Starting a Business in New ZealandLegal Essentials Every Business Owner Should Know

Why it matters

Starting a business is exciting, but some of the legal decisions you make at the beginning can have important consequences later. Getting the foundations right early can help protect your business and reduce the risk of costly problems or disputes as it grows.

Before you begin, consider

• •Should you operate as a sole trader, partnership or company?
• •Are you starting the business with someone else - and do you need a shareholders' or partnership agreement?
• •Are there licences, permits or regulatory requirements for your industry?
• •Have you considered how to protect your business name, brand and intellectual property?
• •Do you have the right contracts in place with customers, suppliers, contractors or employees?
• •Which of these issues might require advice from a business lawyer or another legal specialist?

Not every new business needs extensive legal advice. But knowing which legal issues matter for your particular business - and when to involve the right lawyer - can help you start with stronger foundations.

What legal issues should you consider when starting a business?

Starting a business in New Zealand can be relatively straightforward - but some of the decisions made at the beginning can have important consequences later.

Should you operate as a sole trader or set up a company? What if you're starting the business with someone else? Do you need a shareholders' agreement? Who owns the business name, brand or intellectual property? And when is it worth getting a lawyer involved?

Understanding the legal questions that may affect your business early can help you make better decisions and recognise when specialist advice may be useful.

Which business structure should you choose?

The most common business structures in New Zealand are:

• •Sole trader
• •Partnership
• •Company

They aren't simply different ways of registering a business. The structure can affect ownership, responsibility for debts and liabilities, tax, administration, investment and what happens if the business is eventually sold.

There isn't one structure that is right for every business. The appropriate choice can depend on what the business does, who is involved, the financial risks and your plans for the future.

An accountant can be important for understanding the financial and tax implications, while a business lawyer can help you understand the legal implications of the structure and arrangements you are considering.

Are you starting the business with someone else?

When everyone is enthusiastic about a new venture, formal agreements can sometimes seem unnecessary.

But it can be important to consider:

• •Who owns what percentage of the business?
• •Who makes important decisions?
• •What is each person expected to contribute?
• •How will profits be distributed?
• •Can an owner sell their interest?
• •What happens if one person wants to leave?
• •What happens if the owners disagree?

Depending on the business structure, a shareholders' agreement, partnership agreement or other ownership arrangements may be appropriate.

A commercial lawyer can help explain which type of agreement may be relevant and ensure that it reflects how the owners intend the business to operate.

What contracts might a new business need?

Contracts can become relevant surprisingly quickly.

Depending on the business, these might include agreements with:

• •Customers or clients
• •Suppliers
• •Contractors
• •Employees
• •Business partners
• •Distributors
• •Landlords
• •Software or technology providers

Terms and conditions, service agreements, supply agreements, confidentiality agreements and other commercial contracts can define responsibilities and allocate risk between the parties.

A lawyer doesn't necessarily need to be involved in every routine transaction. But where an agreement involves significant money, long-term commitments, unusual risks or important rights, getting the right legal advice before signing can be valuable.

What about your business name, brand and intellectual property?

Depending on the business, intellectual property may include trade marks, branding, designs, software, written material, confidential information or other valuable assets.

Questions can also arise about who owns work created by founders, employees or contractors.

Where intellectual property represents significant value to the business, a lawyer with relevant expertise can help you understand how it may be protected and identify potential ownership issues.

Are there licences, regulations or compliance requirements?

Legal and regulatory requirements differ depending on what your business does.

Some businesses may have industry-specific licensing, privacy, consumer, health and safety or other regulatory obligations. An online business, for example, may face very different legal issues from a construction company, professional services firm or hospitality business.

This is one reason why finding the right type of lawyer can matter. Different legal issues can require different expertise.

Are you employing people?

Taking on employees introduces another set of legal obligations.

Employment agreements, workplace policies, pay and leave requirements, health and safety, performance issues, restructuring and dismissals are governed by specific New Zealand employment rules.

Where there is uncertainty, significant risk or a dispute developing, advice from a lawyer experienced in employment law may be particularly useful.

Are you leasing business premises?

A commercial lease can represent one of a business's largest and longest financial commitments.

Rent is only one part of the arrangement. Issues can include lease terms, renewals, rent reviews, outgoings, guarantees, permitted use of the premises, maintenance and what happens if the business needs to leave.

Before making a significant commitment, a commercial property lawyer can help you understand the terms and obligations contained in the lease.

When might you need a business lawyer?

There isn't one point at which every business needs to involve a lawyer.

Legal advice may be particularly useful when:

• •You are unsure which business structure is appropriate
• •Two or more people will own the business
• •You are bringing in shareholders or investors
• •You are entering an important commercial contract
• •You are signing a commercial lease
• •Intellectual property is important to the business
• •You are employing people
• •Significant money or personal guarantees are involved
• •You are buying an existing business or franchise
• •Regulatory or compliance questions arise
• •A disagreement or dispute is developing

The question isn't always simply "Do I need a lawyer?" It can also be "What type of lawyer does my business need for this particular issue?"

Finding the right lawyer for your business

Business law covers a broad range of legal issues.

A new company needing advice about shareholders and ownership may require different expertise from a business negotiating a commercial lease, dealing with an employment problem, reviewing a major contract or resolving a commercial dispute.

Depending on the issue, you may need a commercial lawyer, employment lawyer, commercial property lawyer, intellectual property specialist or dispute resolution lawyer.

You don't need to work out the exact legal speciality yourself. Describe your business and the issue you need help with, and Get A Lawyer can connect you with a trusted New Zealand lawyer suited to your particular matter - ready to help.