Being a sole trader is an easy way to start a new business, you can work for yourself or work as a contractor for someone else. However, being self-employed isn’t for everybody. Here are a few things to consider before taking the plunge from New Zealand’s premier accounting professionals Tauranga-based Tutbury & Associates
Being self-employed gives you complete control of your business You get to keep all the profits and you get some of the same benefits employees as paid parental leave. “However, you should consider that you will miss out on other things like paid sick leave, or holidays,” says Kelly Tutbury, Accountant and Managing Director at Tutbury & Associates Limited.
Before you take the leap, make sure you have a clear idea of the reasons why you want to be a sole trader and what you want to achieve from it.
To become a sole trader, you must have:
- A personal IRD number for paying income tax and GST
- Government licences and permits your business needs
- Qualifications or registrations for your trade or profession.
From the outset, you should think about intellectual property. Your intellectual property includes your items logos, trademarks and inventions. By protecting intellectual property early, you’re safeguarding the time, money and effort you put into a business.
Even though you are a sole trader it doesn’t mean you have to go through it alone. Seek out advisors from all areas of business. “Accountants, mentors and lawyers are important to help you from an early stage and help you get your business started on the right footing,” comments Kelly.
Your net profit is taxed through your IRD number according to how much you’ve earned in your financial year. “When you’re working as a sole trader, you need to file an IR3 income tax return at the end of each tax year,” advises Kelly.
You might have to pay provisional tax in your second year. Provisional tax is a process of managing your income tax by paying instalments throughout the year. The amount of provisional tax you need to pay is based on your expected profit for the year or your GST.
You can claim back some of the expenses you sustain while you’re doing day-to-day business to help reduce your tax bill.
If you are unsure is becoming a sole trader is the right structure for your business, the Government Business website has a Business Structure Tool to check that it’s right for your business needs, or if you are uncertain please feel free to contact us for a free consultation.
About Tutbury & Associates Limited:
Tutbury & Associates Limited has worked hard to build their reputation for excellent customer service by working interactively with their clients and making sure that their clients get value for money. They are ideal for tradespeople, or anyone who wants to grow their business.
Contact Tutbury & Associates Limited:
Phone: 07 576 2194
Address: 23 Myres Street Tauranga