Full source list for Should I incorporate, or stay a sole trader?
Six numbered references for /wayfinder/refs/sole-trader-or-company:
1. Limited liability exceptions in NZ company law: directors can be personally liable for trading while insolvent (Companies Act 1993, sections 135 and 136 — reckless trading and incurring obligations). Certain tax debts, including PAYE withheld and not paid, can attach personal liability under the Tax Administration Act. Health and safety breaches under the Health and Safety at Work Act 2015 can attach personal liability for officers. Personal guarantees on bank loans contractually remove the limited-liability protection for that specific debt.
2. New Zealand personal income tax brackets (2025–2026 tax year): 10.5% to $15,600; 17.5% on $15,601–$53,500; 30% on $53,501–$78,100; 33% on $78,101–$180,000; 39% above $180,000. Sole traders pay tax at these rates on business net profit. Companies pay a flat 28% on net profit regardless of amount.
3. GST registration is independent of structure. Both sole traders and companies must register for GST when annual turnover exceeds $60,000, or may register voluntarily below that threshold.
4. Company compliance costs typically include: incorporation fee ($118.74 + GST one-off), annual return ($49.74 + GST per year), separate tax return preparation, share register maintenance, director-duties compliance. Accounting fees for a simple sole-director company typically range $1,500–$3,000 per year.
5. Company shares and ownership transfer: companies can issue, transfer, and reorganise shares to bring in co-owners or sell out, governed by the Companies Act and the company's constitution (or default Act rules). Sole traders cannot transfer ownership of "the business" as a separate entity — only its assets.
6. Sole-trader-to-company transition triggers tax events: asset transfers may have depreciation recapture implications; goodwill transfers may be taxable; GST registration may need to be re-elected. The IRD has anti-avoidance rules under the Income Tax Act 2007 covering structure changes that have a tax-avoidance purpose. Professional advice is normal practice for the transition.