Sole trader or company? A guide for psychologists in New Zealand
Most psychologists setting up in private practice in New Zealand choose between operating as a sole trader or incorporating a limited company through the Companies Office. Neither is universally "better" — the right answer depends on your liability comfort, your income level and how you plan to grow. This is genuinely a conversation for your own accountant; what follows is the structural shape of the decision, not personalised advice.
Sole trader: the simpler starting point
As a sole trader, you and the business are the same legal entity. There's no separate registration step to trade this way — you operate under your own name (or a registered trading name) and your own IRD number, file business income through your personal tax return, and are personally liable for the business's debts and obligations. It's the structure most psychologists start with because there's less to set up and fewer ongoing filing obligations.
The trade-off is liability: because there's no legal separation between you and the business, your personal assets are, in principle, exposed to business liabilities. For most solo talk-therapy practices the practical risk is manageable and covered by professional indemnity insurance, but it's worth understanding rather than assuming away.
Limited company: a separate legal entity
Incorporating a limited company through the Companies Office creates a distinct legal entity, separate from you personally, under the New Zealand Business Number system. The company holds its own IRD number, has its own filing obligations (including annual returns to the Companies Office), and in principle limits your personal liability to what you've invested in the company, subject to normal exceptions like personal guarantees or director duties.
The trade-off here is complexity: more setup, more ongoing administration (annual returns, potentially separate accounting for the company versus your personal finances), and typically a higher accounting cost. For a growing practice, especially one bringing on other practitioners or aiming to build something sellable down the line, that overhead is often worth it. For someone testing the waters with a handful of private clients, it may be premature.
GST registration. Whichever structure you choose, GST registration becomes compulsory once your turnover crosses the threshold Inland Revenue sets, and voluntary registration below that threshold is also an option in some cases. Confirm the current threshold and whether it makes sense for you with your accountant — it isn't a number worth guessing at.
Questions worth raising with your accountant
- At what income level does incorporating start to make a real tax difference for me?
- How does each structure affect ACC levies I pay as a self-employed person, if I do ACC-funded work?
- What ongoing filing and accounting costs come with each option, realistically?
- If I plan to bring on other practitioners later, does that change which structure makes sense now?
Whichever structure you choose, keep the clinical side simple
Scheduling, records, notes and invoicing in one place, so the business decision doesn't spill into daily admin.
Bringing it together
There's no wrong choice here so much as a choice that fits your situation today, with the option to change structure later as your practice grows. Many psychologists start as sole traders and incorporate once income and complexity justify it — treat this as a decision you can revisit, not one you need to get perfectly right on day one.
Frequently asked questions
Do I need to register a sole trader business in New Zealand?+
There's no separate company registration for operating as a sole trader — you trade under your own IRD number (or a registered trading name), and you're personally responsible for the business. It's the simpler structure to start with, and many psychologists begin here.
How do I register a limited company in New Zealand?+
A limited company is incorporated through the Companies Office (part of the New Zealand Business Number system), which creates a separate legal entity from you personally. It involves its own registration, ongoing filing requirements and, usually, a separate IRD number for the company.
Do I need to register for GST?+
Registration becomes compulsory once your turnover crosses the threshold Inland Revenue sets, and you can also register voluntarily below that threshold if it suits your situation. Confirm the current threshold and whether voluntary registration makes sense for you directly with your accountant or Inland Revenue, since it depends on your specific numbers.
Focus on the clients, not the paperwork
Nerela keeps your schedule, records and invoicing organised, whichever business structure you choose.
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