Welcome to the second part of our Business Structures help guide (see part one here), where we focus on helping those interested in starting a business, but unsure of which business structure to go with.
When setting up a new business there are more things to think about than just the company structure.
There are numerous types of insurance you can purchase to protect yourself and your business. They include Business Asset Insurance, Public Liability, Employers Liability, Statutory Liability and Income Protection.
We suggest you contact insurance providers for quotes. Another option is to speak to your bank manager; they usually provide sound advice around what is best for you. Remember, at the end of the day, it is up to you what sort of Insurance you buy. Don’t be pressured into purchasing every insurance policy under the sun, but security definitely comes first.
If you are contracting, you are responsible for paying you own ACC levies. Your first ACC payment is normally calculated after your first Tax Return as a contractor is filed. Your payment will be calculated from your net income x the specific industry you work in – each industry has a different rate.
ACC often comes as a surprise to a new business person because you pay ACC within your wages normally so this is a separate invoice. However, in the event you have an accident, you do get paid out a weekly amount 80% of your normal income – so this is effectively another form of insurance.
You can contact ACC directly if you would like to speak to an advisor:
ACC Business helpline: 0800 222 776
Student Loan Payments
If you have a student loan and are no longer receiving any salary payments, your student loan payment will be calculated when you file your personal tax return at the end of the financial year. The student loan threshold is $19,760, which means you will pay 12% on any net income you earn above this threshold.
For example, if you earn a net income of $32,500 for the financial year, you will pay:
- 12% on ($32,500-$19,760 = $12,740)
- 12% x $12,740 = $1,528.80 Student Loan Payment due.
You will pay this along with your End of Year tax payment. You can however contact the Inland Revenue Department, Student Loan section if you wish to make voluntary payments throughout the year.
If you have a KiwiSaver account and wish to continue making contributions, please contact your KiwiSaver provider about setting up a direct debit into your account.
Business Bank Accounts
If you are setting up a company, you will need to open a business bank account under your business name. You will need to provide a copy of your company registration (we will provide this) to your bank manager when doing so.
We suggest opening a normal debit account and also a Tax/GST savings account. This way you can allocate 20% of your earnings into you tax savings account and won’t be caught out when it’s tax time!
Separate business credit cards can also be setup – please discuss with your bank manager for your best options and be sure to ask about fees!
If you are operating as a sole trader, you can use your own personal bank account and allocate any private expenses to ‘private’ or ‘drawings’.
Remember to put ALL business expenses through your business account so they can easily be recorded and not forgotten!
Xero Setup – Record Keeping
As part of this package, we will set you up with a Xero accounting subscription. This will be linked directly to your bank account and records all income and expenses going through your bank.
You are not required to use Xero, there are many other options out there, however we find Xero the most efficient accounting package available, plus we can access it (if you provide authorisation) and help advise you on your progress at any stage.
You will still be required to keep all invoices/receipts for up to 7 years and could be requested to provide copies to the Inland Revenue Department at anytime. So keeping these in some sort of order is definitely advisable.
As your accountant, we will request to see copies of invoices for any assets purchased above $500, insurance or legal costs etc at year end only. These can be uploaded to your beany account at any stage for safe keeping.
Remember, we are here to help you! If you would like to discuss any of the above information, please email us or call us on 0800 755 333.