How to start as a sole trader

The seven steps

Most of these are free and can be done in an afternoon. Only two of them have deadlines attached.

1. Tell Inland Revenue you are self-employed

   You keep your existing personal IRD number; you do not get a new one. Log in to myIR and add a self-employed income source so IRD knows to expect an IR3 from you, and so ACC gets your earnings information.

2. Work out whether you need to register for GST

   Registration is compulsory once turnover passes $60,000 in any rolling 12-month period, or as soon as you reasonably expect it will. Below that it is optional, and sometimes worth doing anyway. Read the GST guide.

3. Secure your business name and domain

   Decide what you are trading as, then check the domain is free before you print anything. This is the step people leave until last and regret. A domain from Moreweb includes a mailbox, so you get you@youridea.co.nz at the same time.

   Business or trading name .co.nz Check the name

    

4. Get an NZBN

   The New Zealand Business Number is free for sole traders and takes a few minutes at nzbn.govt.nz. It gives you one identifier that suppliers, councils and government procurement systems can look you up by. Not compulsory, but it removes friction.

5. Open a separate bank account

   Not legally required, genuinely important. One account that only business money moves through makes your tax return quick, your deductions defensible, and your GST returns accurate. A personal account in your own name is fine to start with if your bank charges more for business accounts.

6. Sort your ACC and insurance

   ACC cover is automatic for self-employed people, and you will be invoiced for levies based on the income you declare. Consider whether CoverPlus Extra suits you better, and look at public liability and professional indemnity cover for your trade. More on ACC and insurance.

7. Set up how you will record income and expenses

   A spreadsheet is fine at the start. Accounting software pays for itself once you are GST registered. Whatever you choose, do it now; reconstructing a year of receipts in June is miserable. Use our free invoice generator to get your first invoice out today.

Licences, permits and registrations

The structure is simple, but your trade might not be. Check whether your work needs any of these before you take your first job:

• Food: food control plan or national programme registration through your council.
• Trades: practising licences and registration boards for electrical, plumbing, gasfitting, drainlaying and building work.
• Transport: passenger or goods service licences, and the right class of driver licence.
• Care and education: police vetting, and licensing for early childhood or home-based care.
• Health and beauty: council registration for services that pierce the skin, such as tattooing.
• Alcohol, security, firearms: specific licensing regimes.
• Home-based work: check your district plan and, if you rent, your tenancy agreement.

If you hire someone

Being a sole trader does not stop you employing people. It does mean taking on employer obligations properly: registering as an employer with IRD, deducting and paying PAYE, KiwiSaver contributions, written employment agreements, holiday and leave entitlements, and health and safety duties under the Health and Safety at Work Act.

Contracting other sole traders instead is simpler, but be careful: if the reality of the arrangement looks like employment, the law will treat it as employment regardless of what the paperwork says.

How long this all takes

Work through the startup checklist to keep track; it saves your ticks in your browser so you can come back to it.