Legal & Compliance FAQs

The main business structures in NZ are Sole Trader (simplest, you and business are legally the same, unlimited liability, easy tax), Partnership (shared ownership, unlimited liability unless Limited Partnership, profits distributed to partners), Limited Liability Company (separate legal entity, limited liability protection, requires annual returns, most common for growing businesses), and Trust (asset protection, estate planning, complex setup). Choose based on: liability concerns (companies protect personal assets), tax efficiency (companies can retain profits, sole traders pay income tax on all profit), growth plans (companies easier to sell or bring in investors), compliance burden (sole traders have minimal compliance, companies require annual filings), and credibility (companies often appear more professional). Most businesses start as sole traders then incorporate as they grow. Consult an accountant or lawyer - the right structure can save thousands in tax and protect personal assets.

You don't legally need a lawyer to start a simple business (sole trader, basic company) - you can register online yourself. However, legal advice is valuable for: choosing optimal business structure (potentially saving thousands in tax and liability), drafting shareholder agreements (preventing future disputes), understanding compliance obligations (avoiding penalties), creating employment agreements (legally required for employees and must meet minimum standards), reviewing commercial leases (protecting against unfavorable terms), protecting intellectual property (trademarks, copyrights), and setting up proper contracts for customers and suppliers. Initial legal setup typically costs $500-3,000 but prevents costly mistakes. Many lawyers offer fixed-fee startup packages. At minimum, consult a lawyer when: hiring employees (employment agreements), signing leases (commercial property), taking on business partners, or raising investment capital.

NZ businesses must comply with: Company Registration (register with Companies Office, maintain NZBN, file annual returns), Tax Obligations (register for IRD number, GST if turnover over $60,000, file income tax returns, PAYE if employees, provisional tax), Employment Law (written employment agreements, minimum wage compliance, holiday pay, health and safety, ACC levies), Privacy Act (protect customer and employee data, report breaches, lawful data collection), Consumer Law (Fair Trading Act - accurate advertising, Consumer Guarantees Act - quality standards), Health & Safety (eliminate/minimize risks, incident reporting, worker engagement), and Industry-Specific Regulations (food licenses, building consents, professional registrations). Non-compliance costs can be severe - employment breaches ($5,000-20,000 penalties), health & safety violations ($10,000-300,000 fines), tax evasion (penalties, interest, potential prosecution). Most businesses need accountant for tax compliance and HR advisor for employment compliance.

Protect your business assets through: Company Name (registering a company reserves the name, prevents identical names in NZ), Trademark (registers logos, brand names, slogans with IPONZ, costs $250-500, provides 10 years protection, prevents others using confusingly similar marks), Copyright (automatic protection for original creative works - doesn't require registration but document creation dates), Patents (protects inventions, costs $5,000-15,000 for NZ patent through examination process), Domain Names (register .co.nz and .nz domains, costs $30-50 annually), and Trade Secrets (protect confidential information through NDAs, employee contracts). Start with: checking your business name isn't already trademarked (use IPONZ search), registering your company/business name, purchasing domain names, and considering trademark registration if you're building a brand. IP law is complex - consult an IP lawyer for valuable assets. Enforcing IP rights costs $10,000-100,000+ in legal fees, so prevention through proper registration is crucial.

As a NZ employer, you must: provide written employment agreements (legally required, must include key terms like pay, hours, leave, notice periods), pay at least minimum wage (currently $22.70/hour, reviewed annually), provide minimum entitlements (4 weeks annual leave, 11 public holidays, sick leave, bereavement leave per Holidays Act), deduct and pay PAYE and KiwiSaver (employee contributions, employer contributions 3% minimum), register for ACC CoverPlus (workplace injury coverage), maintain health and safety (eliminate/minimize workplace risks, incident reporting, worker participation), follow fair hiring practices (no discrimination based on protected characteristics), keep accurate employment records (wages, hours, leave, tax), and handle terminations properly (notice periods, fair process for dismissals). Breaches can result in Employment Relations Authority claims ($5,000-30,000+ penalties), personal grievance claims (often $10,000-50,000 settlements), and ACC penalties. Invest in proper HR software, employment agreement templates from lawyer, and HR advisory services to ensure compliance.

Annual compliance costs vary by business structure and size: Sole Trader ($500-2,000: accountant for tax returns, IR10 form, basic advice), Small Company 1-5 employees ($2,000-8,000: company annual return $130, accountant $1,500-3,000, employment agreements $500-1,500, health & safety consultant $500-2,000, general legal advice $500-2,000), Medium Business 5-20 employees ($5,000-20,000+: accounting $3,000-8,000, legal $2,000-5,000, HR compliance $2,000-5,000, health & safety $1,000-3,000), plus potential additional costs for industry-specific compliance, insurance, audits, and licenses. One-time setup costs: company incorporation $150-500, employment agreements $500-2,000, shareholder agreements $1,500-5,000, trademark registration $500-2,000. Ongoing: Companies Office annual return $130, accountant annual fees, legal retainer $200-500/month. Non-compliance costs far more - employment disputes average $15,000-50,000, health & safety breaches $10,000-300,000, tax penalties can be 20-150% of tax owing.

The Fair Trading Act prohibits misleading and deceptive conduct in trade and ensures fair dealing between businesses and consumers. Key requirements: no misleading advertising (claims must be accurate, substantiated, not deceptive), clear pricing (including all mandatory charges, GST-inclusive pricing), accurate product descriptions (fit for purpose, match descriptions), clear terms and conditions (especially for returns, warranties), honest representations (about business affiliation, sponsorship, endorsements), and no unfair practices (bait advertising, pyramid schemes, unconscionable conduct). Breaches can result in Commerce Commission action ($10,000-600,000 fines), consumer complaints and refund demands, court injunctions, and reputation damage. Common violations: overstating product benefits, hidden fees, false scarcity claims, fake reviews, and misleading sale prices. Ensure marketing materials are truthful, terms are clear and visible, and any claims can be substantiated with evidence. When in doubt, seek legal advice - misleading conduct claims can be costly.

Yes, terms and conditions are essential for NZ businesses, especially those selling online or providing services. They should cover: payment terms (prices, payment methods, when payment is due), delivery/performance (timeframes, responsibilities, risk transfer), refunds and cancellations (policies must comply with Consumer Guarantees Act), liability limitations (excluding liability where legally possible), intellectual property (who owns what), dispute resolution (how disputes are handled), privacy (how customer data is used), and jurisdiction (which laws apply). Benefits include protecting your business (limiting liability, setting expectations), dispute prevention (clear terms reduce misunderstandings), legal compliance (meeting Consumer Law requirements), and professional credibility. Don't copy terms from other websites - they need to match your specific business model and comply with NZ law. Legal templates cost $200-500, custom terms from lawyer $1,000-3,000. Review annually and update when business model changes. Ensure terms are clearly visible and customers agree before purchase.

Under the Privacy Act 2020, NZ businesses collecting personal information must follow 13 privacy principles including: lawful collection (collect only what you need, for lawful purpose), notification (tell people why you're collecting their information), source (collect from individual where possible), manner of collection (don't be underhanded or intrusive), security safeguards (protect information with appropriate security), access (let people access their information), correction (allow people to correct inaccurate information), retention (don't keep information longer than needed), disposal (securely dispose of information), and use/disclosure limits (only use for stated purpose, don't disclose without consent). You must also: report notifiable privacy breaches to Privacy Commissioner and affected individuals (within 72 hours if practicable), have a privacy officer, and maintain privacy policy. Breaches can result in Privacy Commissioner investigations, fines up to $10,000 per affected individual, compensation claims, and reputation damage. Implement proper data security, train staff, maintain privacy policy, and have breach response plan.

Dismissing an employee in NZ requires following proper process to avoid personal grievance claims. For performance/misconduct dismissals: 1) Identify genuine issue (specific, documented examples), 2) Raise concerns with employee (clear communication of problem), 3) Provide opportunity to improve (reasonable timeframe, support, clear expectations), 4) Document everything (meetings, warnings, improvement plans), 5) Hold formal meeting (explain consequences, allow employee to respond, have support person), 6) Make fair, considered decision (weigh all factors), 7) Provide written termination (clear reasons, notice period, final pay details). For redundancy: genuine commercial reason, consult meaningfully with employee, consider redeployment, follow fair selection process, provide notice or payment in lieu. Common mistakes: no proper process, insufficient documentation, not allowing employee to respond, personal reasons rather than business justification. Always: provide required notice (per employment agreement or minimum 2-4 weeks), pay all entitlements (outstanding leave, notice, final wages), and consider legal advice ($500-2,000) for complex dismissals. Unjustified dismissal claims typically cost $15,000-50,000 to defend and settle.

Under the Health and Safety at Work Act 2015, all NZ businesses must: eliminate risks where possible (remove hazards entirely), minimize risks where elimination not possible (controls, procedures, equipment), engage workers (consult on health and safety matters, allow participation), have emergency plans (evacuation, first aid, emergency contacts), report incidents (notifiable injuries, illnesses, deaths to WorkSafe within 24 hours), keep records (hazard registers, incident reports, training records), provide training (safe work procedures, emergency protocols), and monitor health (where risks require it). Even solo operators have duties. Requirements scale with risk - construction has more obligations than office work. PCBUs (Person Conducting Business or Undertaking) can be personally liable. Penalties for breaches: individuals $300,000 fine and/or 5 years prison, companies $3 million fine. Beyond legal obligations, good health and safety reduces ACC levies, prevents productivity loss from injuries, improves employee morale, and protects reputation. Start with: risk assessment, basic policies, worker engagement, and incident reporting system. Budget $1,000-5,000 annually for health and safety depending on industry.

Licensing requirements depend on your industry. Common licenses include: Food Business (Food Act registration for anyone selling food, $100-500), Alcohol License (Off-license for retail, On-license for consumption on premises, $300-2,000+), Building Practitioners (LBP license for building work, requires qualifications), Real Estate Agents (agent license from REA, requires training and exam), Financial Advisers (FAP license from FMA for financial advice), Health Practitioners (registration with professional body - doctors, nurses, etc.), Trade Waste (consent for discharging waste to wastewater), Resource Consent (for activities affecting environment), Childcare Services (MOE license for early childhood education), and Security (CoA for security work). Some industries need occupational licenses (electricians, plumbers, gasfitters). Check with your local council for specific requirements - operating without required licenses can result in fines ($5,000-50,000+), shutdown orders, prosecution, and invalidated insurance. Research requirements at business.govt.nz or consult industry association. Budget $500-5,000 for licensing depending on industry.

NZ business tax obligations include: IRD Number (all businesses need one, free to register), GST Registration (mandatory if turnover exceeds $60,000, optional if below, can claim input tax credits), Income Tax (sole traders pay on profits at personal tax rates 10.5-39%, companies at 28%), PAYE (withhold tax from employee wages, file monthly returns), Provisional Tax (pay tax in installments if residual income tax exceeds $5,000), FBT (Fringe Benefit Tax on employee benefits like vehicles, 43-63% rate), and ACC Levies (workplace injury insurance). Key dates: GST returns (1-2 monthly or 6-monthly), PAYE filing (20th of each month), Income tax returns (March-July), Provisional tax (Aug 28, Jan 15, May 7). Late filing penalties start at $50 and increase significantly. Use accounting software (Xero, MYOB) for compliance and consider an accountant ($1,500-5,000 annually for small business). IRD offers myIR gateway for online filing. Start-up tip: register for GST from day one if you'll exceed $60,000 turnover - claiming input tax on startup costs can provide valuable cash flow.

Handle customer disputes professionally to avoid escalation and maintain reputation. Process: 1) Listen actively (understand full complaint without defensiveness), 2) Document (record details, dates, communications), 3) Investigate (gather facts, review evidence), 4) Respond promptly (acknowledge within 24-48 hours), 5) Offer solution (refund, replacement, remedy aligned with Consumer Guarantees Act), 6) Follow up (ensure resolution satisfactory). Under Consumer Guarantees Act, products must be fit for purpose, acceptable quality, and match descriptions - you can't contract out of these rights for consumer sales. For service disputes, Disputes Tribunal handles claims up to $30,000 (process is informal, inexpensive, quick). Beyond $30,000, District or High Court required. Prevention strategies: clear terms and conditions, accurate product descriptions, good communication, quality products/services, and fair complaint handling process. Unresolved complaints can escalate to: Commerce Commission (Fair Trading Act breaches), Disputes Tribunal, legal action, and online reviews damaging reputation. Budget $500-5,000 for legal advice on complex disputes.

Limited insurance is legally required in NZ: ACC CoverPlus (mandatory for employers, covers work-related injuries, rates vary by industry risk, typically $500-5,000+ annually), Motor Vehicle Third-Party (mandatory for all vehicles including business vehicles, covers injury to others), and some industry-specific insurance (contractors often need public liability to meet building consent requirements, food businesses may need product liability). While not legally required, essential insurance includes: Public Liability (covers third-party injury/property damage, typically $1-2 million coverage, often required by contracts/leases), Professional Indemnity (for service businesses, covers errors/negligence claims), Business Contents/Property (covers assets, stock, equipment), and Business Interruption (covers lost income during closure). Not having adequate insurance can result in: personal liability for claims (potentially hundreds of thousands), inability to secure contracts (many require insurance certificates), and business failure from uninsured losses. Budget $2,000-10,000 annually for comprehensive business insurance depending on size and industry. Review coverage annually and ensure it matches current business operations.