The main benefit of incorporation is that it limits the liability of the shareholders or owners of the company. Incorporation creates a company which is a separate legal entity, apart from the shareholders. A company may act and enter into transactions as if it were a natural person. For instance it can sign a contract and will be bound by that contract. It can sue people and be sued. The company is liable for its own actions and the shareholders will only be liable for any amount left unpaid on their shares or uncalled capital.
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As an employer, you are subject to a range of laws which govern all employment relationships within New Zealand. This article briefly outlines the most important of these laws for you.
EMPLOYMENT RELATIONS ACT 2000
The Employment Relations Act 2000 (the ERA) governs employment relationships in New Zealand. The ERA establishes the legal rules covering the negotiation and enforcement of employment agreements as well as the processes required to resolve employment disputes.
One of the first decisions you need to make when you decide to set up in business is what legal structure you will use. Generally, the options available to you are to:
- Form a company under the Companies Act 1993;
- If you plan to trade on your own, trade personally; or
- If you are entering business with other people, trade through a partnership.