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For businesses and employers Ngā pakihi me ngā kaiwhakawhiwhi mahi

Starting a business - operating as a sole trader, partnership or company

Watch our short video on business structures

Sole trader

A sole trader is a person trading on their own. The sole trader:

  • controls, manages and owns the business
  • is personally entitled to all profits
  • is personally liable for all business taxes and debts.

As a sole trader you can usually begin the business without following any formal or legal processes to establish it. You may employ other people to help run the business.


In a partnership, two or more people run a business together. Each partner:

  • shares responsibility for running the business
  • shares in any profit or loss equally, unless the partnership agreement states otherwise
  • is liable for any debt within the partnership.

Many partnerships are established with a formal partnership agreement.

Income tax

The partnership itself does not pay income tax. Instead it distributes the partnership income to the partners. The partners then pay tax on their own share.

Income, tax credits, rebates, gains, expenditure or losses allocated to a partner in an income year will generally be allocated in proportion to each partner's share in the partnership's income under the partnership agreement.

Limited partnerships

A limited partnership exists as a formal and legal entity in its own right. It is separate from its partners.

To register a limited partnership you need to contact the Companies Office website.


A company exists as a formal and legal entity in its own right. It is separate from its shareholder(s) or owner(s).

To register (incorporate) a company under the Companies Act, you need to:

Assets and liabilities

The company:

  • owns the assets and liabilities of the business
  • is responsible for any debts.

The shareholders' liability for losses is limited to their share of ownership of the company.

Look-through companies (LTC)

An LTC is a special type of company. It is still a separate legal entity in its own right but for income tax purposes its treatment is more like that of a partnership.

To become an LTC company all of the owners must complete a Look-through company election IR862.