Q: Can you briefly explain the pros and cons of the different business structures?
A: At the risk of oversimplifying, here's a broad outline of the differences.
As a sole trader you are the business and the business is you. Most people start this way because it offers low-cost, easy entry, but the disadvantage is that you are totally responsible for the debts and liabilities of your business. You'll be taxed on your income from the business at individual tax rates.

Partnerships are usually formed when two or more people, perhaps with different or complementary skills and resources, get together to run a business or to share office space and overheads (the partnership structure is popular with accountants and other professionals). As a partner, you are liable both separately and jointly with the other partner(s) for the liabilities of the partnership. You split the profits according to the partnership agreement (for example, two partners agree to split the profit 50%). You are taxed at individual tax rates on your income from the partnership. The disadvantage is your liability not only for your own debts, but also for those partnership debts incurred by your partner(s).

When you form a company, you create a legal entity quite separate from yourself. The company can continue long after you have departed, because your shareholding in the company can pass to someone else. The 'Limited' part of a company's name stands for 'Limited Liability'. This means that as a shareholder in the company you are not personally liable for the company's debts (beyond the paid-up capital) unless it can be shown that you have acted recklessly (for example, continuing to trade when the company is insolvent). You'll be taxed at a different rate from the company.

Companies carry more credibility in the marketplace than sole traders, because taking the trouble to form a company shows that you are thinking about the long-term future of the business. The disadvantages are that a company costs more to run because more compliance paperwork and registration costs are involved. Also, in practice the 'limited liability' advantage is offset by the fact that a bank or other lender will typically require your personal guarantee before advancing finance of any significance.

Q: How do I register a company and can I do it myself?
A: Your accountant or lawyer will be able to set one up for you and advise you on a suitable structure and constitution. There are some wrinkles that you need to be aware of so at least discussing your intention with an accountant or lawyer is a good idea.

If you're a confirmed 'do-it-yourself' type, then visit www.companies.govt.nz and browse the options. A private business called Standard Businesses offers a complete business registration service at a reasonable cost. Visit their website www.companies.co.nz for more details.

Q: Should I write a Business Plan for my business?
A: I certainly recommend you complete a Business Plan. Three good reasons: firstly, the research and thought you'll have to put into writing the business plan will help you to sharpen and/or adjust your ideas.

Secondly, any lending institution that you might approach for funds, such as a bank, will want evidence that you're done your homework and properly thought through your business concept.

Thirdly, the business plan provides a road map for your business. It lays out what you intend doing, how you intend to do it, the resources you need, and your action deadlines for each stage. The business plan forms a 'living document' that you can then revisit at regular intervals and modify according to your progress or changing circumstances.

New Zealand Trade & Enterprise offers an excellent Business Plan (order the Plan from them or download from their web site www.nzte.govt.nz - in the biz section there are links to various publications.

Q: Must I register for GST?
A: Not unless your business turnover is likely to exceed $40,000 in the next 12 month period. But my advice is yes, go ahead and register. There are very few small businesses that would benefit from not registering (if necessary phone 0800 377 774 and arrange to speak to a Business Tax Information Officer about the pros and cons).

Why do I say register? Four reasons. Firstly, let's get real! You do want to turn over more than $40,000 a year, don't you? If not this year, then soon! Start with the right, positive attitude and take your business seriously.

Secondly, you'll be able to claim back the GST back on all your business expenses that have a GST component, such as equipment, supplies, etc. So that computer that is priced at $3,000 in fact costs you only $2,666.67. Of course, you have to add GST to all your invoices and pay this to Inland Revenue (less the GST you're claiming back on expenses), but this shouldn't be a problem as long as you have enough self-discipline to remember that this GST component belongs to the government and is not your money.
To make life easier, it's a good idea to start a separate bank account (still under your trading name) and channel sufficient funds into the account to meet your various tax obligations. Your accountant will give you advice on how much you should tuck away each month to meet your obligations. This way you'll sleep much better at nights.

Thirdly, the discipline of doing a GST return every two months (you can choose a six-monthly return if your turnover is low, but I recommend you choose the two-month option for the discipline reason) will let you know how your business is doing. It's like generating a quick Profit and Loss report every two months.
If you're not paying any GST to Inland Revenue at the end of every two months, then you've probably made a loss (unless perhaps there was a large equipment purchase or some other one-off factor during this particular two-month period).
This is because you pay IRD the different between the GST you're claiming back (supplies and expenses, like that computer purchase) and GST you've collected on your invoices or cash sales. Obviously to stay in business you hope to sell more than the cost of your expenses, so every two months you'll be hoping to send a fat GST cheque off to IRD. The bigger the cheque, the more money you've made. If those cheques aren't being sent on a regular basis, there will be a problem that needs correction. So the two-monthly return also offers you a quick check on the health of your business and a regular chance to correct things before a minor problem becomes a major problem.

The fourth reason for becoming GST registered is that larger businesses will take you more seriously. If you're not registered, the signal is that you're possibly something of a tinpot outfit. Do they really want to bother with you? Don't be concerned either if you sell to other businesses that adding GST makes your prices look too high. They aren't worried about the GST component of your invoices because they can claim this back: it's an expense to them. All they look at is the price before GST. So if you sell them a $3,000 computer, (GST inclusive) they'll see it as a $2,666.67 (GST exclusive) computer, the true net cost to them.

Q: What help and/or funding is available for small businesses
A: At the risk again of oversimplifying, you're most likely to get funding for your business if you are starting the kind of business (such as in a high-tech area) that will be genuinely innovative or that has the potential to earn foreign exchange (export dollars) for New Zealand. But there is still a lot of help available out there. Visit www.nzte.govt.nz , click on the BIZ section, then browse the publications. You can order or download the following free publications:

Business steps: A practical guidebook for small business
There is a minimum set of practical requirements for being in business. These few, very basic items and processes will make life a lot easier for you. The purpose of this booklet is to make you aware of these basic items and to give you an idea of their use within a business.

Planning for success
a do-it-yourself kit for developing your own business plan. 

Foundations for growth
How to improve business practices and how to get support and guidance once you've identified those areas you want to improve.

The most important nationwide help for small businesses are the FREE BIZ workshops and seminars programme that will help you build your small business skills in a number of crucial areas. BIZ also offers Business Start-up workshops that will help you assess if you're on the right track, and help you complete the Business Plan you'll need to get that funding!

Q: Do I need business skills or experience to start a small business?
A: The failure rate of small business start-ups is high. One major reason is lack of business skills. Therefore yes, you should systematically set about improving your business skills. If you have never been self-employed, attend a business start-up course. If you have some business experience, look for free training (such as BIZ workshops and seminars) that will enable you to expand your skills. Continue to build your business skills through the free BIZ programme. Visit www.business.govt.nz for details of your nearest BIZ provider and BIZ courses (including start-up courses) currently being run in your area.

Perhaps the most important ingredient you need to succeed is enthusiasm and drive, backed by persistence and a determination to achieve your goals no matter how much hard work is involved.
But you'll greatly improve your chances of success if you have good business skills. These include the skills to market your business in a creative and sustained way and the skills to build and manage efficient business systems that enable the business to operate smoothly.

Many people start small businesses because they're very good at something, like making things, or being an electrician, or offering specialist knowledge, like computer installations, or public relations work. They often fail because their other business skills are poor, or they couldn't be bothered with them. It seems more fun to do what you enjoy doing than to keep the book work up to date, chase debtors, invoice promptly, do a cash flow forecast or manage tax liabilities, so these tasks are neglected, and the business suffers.

Another major reason for failure is lack of experience in the chosen industry. The solution is to work in the industry before you start or buy that business - even if you have to work for low wages or just for the work experience. The idea of running a Bed & Breakfast might sound dandy, until you've actually tried it and learned about some of the difficulties. Buying a hot bread shop with all those fresh pastries on display might seem great until you realise that bakers often have to get up around 3 am to start the baking process for the day. My advice is to learn about the advantages and the disadvantages of the industry you're interested in before you take the plunge.