A big business starts small.Richard Branson
A business is an organisation or enterprising entity engaged in commercial, industrial, or professional activities. The business world is big – there are many roles and positions you can work towards from an employee to manager, aim higher as a director.
When looking at the structure of a business, the three most common structures in New Zealand include: sole trader, partnership and company. Whichever the structure you choose, there are legal and taxation requirements that correspond with these. You should always seek advice from an accountant or a lawyer before you decide which business structure best suits your needs.
Sole traders are people who are starting in business or are contracting. Many small business owners, contractors and self-employed people begin as sole traders. It’s the cheapest and easiest option, and may appeal to you if you want to make a living by following your passion, or to work as a contractor.
There are various pros and cons to being a sole trader. These have been illustrated in the following table.
| Pros | Cons |
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(Adapted from https://www.business.govt.nz/)
A company is a legal entity formed by a group of individuals to engage in and operate a business (commercial or industrial) enterprise.
A company is legally separate from its owners (directors and shareholders). This limits the owners’ risk and is a reason why many businesses that export set up as companies.
Shareholders are responsible for paying a company’s debts, up to the value of their shares. But shareholders are also entitled to a dividend, a share in the company’s profits.
Doing business as a company can be more complicated than under other business structures. If you wish to start a business as a company, you need to consider the following.
Before starting a company, ensure you research and get as much advice as possible. Talking to people you know who have started companies or who advise business owners is a good place to start. You may also wish to consult with accountants and business mentors.
The following table illustrates the pros and cons of starting a company as a business.
- Annual returns must be filed with both the Companies Office and Inland Revenue.
- Different rules apply to how a company and its shareholders pay tax.
- Details of a company’s directors and shareholders must be provided to the Companies Office.
| Pros | Cons |
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Adapted from https://www.business.govt.nz/)
A partnership is when two or more people or organisations form a business. A partnership agreement sets out how they intend to share profits, debts and work.
A partnership is a popular structure with professionals, for example, architects, lawyers, and accountants.
| Pros | Cons |
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(Adapted from https://www.business.govt.nz/)
There are other types of business structures that you may wish to explore in addition to the ones we have just discussed. If you wish to learn more about these structures, access the following website: Other types of New Zealand companies.
Knowledge Check Activity
Business entities may wish to frame their organisation around not-for-profit or for-profit. When you decide to embark on a business venture, it is important to determine early on, how you want to frame your business- is set your goals and determine what you want to gain from the business. You should also consider your mission and vision- both should be visible to all shareholders involved. Let us take a look at the differences between not-for-profit and for-profit.
Non-profit
A non-profit organisation is all for the community – rather than taking profits and distributing profit to the stakeholder. A non-profit organisation's focus is on charitable benefits to the community.
Esports US foundation
One example of a not-for-profit organisation is the Esports US Foundation. This organisation was founded by gamers who wished to give back to the eSports community. Esports.us is a not-for-profit organisation to help support children in poverty through competitive video gaming. Esports.us mission statement – “To provide relief and assistance to, and improve the quality of life for, children affected by poverty, emergencies, or health issues, using competitive video gaming as a platform to support our cause.”
AnyKey
AnyKey is a non-profit organisation that fosters change and empowers the champions making a difference in esports, competitive gaming, and live streaming. Mission and Vision: Anybody should feel welcome in gaming; everybody ought to be meaningfully included, and all people deserve to be fairly represented. AnyKey's primary objective is to substantially increase diversity, inclusion, and equity in competitive gaming & live streaming.
For Profit
A for-profit business is a company whose main focus is for profit, that is, to make money for the business and distribute it amongst the shareholders. This does not make the company better or worse than a not-for-profit company – this means the business have different goals. If the business venture is a for-profit organisation, there is always an option to donate to local charities community services or offer sponsorships. Let’s take a look at some examples of for-profit organisations.
Respawn
Respawn is a for-profit game development studio emphasising creative innovation, actively playing their own games and listening to what the community wants. Listening to what the community is after allows their work to be adapted to strive for success. Respawn‘s philosophy – “We decided to create Respawn after seeing little effort being put into growing the esports and gaming community alongside education. Through our events, programmes, workshops and tournaments we will support the growth of esports in New Zealand while proving the benefits and skills esports can bring to peoples lives.”
Counter Culture board game café & bar
Counter Culture is a unique café and bar based on the idea of board games meets coffee (and beverages). The following is a snippet from where the Counter Culture café started.
… They started looking and looking for a place to open a board game cafe and share their love of board games, coffee, beer, and food. One day, they saw a TO LEASE sign underneath their old super cool inner city apartment. In a mad chaos of sleepless nights and ‘What ARE we doing?’ moments, they opened the doors of Counter Culture Board Game Cafe and Bar on 1 June 2017. Now, they’re marvelling at the huge range of enthusiastic people who come through their doors to play games and the super positive response they’ve had to opening Counter Culture.
Forum Activity: For Profit versus Non-for profit
Consider whether or not you would like to peruse a non for profit or profit business. Choose one and complete the following activity.
Non- for profitWhat would you like to give back to the community through your business? Think about what is important to you, i.e. your core values.
For profitWhat would you like to achieve within your business? Think of what is important to you, i.e your core values.
(You may wish to volunteer, promote volunteer work, research local charities, run a successful business to provide paid employment opportunities and growth, create something innovative and unique etc.)
Discuss your chosen pursuit with your peers. Consider what it is you would like to accomplish and how you would do it.
Post your responses on the Learning Activity Forum.
Knowledge Check
