Flexibility and self-management…the appeal is real. In fact, approximately 70% of enterprises within New Zealand are sole traders. It’s easy to understand why – no more worrying about applying for holiday leave, pushing for a much deserved pay rise, or being subject to painful small talk around the coffee machine. Instead, the main person you’re checking in with is…yourself! For some, becoming a sole trader is a win-win situation.
Is it right for me?
Generally, being a sole trader is the most suitable business structure for self employed tradespeople, contractors, small business owners and many professionals, but here’s a handy online tool to help you decide. A sole trader differs from a company or partnership as the business becomes part of your personal finances.
Sign me up!
Getting started as a sole trader is very simple, there’s not much in the way of admin at all. In fact, you don’t have to go through any legal processes or registrations. However, as you’ll be using your personal IRD number for the business, you do need to notify IRD that you’ve become a sole trader.
You have the option of getting a NZBN (NZ Business Number). The application process starts by logging into your RealMe account, followed by setting up a user account, so you’ll need your IRD number and proof of identity handy. The whole process is quite painless, it takes about five minutes if you already have a RealMe login.
Getting fancy
If you don’t think your personal name is quite catchy enough to cut it, don’t panic. One of the great things about being a sole trader is that you still get to do the fun stuff! By choosing an optional ‘Trading As’ name when you register your NZBN, you can brand your new business too. Using a well designed logo creates a sense of professionalism for quoting, invoices and printed promotional material like business cards. Check if your chosen business name is available through the ONECheck tool.
Hint: You can access excellent, affordable freelance designers online through websites such as Upwork or Fiverr for your logo design.
The ‘T’ word
Tax! It shouldn’t cause too much stress as a sole trader. You’ll use your individual tax number for your business, so income tax will be calculated against your earnings when you file your usual individual income tax return. It pays to get up to speed with claiming back on expenses, but you might find you get the best result if you get help from an accountant for this.
As a sole trader, you register for GST if your earnings are over $60,000 per year.
Help is on hand
To learn more about becoming a sole trader, including claiming expenses, ACC payments, record keeping and intellectual property, visit business.govt.nz, check out some of our small business articles, or talk to us.