ESTABLISHING A BUSINESS ENTITY IN NEW ZEALAND 371
Confidentiality – no registration requirements whatsoever. Subject to the joint venture agreement:
There is a very fine line between unincorporated JV and partnership – care must be taken in drafting the joint venture agreement, including: • Ensuring that management decisions are made independently of the participants;
The participants’ capital contributions can be in any form – including cash, loans, skills or assets; Participants own a proportionate share in the JV’s assets as tenants in common; There is flexibility to introduce and raise new capital; There is flexibility as to distribution of profits/income; specifically, there is no solvency test requirements.
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A clear lack of partnership or agency.
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Tax : JVs are fiscally transparent for tax purposes – each participant’s income share is taxed according to its own tax status. Tax losses can be passed through, utilised or carried forward. No RWT/NRWT payable. Loss limitation rule does not apply. The JV can register for GST. Incorporated joint venture (JVC) Incorporated Joint Ventures (JVC) in New Zealand effectively take the form of a company (as discussed above). The same governance, requirements, advantages and disadvantages apply. TRADING TRUST Trusts are relatively common in New Zealand, especially in a family setting. A trust formed and existing for a business purpose is referred to as a ‘trading trust’. As with any trust in New Zealand, a trust requires a settlor, at least one trustee, and at
Tax : As a JV is not a separate legal entity, participants are jointly and severally liable for GST obligations.
least one beneficiary, and is governed by a specifically drafted trust deed and the Trusts Act 2019 (‘Trusts Act’). The settlor is the person or entity which establishes the trust – they appoint the trustees and beneficiaries and contribute the initial capital. The trustees are effectively the agents for the trust. They handle all of the management and day to day operations, including distribution of income to the beneficiaries, and get no direct benefit from the trust. Often a company is specifically enacted to take on the role of trustee, referred to as a ‘corporate trustee’. As the name suggests, the beneficiaries of the trust
ILN Corporate Group – Establishing a Business Entity Series
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