Starting a business in New Zealand comes with opportunities and hurdles. Before launching a business in New Zealand, it's important to understand the country's economy, culture and rules, what people like to buy and how payments work there, so that you can align your business accordingly.

Below, we'll cover what anyone starting a business in New Zealand needs to know, including what the climate is like for businesses, the legal requirements involved, local ways to fund a business, and potential challenges and risks.

What's in this article?

• Overview of the business environment in New Zealand
  
• Advantages of starting a business in New Zealand
  
• How to start a business in New Zealand
  
• Challenges and risks when starting a business in New Zealand
  

Overview of the business environment in New Zealand

Economic climate and opportunities

• Overview: New Zealand is home to a wealthy, if small, population, with just over 5 million residents. It has a stable democratic government and a sophisticated economy that is welcoming for businesses.

• Economic backbone: Dairy is New Zealand's largest export commodity, accounting for 28% of all exports and totalling around US$13 billion in 2022. Its other exports and major economic industries are largely agricultural as well, including meat, fruit, vegetables, wine and wood.

• Trading partners: The United States, China and Australia are key trading partners. The US is New Zealand's third-largest trading partner, although no free trade agreement exists between the countries.

• Economic challenges: The country has faced rising costs of living because of global trading factors and extreme weather events, leading to an inflation rate of 5.6% for the year ending in September 2023. The impact of climate change is also a key focus for public and private organisations because of its broad implications for the economy and society in general.

• Green initiatives: New Zealand's commitment to zero emissions is enshrined in national law and its goal is to achieve net-zero emissions of almost all greenhouse gases by 2050. This has implications for the technologies that businesses use, as well as investment choices, such as electric vehicle fleets​​.

Cultural and regulatory considerations

• Business friendliness: The country is consistently recognised for its stable and business-friendly environment. It ranked sixth on the Heritage Foundation's 2024 Index of Economic Freedom and is considered to be the third-least corrupt country, according to Transparency International's 2023 rankings.

• Tax environment: New Zealand has broad income and consumption taxes, including withholding taxes on many cross-border payments. However, businesses should consider how specific elements of those regulations may affect them.

Market trends and customer behaviour

• Customer sentiment: According to a November 2023 BCG analysis, customers have become increasingly concerned about their finances as the economy has slowed and inflation has reached levels not seen in decades. High inflation and recessionary conditions are causing customers to lower their spending.

• Spending shifts: In the same survey, up to 60% of customers said that they are spending more on necessities – such as food, utilities and rent – than they did in the previous six months. Over 30% of respondents expect these costs to increase further in the next six months.

• Age group variances: Younger New Zealanders (aged 18 to 51) are generally more pessimistic about the future and their personal finances, in contrast to the more optimistic and financially resilient 52-plus age group. This older demographic is also more likely to spend on health-related and leisure goods and services.

• Reasoning behind purchases: Younger age groups are increasingly using digital channels to research prices and make purchases, while those aged 52 and above prefer in-person purchasing, focusing on quality and reliability, in addition to price.

Advantages of starting a business in New Zealand

New Zealand's welcoming business environment and strong focus on transparency and sustainability make it conducive for starting and growing a business. Here's a quick look at the upsides that come with starting a business here:

• Stable and transparent business environment: New Zealand is known for its transparent and open business culture, stable democratic system, and high standards of business honesty and integrity. This environment provides a reliable and predictable setting for new businesses.

• Ease of doing business: The country ranks consistently among the top jurisdictions globally for ease of doing business. This ranking is indicative of welcoming business regulations and processes, making it easier for new businesses to become established.

• Low corruption levels: New Zealand is one of the least corrupt nations, which paves the way for international collaboration and trust.

• Key location for trade: With strong trading relationships and free trade agreements with major economies including China and Australia, New Zealand is well positioned as a gateway for businesses looking to access these markets.

• Commitment to sustainability: New Zealand's focus on sustainability and its goal of achieving net-zero emissions by 2050 align with global trends towards environmentally friendly business practices. This commitment means that there are opportunities for businesses working in green technologies and sustainable practices.

• Resilient customer market: Despite economic challenges, certain customer segments (notably the 52-plus age group) remain confident and resilient, continuing to spend on health-related and discretionary goods and services.

• Digital adaptation and innovation: The shift towards digital channels among younger customers offers opportunities for businesses that can use online platforms and e-commerce for marketing, sales and customer engagement.

How to start a business in New Zealand

Here's an overview of the process required to start a business in New Zealand:

Legal and administrative steps

• Selecting the business structure: The first step is to decide on the most suitable business structure. For many, a limited liability company (LLC) is a preferred option because it is a familiar format with no minimum share capital requirement.
  

Registration of the business

• Capital and founders: LLCs do not require a minimum share capital and you need at least one shareholder to start the business. There are no nationality conditions for shareholders.

• Director requirements: Your business must have at least one director who is a resident of New Zealand or Australia. This requirement leads to local accountability.

• Business name: Your business's unique name must be reserved with the Companies Office. It's important to make sure that the name does not infringe upon existing trademarks or contain certain restricted words.

• Address requirements: You must have a registered office address in New Zealand. You can opt for virtual office services if you do not have a physical address. According to law, the registered address is where the business's books and records are kept.

• Incorporation process: This involves reserving the business name online, drafting and notarising incorporation documents, and preparing identification documents for foreign shareholders. An application form, along with a resolution to register the business, must be filed with the Trade Register. After this, the business must also register with the tax authorities.

• Tax registration: This includes registering for goods and services tax (GST) if the annual turnover is expected to exceed NZ$60,000. During this process, you will also receive a Business Industry Classification (BIC) code, which classifies the services provided by your business.

• Employment compliance: If you plan to recruit employees, you need to register as an employer with the Inland Revenue and comply with various regulations regarding wages, workplace policies, leave and holidays.

• Financial compliance: Be aware of the tax implications for your business, including a corporate income tax (CIT) rate of 28% and GST of 15%.

• Obtaining necessary permits and licences: Depending on the nature of your business, you may need specific permits and licences, particularly if you are operating in a regulated field, such as accounting or property.

Planning for success

• Conducting thorough market research: Knowing local market trends and customer behaviour is key. New Zealand's current economic climate indicates cautious customer spending habits, making market research even more helpful in positioning a new business.

• Focusing on value proposition: Your business should focus on delivering quality products or services at competitive prices. For New Zealand specifically, this means making sure that your market research is used in your development of products and services, infusing them with locally specific value propositions.

• Embracing sustainability and innovation: Be aware of New Zealand's commitment to sustainability and environmental stewardship. Innovative practices and technologies that support this commitment can give your business an edge.

• Building a strong network: Get involved in local business communities and networks to gather insights into the particularities of doing business in New Zealand. This can help with understanding customer preferences and cultural nuances.

• Establishing a digital presence: Considering the increasing trend of online shopping and information gathering, especially among younger demographics, having a strong online presence is part of establishing a business.

• Effective financial management: Use tools such as online accounting software, and consider hiring bookkeepers or accountants to manage your business's finances.

Work out your differentiated position in the New Zealand market

No matter where in the world you're planning to do business, for any type of business, succeeding in any given market depends largely on having a sharp understanding of your differentiation within your set of competitors. Here's how to ensure that you're familiar with your competition in New Zealand – and how to stand out:

Choosing the right business structure

• Options: There are three types of businesses in New Zealand: limited liability company (LLC), co-operatives, and unlimited companies. Each has different implications for control, liability and tax obligations. If you want to operate a branch of a business based elsewhere, there are three ways to do so.

• Considerations: Choose a structure based on various factors, such as the level of personal liability that you're willing to accept, the tax implications and the complexity involved in managing the business structure.

• Expert advice: Consulting with legal and financial experts can provide valuable insights into the best structure for your business.

Registration processes and legal documentation

• Incorporation: You must register your business with the Companies Office and obtain a New Zealand Business Number (NZBN).

• Legal documents: Prepare key documents, such as the company constitution (if applicable), shareholder agreements and director details.

• Compliance: Comply with all aspects of local regulations, including obtaining the necessary permits and licences depending on your business type.

Understanding tax obligations and GST

• Corporate tax: Learn about the corporate tax rates and how they apply to your business structure.

• GST registration: If your turnover exceeded NZ$60,000 in the past 12 months, you'll need to register for GST, which affects pricing and accounting systems.

• Recordkeeping: Maintain accurate financial records for tax purposes and potential audits.

Legal requirements for starting a business in New Zealand

• Employment law: Find out your legal obligations if you're recruiting employees, including laws surrounding wages, working conditions, and health and safety requirements.

• Intellectual property: Protect your business's intellectual property, including trademarks, patents and copyrights.

• Data protection: Comply with data protection laws if your business involves collecting and processing personal information.

Funding options in New Zealand

• Self-funding: Consider personal savings or assets for initial funding.

• Loans and grants: Explore business loans from banks or government grants available for startups.

• Investors: Seek venture capital or angel investors, especially if your business requires a large amount of up-front capital for growth and development.

Challenges and risks when starting a business in New Zealand

• Market size and geographic isolation: New Zealand's relatively small population and geographic isolation pose business challenges. The limited market size can restrict the growth potential for businesses, especially those relying on a local customer base. Geographic isolation can also lead to higher costs and logistical challenges surrounding importing and exporting goods.

• Compliance with local regulations: New Zealand has a set of business regulations that must be adhered to. This includes complying with local tax laws, employment regulations and specific industry standards. Failure to comply can result in legal repercussions and financial losses.

• Cultural sensitivities and customer preferences: The local culture influences customer behaviour in New Zealand. Customers have a strong preference for eco-friendly and sustainable products, reflecting the country's widespread environmental consciousness. Ignoring these preferences can result in a disconnect with the target market.

• Competition and market saturation: Certain industries in New Zealand are saturated. New businesses in these sectors face the challenge of differentiating themselves and gaining a foothold in the market. This requires innovative approaches and a deep awareness of customer needs and trends. On the other hand, five industries in particular were characterised by a Deloitte report as "industries of opportunity". These are tourism, agribusiness, food processing, international education and advanced manufacturing.

• Economic fluctuations: As is the case for any other country, New Zealand has an economy that is subject to fluctuations. These can affect customer spending and the business environment. Startups need to be prepared for these economic changes and have flexible business models in place which they can adapt accordingly.

• Technology adaptation and digital competitiveness: In a world where having a digital presence is increasingly important, new businesses must use technology effectively. This includes having a strong online presence and using e-commerce platforms, which are becoming increasingly prevalent among customers in New Zealand.

• Access to funding and financial management: Securing funding and managing finances is a challenge for any startup. New Zealand has various funding options available, but competition for these resources is high. Efficient financial management is key for any business to remain viable and be able to grow.

• Talent acquisition and retention: Finding and retaining the right talent is key. This can be challenging in a competitive job market, especially for specialised positions. Businesses must offer compelling benefits and a positive work culture to attract and retain skilled employees.

• Cultural diversity and inclusivity: New Zealand's diverse population requires businesses to be culturally sensitive and inclusive. This diversity must be reflected in the marketing strategies employed, the products available and the business operations themselves in order to appeal to a broad range of customers.

• Networking and local business community engagement: Building a strong network and engaging with the local business community can be challenging but will generate growth and provide support. New businesses must invest time in networking to build relationships that can provide guidance, partnerships and growth opportunities.