Sole Trader vs Company for Tradies (2026 NZ Switch Guide)

Executive Summary

Should you switch from sole trader to a limited company?

The tax hook everyone repeats is misleading: the flat company rate only saves you tax on profit you leave in the business, not the money you take home
On the current rates, a sole trader does not actually pay more tax than a 28% company until profit gets close to $190,000
Incorporating in New Zealand is cheap (about $119 plus GST), so cost is rarely the blocker. The real work is the admin around it
Your trade licence is personal to you in New Zealand, so unlike Australia you do not re-issue it to the company
The genuine reasons to switch are usually asset protection and taking on staff, not tax

If you are just going out on your own, start with our subbie to your own trade business guide. For the standing compliance list, see tradie legal requirements in New Zealand. Either way, a free Google Business Profile audit shows where your business stands online right now.

Quick heads up. This is general information for New Zealand tradies, not tax, legal, or financial advice. Rates, fees, and thresholds are current at the time of writing and they change. Every tradie's numbers are different, so confirm the detail with the official source linked for each point and talk to a chartered accountant about your own situation before you switch.

Sole trader and limited company are the two structures almost every New Zealand tradie chooses between, and the real difference is simple: as a sole trader you and the business are legally the same person, while a company is a separate legal entity with its own tax rate, its own IRD number, and its own liability for debts 6. That one difference drives everything below, the tax you pay, the assets a claim can reach, and the paperwork it takes to change.

Getting the structure right is one job. Getting found so the phone rings is another, and it is the one that actually pays the bills. If you want a straight read on how your business shows up online while you sort the back office, grab a free Google Business Profile audit. No pitch, just what is costing you calls.

A few numbers worth knowing before you decide:

Most New Zealand companies pay a flat 28% tax on every dollar of profit 1.

A sole trader pays personal marginal rates instead, and the 30% rate kicks in at $53,501 of taxable income, climbing to 33% at $78,101 and 39% above $180,000 2.

Incorporating a company with the Companies Office costs $118.74 plus GST, with an optional $10 plus GST to reserve the name first 3.

After that it is $49.74 plus GST every year for the annual return to keep the company on the register 3.

What Is the Actual Difference Between a Sole Trader and a Company?

As a sole trader, you are the business. You trade under your own name or a registered trading name, the profit is your income, and the debts are your debts. It is the cheapest and simplest way to run a trade: you use your own personal IRD number for the business, and you file one return 5.

A limited company is a separate legal person that you own (as a shareholder) and run (as a director). The company earns the money, the company owes the debts, and the company has its own IRD number and files its own return 5. You pay yourself out of it as a shareholder salary or dividends.

That split matters in two practical ways for a tradie:

Tax: company profit is taxed at the flat 28% company rate. Sole trader profit is added to your personal income and taxed at your marginal rate.
Liability: as a sole trader you are personally responsible for all the business debts. In a company, shareholders are responsible for the company's debts only up to the value of their shares 6. Generally, not always, more on the exceptions below.

Neither is "better". They suit different stages. Most Kiwi tradies are right to start as a sole trader and only move when a real trigger shows up.

Which One Pays Less Tax?

This is where the bad advice lives. "Go limited and pay 28% instead of 39%" sounds great in the smoko room, and it is usually wrong for a working tradie.

Two things get skipped.

First, the 39% figure is a marginal rate, not your average. The top rate only starts above $180,000 2, and it only applies to the dollars above that line. Everything below is still taxed at 10.5%, 17.5%, 30% and 33% on the way up. So your average tax rate as a sole trader stays under 28% for a long time.

Second, New Zealand does not tax the company profit and then tax it again in full. When the company pays you a dividend it carries imputation credits for the tax the company already paid, so the company rate is not a separate saving on money you take home. It is a prepayment.

Here is the tax on business profit at a few levels, sole trader against a 28% company, worked on Inland Revenue's current individual rates. The sole trader figures exclude ACC levies:

Business profit	Sole trader tax	Company tax (flat 28%)
$50,000	about $7,700	$14,000
$80,000	about $16,300	$22,400
$120,000	about $29,500	$33,600
$150,000	about $39,400	$42,000
$190,000	about $53,200	$53,200

Read that bottom row again. On these rates the two structures do not actually cross over until profit is somewhere near $190,000. Below that, the sole trader is paying less, not more. So where does the company tax saving everyone talks about come from?

It only shows up on profit you leave in the company. If you draw the money out to live on, as a shareholder salary or dividends, it is taxed at your personal marginal rate anyway and the 28% the company already paid is credited back through the imputation system. The flat company rate only defers real tax on profit you keep inside the business to reinvest, in tools, a second ute, stock, or growth.

There is also one thing a company will not save you. ACC levies follow the earnings either way: a self-employed person and a shareholder-employee both pay the earners' levy, the work levy, and the Working Safer levy 9. Going limited is not an ACC dodge.

So the honest version is this. If you take home nearly everything you earn, a company will not cut your tax bill, and it adds cost. If you are making strong profit and deliberately leaving a chunk in the business, or an accountant is setting up income splitting across a family, that is when the tax argument starts to hold up. That last part is exactly the conversation to have with an accountant, not a blog.

Action: Work out your actual annual profit, not your turnover, and how much of it you take home versus reinvest. Take that one number to your accountant. It decides the tax question faster than any rule of thumb.

When Does Switching to a Company Actually Make Sense?

For most tradies the trigger is not tax at all. It is risk. A company is legally separate from its owners, which limits their risk and liability in a way a sole trader structure cannot 6. These are the moments that usually tip the decision.

You are taking on staff or apprentices

The day you put someone else on the tools under your name, your exposure changes. Employees, sites, and other people's mistakes all add risk that, as a sole trader, lands on you personally. A company puts a legal wall between that risk and your home.

The jobs are getting bigger

A $2,000 job going wrong is a bad week. A $200,000 job going wrong, a defect claim, a dispute, a subbie who does not get paid, can reach every personal asset you own if you are a sole trader. As the contract values climb, so does the case for the company carrying that risk instead of you.

Your ute and tools are personal assets on the line

As a sole trader there is no legal line between your work gear and your personal property, because there is no separate entity. A serious claim against the business can, in principle, come after the ute you drive and the tools in the back, along with the house. Under a company, the business assets and liabilities sit with the company.

One important honesty check

A company is not a magic shield. Under the Companies Act 1993 a director must not create a substantial risk of serious loss to the company's creditors, sometimes called reckless trading, and must not agree to the company taking on obligations it cannot reasonably be expected to meet. Keep trading while insolvent and you can be personally liable and face prosecution 7. Add to that any debt you personally guaranteed, which banks and merchants routinely ask for, and your own conduct: the Health and Safety at Work Act 2015 puts a due diligence duty on officers, which includes company directors, on top of the duty on the business itself 10. So the protection is real and worth having, but it is not a licence to be reckless. Your public liability and contract works cover still does a lot of the heavy lifting either way.

Action: If you are about to hire, or you are quoting jobs where a claim could realistically reach six figures, that is the signal to price up a company properly with your accountant.

What Does It Actually Cost to Switch?

Here is the good news for Kiwi tradies: the government fees are almost nothing. Incorporating costs $118.74 plus GST, the optional name reservation is $10 plus GST, and the annual return is $49.74 plus GST 3. That is a fraction of what the same move costs across the Tasman, so cost alone should never be the reason you stay a sole trader.

The real bill is everything around it:

Your accountant's set-up fee, for the company, the share structure, and the extra tax return you now file every year
A second set of books while you carry both structures during the changeover

Then the admin, which costs more in time and hassle than the fees:

A new IRD number. A sole trader uses their own personal IRD number. A company has its own 5. You also need to tell Inland Revenue that your business structure has changed so they can update your tax records.
GST re-registration. GST is tied to the registered entity, so if your turnover is over the $60,000 threshold you register the new company for GST and cancel the registration on the old one 4.
Your NZBN. Sole traders have to apply for an NZBN, but a registered company is allocated one automatically when it is incorporated 8. Your new company's NZBN is a different number from your sole trader one, so anywhere you have published it needs updating.
Insurance. Public liability, contract works, tool cover, and any other policies need reissuing in the company's name so the right legal entity is actually covered.
Bank account and invoicing. A company needs its own bank account, and your invoicing software, invoice templates, and payment details all update to the new entity.
Contracts. Existing client and supplier agreements are with you personally, so ongoing ones may need to be reissued or assigned to the company.
Guarantee memberships. If you offer a builder's guarantee such as Master Build or Halo, that membership sits with the business rather than with you, so check with the provider what carries across to the new company and what has to be applied for again.

The one job you do not have to do

This is where New Zealand is genuinely simpler than Australia. Your trade licence is personal to you, not to your business. EWRB registration and a current practising licence are held by the individual electrical worker 11, and Licensed Building Practitioners are individual people assessed as competent to do restricted building work 12. Plumbing, gasfitting, and drainlaying licences work the same way: the Plumbers, Gasfitters and Drainlayers Board registers and licenses individual tradespeople, not businesses 13. So you do not have to move a contractor licence into the company's name before it can quote and get paid. You keep working under your own licence, and the company is simply the entity that contracts.

Action: Ask your accountant for an all-in number, the Companies Office fees plus their set-up fee plus the extra annual return, then weigh that against the actual benefit. If the benefit is "maybe a bit of asset protection someday", it is probably too soon.

How Do You Actually Make the Switch?

Once the decision is made, this is the rough order of play. Your accountant will drive most of it, but knowing the steps helps you plan the timing.

Run the numbers with your accountant first. Confirm the switch is worth it on your actual profit and how you take it home, and get the all-in cost.
Reserve the company name and incorporate through the Companies Office, with directors and shareholders set. Roughly $10 plus GST for the name and $118.74 plus GST to incorporate.
Get the company's IRD number. The incorporation process can apply for it, and it is separate from your personal one.
Register the company for GST if your turnover is over the $60,000 threshold, and tell Inland Revenue about the structure change.
Reissue your insurance (public liability, contract works, tools, income protection) in the company's name.
Open a company bank account and update your invoicing, accounting software, NZBN references, and any ongoing client and supplier contracts.
Update your marketing. Your website footer, Google Business Profile, quote templates, and signwriting all need the correct legal entity on them.
Close off the sole trader registrations once everything has genuinely moved across, not before.

Action: Do it at a natural break, such as the start of a financial year, so your bookkeeping has a clean line between the two structures.

Want Someone to Review Your Tradie Website?

Whatever your structure, the business still lives or dies on whether the phone rings. "Limited" on the paperwork does not win you a single job. Being the tradie who shows up on Google when someone searches your trade in your suburb does.

Made 4 Tradies offers a free, no-obligation audit for New Zealand trade businesses.

Free website audit: speed, local signals, and the things quietly costing you calls. PDF in 24 hours.
Free Google Business Profile audit: Maps ranking, reviews, photos, and how you stack up against the tradies beating you locally. PDF in 24 hours.

No call required. No pitch. Just a straight read on what is costing you work.

What a tradie website costs

Single Page$1,099
one page, conversion sections, Call + Get a quote
Multi-Page$2,199$1,899Founding Offer
Home, About, Reviews, Contact + page per service
Multi-Page + Extras$3,299
above + ~10 suburb pages + Google Business Profile optimisation

Maintenance: optional $50/month for edits on existing pages (what maintenance covers)

Free strategy call →

A 20-minute call and a plan for more leads. No sales pitch.

Frequently Asked Questions

Should a New Zealand tradie be a sole trader or a limited company?

Most tradies are right to start as a sole trader. It is cheaper, simpler, and at modest profit it usually costs you less tax than a company, because your average personal tax rate stays below 28% for a long time. Move to a limited company when a real trigger appears, such as hiring staff, taking on much bigger jobs, or an accountant confirming the tax and asset protection benefit stacks up for your numbers.

Do you pay less tax as a company in New Zealand?

Not automatically. Most companies pay a flat 28%, but that only helps on profit you leave in the business. Money you draw out as a shareholder salary or dividend is taxed at your personal marginal rate anyway, with imputation credits for the tax the company already paid. On the current individual rates, a sole trader does not overtake a 28% company until profit is close to $190,000.

At what income should a tradie switch to a company?

There is no single dollar figure, because it depends on how much profit you take home versus reinvest, not just turnover. On the tax maths alone the crossover sits near $190,000 of profit, and even then the saving only applies to retained profit. In practice most tradies switch earlier for asset protection or because they are hiring. Get an accountant to run your actual numbers.

How much does it cost to set up a company in New Zealand?

The Companies Office charges $118.74 plus GST to incorporate, with an optional $10 plus GST to reserve the company name first, then $49.74 plus GST every year for the annual return. On top of that you have your accountant's set-up fee and an extra company tax return each year, plus the switching costs of reissuing insurance, contracts, and your bank account in the new company's name.

Do I need a new IRD number and NZBN for my company?

Yes to both. A sole trader uses their own personal IRD number, while a company has its own. A registered company is also allocated its own NZBN automatically when it incorporates, which is a different number from the NZBN you applied for as a sole trader. You also need to tell Inland Revenue that your structure has changed, and re-register for GST under the company if you are over the $60,000 threshold.

Do I have to transfer my trade licence to the company?

No, and this is where New Zealand is simpler than Australia. EWRB registration and practising licences, PGDB licences, and Licensed Building Practitioner licences are all held by individual people, not by businesses. You keep working under your own licence and the company is just the entity that holds the contract, so there is no licence transfer step in the switch.

Does a limited company protect my house and tools?

It helps. A company is legally separate from its owners, so business debts and claims generally sit with the company rather than with you personally, unlike a sole trader where there is no legal line between business and personal assets. It is not absolute, though. Directors can still be personally liable for reckless trading or for letting the company take on obligations it cannot meet, for debts they personally guaranteed, and for their own due diligence duty under the Health and Safety at Work Act 2015.

Is it worth going limited just before hiring an apprentice?

For a lot of tradies, hiring is the trigger that finally justifies the switch. Taking on staff adds risk that, as a sole trader, lands on you personally. Doing the switch before or around your first hire is common, but line it up with your accountant so the insurance, payroll, KiwiSaver, and ACC all start under the company cleanly.

References:

This article is general information for New Zealand tradies, current as of 2026. It is not tax, legal, or financial advice. Rates, fees, and thresholds change over time and vary with your circumstances, so confirm the current details with the official source linked for each point and speak to a chartered accountant before you act.

Published by Made 4 Tradies. Kiwi-owned, run by a Hawke's Bay local. Serving tradies nationwide, from Auckland to Dunedin.

Sole Trader vs Company for Tradies NZ: When to Switch (2026)