How do I remove a director who is not pulling their weight?
- 20.08.2026
I have been freelancing as a sole trader for a couple of years and my income is growing. An accountant friend suggests incorporating, but I am worried about paperwork and cost. What are the real legal differences between a sole trader and a limited liability company in New Zealand?
The core difference is that a company under the Companies Act 1993 is a separate legal person. Your liability for business debts is generally limited to what you have invested, whereas a sole trader is personally liable for everything. Incorporation is quick and inexpensive through the Companies Office, but a company brings ongoing duties: an annual return, financial records, a share register, directors' duties and possibly financial statements depending on size. Banks and landlords often require personal guarantees from small company directors, which can reduce the protection. Tax treatment also differs, so it should be modelled with an accountant. If your work involves real risk of claims or significant debts, a company usually makes sense. If it is low risk and simple, staying a sole trader may be sensible.
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