What is a company
When people decide to start or buy a business, they generally do so in one
of three ways... as a sole trader, in partnership, or through a company.
Apart from tax registration, there is no formality in trading on your own
account. Partnerships usually need an agreement setting out the terms of the
relationship. They are governed by the Partnerships Act 1908. In both cases
the individual and the partners are responsible for the operation of the
business and paying its debts.
Companies are incorporated under the Companies Act 1993 by application to
the Companies Office. A company has:
· One or more shareholders who invest in it by purchasing one or more shares
from the company to an agreed amount so it has the money needed to start and
develop the business; and
· One or more directors appointed by the shareholders to manage the company's
business and make the day-to-day decisions. In small companies the
shareholders and the directors are often the same people. Directors owe
certain duties of good faith, acting honestly, legally and in the company's
best interests for which they are accountable to the company. It is most
important to note that a company is a legal entity in its own right,
separate from its shareholders. It can hold property in its own name, can
sue and be sued and has an indefinite existence unless brought to an end in
accordance with the Act.
While the requirements to operate a company are relatively simple, people
usually only incorporate a company to obtain a specific benefit when
trading.
For further information on Companies please visit www.companies.govt.nz or
contact their info help line on 0508 266 726.
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