Regulations



Starting a Business - and Regulations
Here are the things that you have to do to comply with the regulations set down by the law when you are starting a business.


1. Obtain a Business IRS number.
When you set up a business you will need an IRS number. This is an eight digit number which the IRS will give you to identify your business for taxation matters. If you are operating your business as a sole trader then your IRS number will be your personal IRS number. If you are operating as a partnership you will need to obtain a separate IRS number.

This will also apply if you are running your business through a company. To obtain the number you need to complete an IRS number application form (called an IR595) and forward this form to the IRS with appropriate identification. Identification includes:

  • Birth Certificate
  • the USA Passport
  • Overseas Passport
  • Certificate of the USA citizenship
  • Photo ID Drivers Licence

If you are obtaining an IRS for a company or trust you will need to send:

  • Certificate of Incorporation (for companies)
  • Deed of Trust (for trusts)
  • Certificate of Incorporation (for incorporated societies)

Remember that this IRS number will be the number that you will use in all matters to do with the taxation office.

2. Register for Sales Tax with the IRS.
You don't have to register for Sales Tax unless your business turnover is likely to achieve a $40,000 turnover in the following 12 month period. However, it is a good idea to register because there are advantages. Studies have shown that very few businesses will benefit from not registering at all.

3. Register as an employer with the IRS (if employing staff).
If you decide to employ staff you will need to register as an employer. This will involve you ringing the IRS who will send you a package of documents that you will need to complete. You can also go online at the IRS website (www.irs.govt.nz) and register there. Once you have done this you will be officially registered as an employer.

Each month you will receive forms from the IRS that you will need to fill out. These mainly relate to your employees and the tax that has to be paid into the IRS in the form of FED INCOME TAX. In addition, Statistics the USA may also contact you from the records that the IRS has asking you to participate in some of the services that are regularly carried out.


4. Register for ACC with IRS.
ACC is a Crown entity that administers the USA's Accident Compensation Scheme. It provides no fault, 24 hour cover for all injuries in this country whether they occur at home, at work, on the road or during sport. The ACC works in the two key areas of preventing injury and providing care and rehabilitation to people who are injured. Every self employed business in the USA is liable for ACC levies. The ACC will invoice you directly for all levies based on information supplied to them by the IRS through the tax returns that you have submitted.


How to Register
When setting up a business there are three situations where you will be required to register with the ACC and pay levies.

These are:

  1. Newly, Self Employed People.
    When you have registered as a self employed person and have also registered for Sales Tax with the IRS, ACC is automatically notified and you will receive cover from them for personal injury should that occur. After you have filed your first tax return (IR3) your weekly compensation and levies are set out on the previous year's liable earnings as submitted to the IRS. In the first year of full time employment your levy will be based on your actual earnings up to $16,016 which is the minimum and is updated every year.

  2. New Employers.
    As soon as you employ staff and become registered as an employer with the IRS they will notify ACC and you will become registered for ACC immediately. This means that you will also become liable for ACC payments. These payments involve:

    • Employer based levies and premiums for cover of work accidents and ongoing rehabilitation (for which the ACC will invoice you).
    • The earner levy paid by employees for cover of non work related injuries which are included as part of the FED INCOME TAX deductions.

  3. Shareholder employees
    These are people who are both a shareholder and an employee of a company. There are two types - PYE and Non-FED INCOME TAX. Both of these groups are automatically covered by ACC however there are a number of alternatives available to increase the amount and type of cover for non-FED INCOME TAX shareholder employees.


5. Register for Fringe Benefits and Super (if applicable).
You automatically register for Fringe Benefits and Super when you complete the details in the Employer Registration Form. The form will ask whether you are providing fringe benefits or handling specified super contributions.

  1. Fringe Benefit Tax
    Employers pay fringe benefit tax (FBT) on non-cash benefits that they provide to employees for their past, present and future employment.

    These benefits could include:
  • Motor vehicle for private use
  • Low interest loans
  • Subsidised transport
  • Subsidised goods and services
  • Financial contributions to super funds

The FBT is payable quarterly at the rate of 49% of the taxable value of fringe benefits provided in that quarter. The FBT is tax deductible.

  1. Superannuation
    Any contributions that employers make to a registered super scheme are allowed as a deduction from their taxable income. Cash contributions are subject to a 33% withholding tax.