Retail Startup Checklist

By On Your Terms co-founder Natalie Fennell
Oct 2023

Starting a retail business in New Zealand is exciting! Understanding your legal obligations and how to protect yourself legally might feel less so, but don’t worry On Your Terms is here to help. In this blog, you’ll learn five legal essentials for launching your ‘bricks and mortar’ retail store to ensure long-term success and sustainability.

1. Choose the right business structure

The right business structure for you will be the one that best aligns with your goals and requirements. A business structure is the legal arrangement you provide your products from.

In New Zealand, the most common structures are sole trader, company or partnership. See details on each below. Trusts are also an option, but it is uncommon to operate a business from a trust.  

• A Sole Trader operates under the owners’ name (eg, Ben Brown). Is NOT a separate legal entity. Pros: Easy to set up and no ongoing legal admin or maintenance besides tax & accounting. Cons: The business owner is personally liable for all debts of the business. Doesn’t work if you have business partners. Harder to raise funding.
• A Company is a Separate legal entity from the owner(s). Owners are the shareholders of the company. Pros: Liability protection for shareholders as their liability is limited to the amount they have invested in the company (personal assets are better protected). Provides more comfort to banks/investors. Continuity – shareholders can sell their shares, but the company remains in existence. Cons: Some personal liability for directors – can be reduced by director insurance and following the law. More expensive. More administration.
• A Partnership means the business is owned by two or more people. NOT a separate legal entity unless a Limited Partnership under the Limited Partnerships Act 2008 (typically an unnecessarily complex structure for SMEs). Pros: Slightly easier to set up than a company. Provides flexibility of income/expense flows without company structure constraints. Cons:  Partners may have personal liability for business losses and liability for mistakes/losses of their business partners. Harder to raise funding

See our comprehensive Guide to Business Structuring to learn more about business structures, the set-up requirements and ongoing obligations for each (including tax). The most straightforward choice for many retailers will be a company as it provides some personal asset protection with relatively simple set-up and ongoing compliance requirements. If you decide to incorporate a company, you’ll need to register it with the Registrar of Companies – our Guide to Incorporating a Company in NZ talks you through this process to make it super easy for you to do it yourself and save money.

2. Negotiate the best possible lease terms

Once you’ve found your ideal location, you’ll need to sign a lease with your landlord to agree the obligations on both sides. A lease is a significant business expense, so make sure you understand what it says and negotiate the best terms you can, using these tips:

• Choose your lease term (length) carefully: Shorter leases provide flexibility, but longer leases can have cheaper rent.
• Any incentives? Landlords will sometimes offer rent free weeks in exchange for your commitment – don’t forget to ask!
• Understand the total rent: Understand how the rent is calculated and what other costs are on top of the rent (eg, carparks, additional storage, opex, commission, % of sales). Will the rent be reviewed (ie, increased) annually? By how much?
• Consider what security you provide: If your lease requires security, avoid giving a personal guarantee or seek advice on how to limit your liability.

Finally, and most importantly, if you are unsure of your obligations, talk to a lawyer before you sign.

3. Protect your intellectual property before someone takes it!

Before committing to your new brand identity, make sure you secure your trading name by registering a trade mark. If you have a trade mark, no one can use the same name or a name that is ‘substantially similar’ to that name. For more information on IP protection, see our Guide to Intellectual Property in NZ.

4. Have the right agreements with your staff

Finding the right people to help you reach your business goals is key to running any successful venture.

You’ll need to decide whether to take on employees, independent contractors, or both. With employees, legally you must have a written employment agreement and you need to pay holiday pay, sick leave and comply with NZ employment law. With an independent contractor, you don’t need a written agreement, but clarifying expectations around the scope of work and fee reduces the chance of a dispute. It is generally easier to terminate an Independent Contractor Agreement than an Employment Agreement. For more information on the important distinction, see here. See our Individual Employment Agreement, Employment Essentials Bundle and Independent Contractor Agreement to ensure you and your business are covered.

You must also become familiar with NZ’s employment laws, such as minimum wage, working hours and health and safety requirements. Failing to comply with these laws can lead to legal disputes, fines and damage to your reputation. Consult with a legal professional if you need help – On Your Terms employment law firm partner Edwards Law is always happy to talk with you.

5. Know the rules

New Zealand has robust consumer protection laws in place to safeguard the rights and interests of consumers, including the Fair Trading Act 1986 and the Consumer Guarantees Act 1993. As a retailer, you must be aware of and comply with these laws.

The Fair Trading Act states you must not mislead or deceive consumers. This includes statements made in-store, online or in any advertisements about your products. Your business must ensure:

• goods are accurately represented (including by employees),
• products meet safety requirements, and
• required information (such as GST) is available.

It is important to check what additional information you must have available to consumers. Any claim about a product’s composition or performance must be backed up. New appliances and clothing (including footwear) must have information about their country of origin.

The Consumer Guarantees Act contains a series of promises (called warranties or guarantees) that retail businesses automatically provide to consumers, such as the goods must be of an acceptable quality, fit for purpose and delivered within the agreed period in a reasonable condition.

If your goods don’t comply with these promises, your customers will have certain rights against you, including the right to repair, replacement or a refund. For more information on NZ’s consumer laws relevant to retailers, see our Guide to Consumer Law in NZ.

Key points

To successfully launch a retail business in New Zealand you need to choose the right business structure, comply with employment laws, negotiate the best terms for your lease and meet consumer law requirements.

On Your Terms offers document bundles designed specifically for NZ retailers with in-store sales terms setting out how you will meet your obligations under consumer laws, product terms of sale (for online sales), website t&cs, privacy policy and comprehensive guides and checklists to get your retail business set up for success! See our In-Store Sales Essentials Bundle (if you sell in-store only) or Retail Sales Essentials Bundle (if you sell products online and in-store).

On Your Terms makes it faster, simpler and more affordable for New Zealand start-ups and small businesses to access top quality legal solutions and connect with legal experts.