Master checklist for new business owners

When you take up the title of “business owner”, you simultaneously agree to an annual set of financial and legal obligations.​

Read on and learn what’s needed to keep the tax office happy – along with any employees or additional shareholders of yours. Below are the procedures you need to be on top of.*​

* It could be a great idea to bookmark this.​

What’s your long-term plan? If you’re planning to stay small, it could be a good move to class yourself as a sole trader. However, there are real benefits to incorporating your business as a company if you have growth on the horizon.​

If you’re not sure yet, you can get a better idea of the ideal choice for you with our article sole trader vs company.​

And if you’ve already decided to register as a company, here’s where to do it and here’s where to grab a business IRD number (it’s necessary by law). We can also handle the whole process for you – just get in touch.​

Here’s how to figure out whether or not you should register your business for GST.​

Are you (or your business) earning (or expecting to earn) over $60,000 per annum?​

Then you’re legally required to register for GST.​

You’ll need a GST number – just use your personal IRD number if you’ve elected to be a sole trader, and if you’re going to trade as a company, you can register for a company IRD number here.​

Are you earning under $60,000 per annum?​

Then it’s your call if you’d like to register for GST. It could be helpful if​

The key to understanding GST is recognising what you can and can’t claim. Learn all about that in our dedicated article here.​

As our client, we’ll offer you a full GST service if you’re using Xero. We make sure you’re claiming all your permitted expenses.​

You can’t trust a spreadsheet. The problem with spreadsheets is that a single mistake in your formulas at any point and it can be catastrophic.​

Of all our recommendations, the strongest is that you use some form of accounting software. You can learn all about the benefits from this article.​

We’re big advocates for our partner, Xero. They’re the best accounting software on the market in NZ, but there are other providers like MYOB and Reckon.​

If you’re yet to choose a system, it may help your future-proofing to know we’re a Platinum Partner of Xero’s and a certified Xero advisor. Our team are also well-versed in MYOB.​

It’s best to have two bank accounts. One handles normal trading transactions, while the other takes care of your tax savings.​

Despite interest rates being at an all-time low, we still suggest transferring 30% of your sales into a separate bank account. This ensures you have adequate funds at hand when tax time rolls around!​

There are numerous types of insurance you can get to protect your business. The ideal combination will depend on your business and personal situation.​

Here are some questions to consider:​

We recommend discussing your needs and risks with an insurance broker. Alternatively, your bank manager can provide some sound advice. At the end of the day, it's up to your what insurance you take out so don't feel pressured into purchasing every policy under the sun.​

It’s also worth knowing that some insurances can be GST-deducted for business purposes, while others are only applicable for personal tax returns.​

If you are contracting, you’re responsible for paying your own ACC levies. Your first ACC payment is normally calculated after your first tax return as a contractor is filed.  Your payment will be based on your net income and the specific industry you work in – each industry has a different rate.​​

ACC often comes as a surprise to a new business person because ACC has always been paid via your PAYE-paid wages and you don’t see it.​​

However, in the event you have an accident, you do get paid out a weekly amount of 80% of your normal income, so this is effectively another form of insurance.​​

You can contact ACC directly if you would like more information. Unfortunately, due to privacy reasons, we are unable to do this for you.​

We do have a more detailed article on ACC levies and how they work if you want to know more.​

Protecting your data is critical for you and your customers. You may need​

Also have a think about​

Unless you already have a company constitution, it’s a good move to formalise agreements between shareholders or partners. Your agreements don’t need to be complex and can be written without legal support.​

An agreement should detail:​

Simmons Steward is a New Zealand legal firm offering templates free of charge. In addition, we recommend asking your lawyer to take a look at anything you’re about to sign.​

If you’d like an in-depth intro to everything you need to know about income tax, go straight to our income tax guide.​

You can do your future self a major favour by keeping your bookkeeping and accounting systems up to date. It equips your accountant to see how you’re tracking and let you know how much tax you should be putting aside.​

To ensure you pay your annual tax bill without worry, we always recommend putting aside 30% of your sales in a separate bank account on an ongoing basis.​

If you have a student loan and are no longer receiving any PAYE-paid wages or salaries, Inland Revenue will calculate your student loan payment when you file your personal tax return at the end of the financial year. The student loan threshold changes each year, but is generally around $20,000. This means you’ll 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:​​

Your student loan payment is due on the same dates as your income tax and provisional tax (if applicable). You can contact the Inland Revenue Department, Student Loan section if you wish to make voluntary payments throughout the year.​

If you have Kiwisaver and want to keep making contributions, you can contact your Kiwisaver provider about setting up a direct debit.​

We have a separate blog on Kiwisaver for the self-employed, which is a useful read.​

Before employing staff, it’s important to understand that you have responsibilities as an employer.​

We have a more detailed information here, which gives you an idea of the ongoing requirements of being an employer.​

If it’s only you working in the business, it’s a good move to keep yourself off the payroll for the first year. You’ll still pay tax, but later, and the amount will depend on your profit levels. We explain further here.​

Having an accountant by your side allows you to focus on growing your business, while they handle the numbers.​

You can claim expenses directly linked to the production of your business income.​

Distinguishing what's directly linked can be tricky at times. Doctor's bills aren't linked even if your work depends on you being healthy. Neither are boat costs, even if you've taken clients out on it.​

We have an in-depth article on business expenses if you want some more info.​

It wouldn’t be silly to make a calendar notification for three months from now to check this list again. Are you slipping into any of these habits?​

You might also want to check the income tax section one more time ????​