Want to sell online and launch a dropshipping business in New Zealand but not sure where to start? You may have an awesome business idea and the money required for launching a new online business.
But that’s not enough. You should also pay attention to the legal aspects of starting a dropshipping business in New Zealand. You should make sure that your website meets all legal requirements, as well.
We know that these are the “less interesting” administrative and legal aspects of setting up a business. However, these are just small “obstacles” that let you know that you are on to something amazing. They are “reminders” that you are on the right path to entrepreneurial success.
Whether you are inspired by a successful e-commerce founder and want to try your luck or simply want to make extra money online, you have come to the right place. In this article, we will provide you with knowledge and teach you how to legally start an online dropshipping business in New Zealand.
To begin with, it is wise to stay up to date with the latest e-commerce stats. As a new online merchant in New Zealand, you need to be familiar with relevant, accurate e-commerce statistics. The more you know about New Zealanders, the better you can market your products and increase your sales.
What Is the Economy of New Zealand?
According to the latest data, the population of New Zealand has reached 4.8 million. While this is a small country, it has a developed economy. New Zealand depends significantly on international trade – mainly with Australia, the United States, China, Canada, Japan, and the European Union.
What Are the Latest Trends Shaping the E-Commerce Industry in New Zealand?
New Zealanders follow the global trends of internet usage. Believe it or not, about 94% of the population in the country were active internet users in 2020.
As a result, retail e-commerce sales in the country have been on the rise. Namely, the proportion of people searching for a product or service to purchase online dramatically increased in January 2021. During this month, nearly 89% of New Zealanders searched for something to buy over the internet. Also, total retail e-commerce sales are estimated to reach US$3.7 billion in 2021.
It is also important to point out that New Zealanders are really into buying clothing. What this means is that fashion is the largest segment in the country, accounting for 25% of the e-commerce revenue. However, before you decide what to sell, it’s best that you fully understand how dropshipping works and learn more about selling online in general.
Now, let’s discuss the most important legal steps you should take to make sure your business is ready for success. Here is a simple, yet comprehensive guide to starting your dropshipping business in New Zealand.
Determine a Legal Structure for Your Business
You have an excellent idea for your online business in New Zealand. But now is the time to choose the most suitable legal structure for your business. The way you choose to structure your business will have operational, legal, and financial implications. Therefore, it is important to be careful and do thorough research before selecting a business structure.
Businesses in this country typically use one of these three structures – Sole Traders, Partnerships, and Limited Liability Companies.
1. Sole Trader
Being a sole trader is one of the simplest and most popular options for opening a small business. A sole trader is a self-employed person that owns and operates an entire business as an individual. A sole trader does not register as a company.
Even though the majority of people use the term to refer to businesses that do not have other employees aside from the sole trader, the actual term ‘sole trader’ defines the legal form of the business, rather than the number of people who are employed and work for the sole trader. This means that although a business structured as a sole trader may be owned and operated by only one person, i.e., the sole trader, it may also consist of the sole trader and employees.
As a sole trader in New Zealand, you are able to hire employees. But if you do so, you will have to register with the Inland Revenue as an employer and meet many obligations.
This legal structure has some disadvantages, as well. One of its disadvantages is that as a sole trader, you have a limited capacity to raise capital. Another disadvantage is that you have unlimited liability for debts since there is no legal distinction between your business and personal assets.
This is a type of legal structure, where two or more people share ownership. Like the previous structure, a partnership is not a separate entity from its owners. So it can be established without registration. However, if you want to hire employees, you will also have to have to register with the Inland Revenue as an employer and meet certain obligations.
In this structure, all partners contribute to all aspects of the business and participate in day-to-day management. As a result, each partner shares in the losses and profits of the partnership. And each partner acts on behalf of the other in the partnership.
A partnership should be established with a formal partnership agreement that covers all possible conflicts and contingencies.
3. Limited Liability Company (LLC)
A limited liability company is a legal entity that’s legally separate from its owner. As the name suggests, this type of structure protects you from being personally liable for the debts and liabilities incurred by your company.
That is to say, by operating your business as a limited liability company in New Zealand, you get some financial and legal protection if something goes wrong and your company gets sued. In short, you are less exposed to financial and legal issues if your company is unable to pay its debts.
There are also some disadvantages of choosing this business structure. Your company must follow strict guidelines, regulations, and legislation. Starting a limited liability company in this country is more expensive than setting up a partnership or sole trader. Luckily, you can register your company online with the Companies Office. You must have a RealMe login in order to do this.
To explore your options and choose the most suitable legal structure for your business, you can use the Choose Business Structure tool. You should also consult a legal and financial expert to make an informed decision.
Choose a Business Name and Secure It
Now, we have reached the most interesting part of setting up a business in New Zealand. It is choosing a business name for your start-up.
The ONECheck tool can help you check the availability of the name you want for your online business. This is a free and easy-to-use tool that helps you check if your name is available as a business name, social media username, web domain, or trademark. One of the best ways to get inspiration for a great name is to analyze some of the most successful dropshipping stores currently out there.
In this country, if you are planning to operate as a sole trader or partnership and the business name you have chosen is available, you can use it for your online business, as there is no central register for business names (unless you are operating as a company).
However, if you want to set up a company, you must reserve your company name with the Companies Office.
Create a RealMe login
RealMe is a widely used system in New Zealand that enables you to access several online services with a username and password.
As a new e-commerce merchant in the country, you may be required to get some registrations from government agencies. A few government agencies in New Zealand require you to have a RealMe login.
As mentioned earlier in the article, you will need a RealMe login to register a company online. Not only will it help you register a company online but also it will make it easy for you to apply for permits, manage your Inland Revenue account, etc. So, you won’t go wrong if you set up an account up-front.
Obtain a New Zealand Business Number (NZBN)
Each business in this country must have a New Zealand Business Number (NZBN). Whether you are about to operate as a sole trader, partnership, or company, you must apply for this number.
Registered companies automatically get this number. But if you are interested in operating as a sole trader or partnership, you can register for a New Zealand Business Number online. You can do so here, and it will not cost you anything.
Register for Taxes and Get Licenses and Permits as Needed
New Zealand does not have separate provisions within the income tax laws, which deal only with e-commerce. So, the existing tax laws apply to online transactions. For more information on this topic, visit the official Inland Revenue website.
Depending on the way you have chosen to structure your business, you will either need a company tax number or individual tax numbers.
In case you want to incorporate a company in New Zealand and sell products online, you can register for Goods and Services Tax (GST) while registering your company with the Companies Office.
But as long as you are about to operate as a sole trader or partnership, you can register for taxes online with the Inland Revenue.
When it comes to licenses and permits, remember that specific regulations may apply in your region or industry. Therefore, you should always check if you need to get a license or permit for selling online. You can do that by using the Compliance Matters tool and consulting a professional.
Open a Bank Account for Business Purposes
It is important to keep your personal cash separate from your business funds. That’s why opening a bank account for business purposes is a great idea.
Banks in the country operate in the interests of New Zealand’s businesses. They offer excellent e-banking and exceptional customer service. This allows you to monitor and manage your business finances from the comfort of your home. You can do so even if you are on the other side of the planet.
You can use one of the largest banks in the country to meet your banking needs. Some of the best banks in New Zealand to open a business bank account with include Bank of New Zealand, ANZ Bank New Zealand, ASB Bank, and Kiwibank.
Other Legal Requirements for Starting A Dropshipping Business in New Zealand
As you step into the role of a dropshipping business owner, you must ensure you are complying with the consumer laws in New Zealand. In short, you must ensure you are not breaching the Consumer Guarantees Act and the Fair Trading Act even if you are simply advertising or selling to New Zealand consumers online without a physical location in the country.
Your Successful Dropshipping Business In New Zealand
For anyone considering establishing an online (or dropshipping) business, New Zealand is a smart choice. Renowned for its strong economy, open market, and flexible regulatory environment, the country is a good place to sell online. So, in order to avoid making mistakes, follow the legal guidelines for New Zealand here and take in as much expert advice on starting a dropshipping store as you possibly can.
But before throwing yourself into the world of e-commerce, you need to have a better understanding of the legal framework of the country. And this is the reason why we have created this article. We hope it can help you put your online business on the road to success.