Online?

You can start any kind of company online, as long as it is feasible. That means the particular product or service you have in mind should be viable online. For instance, it would be challenging to sell prescription medications online. You also can’t sell anything illegal online.

There are still plenty of options when it comes to deciding the type of online company you will be starting. Clothing, cookware, art, books, toys, pet supplies, phone accessories, and candles are some popular products that are often sold online. Additionally, services such as digital marketing, tutoring, graphic design, and freelance writing can be offered completely through an online platform.

Your best bet is to sit down and create a business plan. Narrowing down the types of products and services you want to offer, how your company will make money, who your competitors are, and identifying the potential challenges of your online company can help you be better prepared for the world of online companies.

How Do I Start An Online Company?

An online company starts off the same way any company does. That is, through a registration process. Registering your company is the first step to making it 'official' as you technically can’t start trading until your company is officially listed.

To register your company, you will need to be familiar with the New Zealand Companies Office, the primary regulator for companies in New Zealand. Not only will your online company need to be registered with the Companies Office, but any company updates, annual returns or auditing will also be done through them. When you run a company, it’s important to be aware of your obligations with the Companies Office so you don’t miss anything important.

The registration process for your company can be completed through an online application. Before you get to that stage, however, you will need to make some pretty important choices regarding directors, shareholders, officeholders, and company governance.

There are also multiple types of companies. Picking the type of company you want to register is a major decision that will impact your online company's future. We always recommend having a legal expert help out with this process.

A legal expert knows how to navigate the complexities of the Companies Office and can ensure the right legal structure for your company is registered. They can also provide advice on important company matters, such as director duties and governance documents. Your company’s setup will play an important role in pursuing the goals you have for your company’s future. Take the time to chat with a legal expert and work through things with them.

Is there A Difference Between An Online Company And An Online Business?

Yes, there’s a major difference between an online company and an online business, even though the two terms are often used interchangeably.

Most companies will be classified as a business (there are some exceptions, such as not-for-profits registered as a company) however not every business is a company.

A company is a specific legal business structure. Other legal business structures, such as a sole trader or a partnership, differ greatly from companies. For instance, to register as a sole trader or a partner in New Zealand, you simply need to obtain an IRD number. Even though the registration is much simpler, sole trader and partnership businesses don’t offer the same amount of legal protection as a company as there is no legal separation between you and your business, making you liable for the entire operation.

A company has a somewhat more complex setup process. However, once a company is properly registered, it becomes a legal entity on its own. A company can do things like earn a profit, incur debt, buy property, or be sued. Your liabilities are more protected with a company, not to mention a company structure is much better suited for future expansion opportunities.

If your online company is a serious endeavour, then we always recommend going with a company setup.

Do I Need A Licence To Start A Company Online?

There’s no general licence required to start an online company in New Zealand. However, you may still need to attain a licence for the specific industry you’re in. This will depend entirely on the type of company you will be running online and at times, the location. For instance, if you’re running your online company from home then you may need to see if there are any local laws or permits you need to attain prior to doing so.

It’s important to do your homework and find out what licences and permits apply to your online business, then get them sorted. If you're unsure of where to look, a legal expert can point you in the right direction and make sure you have the necessary licences. Legal compliance is of utmost importance – make sure this is high up on your priority list.

Keep in mind, obtaining licences and permits aren’t the only legal compliance measures you will need to look out for.

Things like consumer laws, data and privacy regulations, and employment standards are all going to impact how you conduct business. The exact laws that apply to your company will depend on your specific operations, so it’s important to discuss what rules your business needs to follow with a legal expert and the best way to be legally compliant.

What Legal Documents Will I Need For My Online Company?

Legal instruments can help protect your company. When you run an online company, there’s the usual risks that come with running any kind of company. Along with that, there are additional concerns that naturally come with having an online presence. Getting the right legal agreements drafted can help you manage those risks and safeguard your company.

We’ve listed a few key legal agreements for you below:

Privacy Policy: Your online company will need a privacy policy, as it will likely be collecting information off its users (such as emails and card details). Under New Zealand privacy law, every business that collects private information from its website is legally required to have a privacy policy visible on their website.

Employment Contract: When hiring staff to work in your online company, it’s necessary to have a written agreement between both parties to set the terms of the relationship.

Website Terms and Conditions: This is an important legal agreement between your website users and your company. When properly drafted, a website terms and conditions creates strong user guidelines, protects your intellectual property, limits your liabilities, and secures your revenue streams.

Supply Agreement: A lot of online companies have a supplier for certain products. A supplier plays a crucial role in your company’s operations, so it’s important to have a clear and concise agreement that properly outlines the rights and obligations of both parties. Misunderstandings can often be resolved quickly if there’s a good legal agreement in place.

Non-Disclosure Agreement (NDA): As an online company, you’re very likely going to have things like intellectual property or other matters that need to be kept confidential. An NDA is a great way to make sure that certain information doesn’t get passed onto the wrong people and stays within the company.

Next Steps

Whichever kind of online company you choose to run, it’s important to protect your company through the right legal avenues. To summarise what we’ve discussed:

• It's possible to start various types of companies online, including selling products like clothing or offering services such as digital marketing, though feasibility and legality should be considered.
• Registering your company involves crucial legal decisions about structure and governance, with registration through the New Zealand Companies Office being mandatory in New Zealand.
• The distinction between an online company and an online business lies in their legal structure, with companies offering more protection and expansion potential due to their legal separation from their owners.
• Licensing requirements vary depending on the industry and location, and additional compliance with consumer laws, privacy regulations, and employment standards is necessary.
• Essential legal documents for running an online company include a privacy policy, employment contracts, website terms and conditions, supply agreements, and non-disclosure agreements to manage risks and protect the business.
• Consulting with a legal expert is recommended to navigate the complexities of company formation, ensuring the right legal structure and compliance with relevant laws.

If you would like a consultation on your options going forward, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.