Tom has worked as a freelance designer for three years, creating logos for small businesses from his home office. What started with just two clients has grown to around twenty. Last month, one client who needed a website asked whether he was running a registered company or working on his own. It was a question Tom had never really considered. Many freelancers eventually face the same decision as their business grows. 

This article follows Tom as he explores the process of registering a company in New Zealand, with practical steps that may differ depending on where you live.

Sole trader or limited company: what is the difference?

At the moment, Tom is a sole trader, which means that in the eyes of the law, he and his business are the same thing. He did not have to sign up anywhere to start; he uses his own tax number, and whatever the business earns is his money.

The hard part is that whatever the business owes is his to pay as well. If a job went badly and a client wanted a lot of money back, Tom's savings, and even his house, could be used to cover it.

A limited company works in another way, because the law treats it like a separate person who owns the business, signs the contracts and pays its own tax. When something goes wrong, it is usually the company's money that is at risk, and Tom's home is left alone, which is the main reason people stop and ask if they should be a sole trader or limited company.

When do you have to register?

Tom never had to register as a sole trader before he took his first job, because in NZ there is no sign-up step for that, and all he had to do was tell the tax office about the money he earned.

A company is not like that, since it does not exist until somebody registers it. So when Tom makes up his mind, he will need to pick a name, make sure nobody else has it, name at least one director and send in his details. He did not know how to register a business, so he began by reading Company Hub, which sets out what he needs before he can register a business and also lets him look up the companies that already exist.

The new numbers Tom is given

Once the company is registered, Tom receives a few new numbers. The first is a New Zealand Business Number (NZBN), which every company gets so other businesses can find and verify its official name and address. The second is a tax number for the company, which is separate from the one Tom already uses for himself.

The third involves GST, a tax added to most goods and services sold in New Zealand. Any business earning or expecting to earn more than $60,000 in taxable sales over a 12-month period must register for GST, regardless of whether it is a sole trader or a company. Tom was already registered for GST as a freelancer, but because his company is a separate legal entity, he needs to register it for GST too if it meets the requirements.

Sending invoices under the company name

From now on, the invoices come from the company and not from Tom, so the full company name, with the word Limited at the end, goes on every invoice, quote and contract he sends out. 

His clients pay directly into the company's bank account, keeping business funds separate from his personal money until the company pays him, just as it would any other employee. Contracts are also signed in the company's name, which reassured the client who had raised the question. Larger clients often prefer working with a registered company because it gives them greater confidence in the business.

The extra jobs that come with a company

Tom's freelance design work has not changed at all, but there is more paperwork for him to look after. Once a year he has to tell the government that the details of his company are still correct, the company needs its own tax return, and he must keep good records of what comes in and what goes out. He now pays an accountant to help with this, which is a new cost he did not have as a sole trader.

Tom still believes registering a company was the right decision for him. His contracts were getting bigger and he wanted to protect his home and personal savings. Meanwhile, a friend who only takes on a few small projects each month has chosen to remain a sole trader, which works just as well for her.

Written by DesignCrowd on Friday, October 16, 2026

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