Choosing a type of company for your business
The different structures of companies in New Zealand
Before you register a company on the Companies Register, you need to choose the type of company that best suits the way you want to operate your business.
Types of companies
There are 3 types of New Zealand companies:
- Limited liability companies — these are the most common type which you can often recognise because they have Limited, Ltd or Tapui (Limited) at the end of their name.
- Co-operative companies — sometimes called co-ops, these are also limited liability companies. They provide goods or services to their members (shareholders) who own and control the business.
- Unlimited companies — these are quite rare, as they don't limit a shareholder’s liability for company debts.
Limited liability companies
A limited liability company has full responsibility for all of its legal and financial obligations. It’s the liability of the shareholders that’s limited.
Shareholders are only liable for:
- money owing on their shares
- personal guarantees they have given to lenders or creditors, such as banks or suppliers.
Limited liability companies are incorporated under the Companies Act 1993.
Co-operative companies
A co-operative company is a specific type of limited liability company. Its purpose is to serve the common needs of its members (shareholders), by providing them with commercial services. Co-ops must be under the majority control of members (at least 60 per cent of voting rights) who are actively trading with the co-op. The structure of co-ops is very broad, their members can be suppliers, customers or employees.
Co-operative companies operate across a range of sectors including agriculture, horticulture, manufacturing, financial services, utilities, education, health, community services, wholesale and retail.
They often have the word 'co-operative' in their company name.
Co-ops:
- have transacting shareholders — this means shareholders who:
- supply goods or services to the company
- buy the company’s goods or services, or
- enter into commercial transactions with the company
- have member representation on the board of directors
- must have at least 60 per cent of voting rights held by transacting shareholders
- have a constitution that includes a description of the co-op's activities — this must be filed with us
- typically return a portion of their profits to shareholders as rebates or as shares instead of rebates.
Registering a co-op
Co-op companies incorporate as a company in the same way as other limited liability companies. At the same time, or afterwards, they can register as a co-operative company under the Co-operative Companies Act 1996, which allows them to use ‘Co-operative’ in their company names.
Unlimited companies
The shareholders of an unlimited company have ultimate liability meaning they must pay any debts the company can’t pay. This liability is included in the company’s constitution.
Unlimited companies are used to meet very particular, often foreign, legal requirements.
Overseas companies registered in New Zealand
There are 3 ways an overseas company can operate in New Zealand. It can:
- set up a New Zealand subsidiary — the overseas company owns 100 per cent of the shares and the subsidiary is registered on the Companies Register
- establish a business, for example a branch, for its NZ operations — the business is not a separate legal entity, but is governed by New Zealand law
- become a New Zealand company — the overseas company leaves its country of incorporation and transfers its incorporation to New Zealand.
Incorporating your company
When you’ve decided on the type of company you want to set up and other details about how it will operate, apply online on the Companies Register to incorporate it.