12 Ways to Bring Someone Into Your NZ Business

Bringing someone into your business does not automatically mean giving them a percentage of the company on day one. Someone might come in because you need money, because you need help running the business, because they can grow it, or because you want a long-term business partner. Those are different problems, so they do not all need the same solution.

You can employ someone first, give them a profit share, let them earn shares over time, take money from an investor without giving them day-to-day control, or give them a path to ownership later. The important thing is understanding what each option actually gives them and what you are giving up.

1. Employee first

This is often the simplest place to start when you are interested in someone but do not yet know whether you want them as an owner. They join the business, receive normal pay and work there for an agreed period.

For example, you could employ someone for six months and see how they handle staff, customers, sales, problems and money. If they perform well and both sides still want a partnership, you can discuss profit sharing or shares later.

The benefit for you is that you test the relationship before giving away ownership. They get paid and can see the business from the inside before committing their own money.

2. Employee plus profit share

With a profit share, the person still owns 0% of the company. They are paid for their normal work and receive an additional amount based on profit.

For example, if the agreement gives them 10% of a $10,000 monthly profit, they receive an extra $1,000. You could also reward only the improvement they create. If the business already makes $8,000 a month and they grow it to $12,000, you could give them a percentage of the extra $4,000 rather than a percentage of everything.

Define profit carefully. The agreement should say which revenue, costs, owner payments, tax, accounting adjustments and time period are included. Otherwise, two people can calculate very different profit figures.

If the payment is made to an employee, it is not tax-free just because it is called a profit share. The payroll and PAYE treatment needs to be handled correctly. Inland Revenue treats lump-sum profit shares and bonuses paid to employees as extra pay for PAYE purposes.

3. Earn-in shares

Earn-in shares are different because the person can become a real owner, but they have to earn that ownership first. You might agree that they earn 5% when an agreed profit target is reached and another 5% when a second target is achieved.

This can work when someone has skills and time to contribute but does not have a large amount of money to invest. The current owner is protected because shares are not simply handed over based on promises, while the other person gets a genuine opportunity to build ownership through results.

The targets, measurement dates, valuation, voting rights and treatment of someone who leaves should be written clearly. If the shares are provided because of the person's employment, New Zealand employee share-scheme rules may apply, so the tax treatment should be checked before setting it up.

4. Convertible loan

A convertible loan starts as money owed by the company rather than immediate ownership. Someone might lend the business $50,000 today, and the agreement might allow or require that loan to turn into shares later.

The important word is agreement. A convertible loan does not automatically mean the investor can always choose between cash and shares, and it does not automatically mean the company can force conversion either.

The written terms should say:

• whether conversion is optional or required
• when conversion happens
• how many shares are issued or how the valuation is calculated
• whether interest applies
• what happens if targets are missed or the company is sold
• whether and when the loan can instead be repaid

That avoids reaching the conversion date and then arguing about what the $50,000 is actually worth.

5. Immediate share issue

With an immediate share issue, the company creates new shares for the incoming investor and the investor becomes an owner immediately.

Imagine a company with 100 shares owned by one person. It issues another 25 shares to a new investor, so there are now 125 shares. The original owner has 100 out of 125, or 80%, and the new investor has 25 out of 125, or 20%.

The investor's money goes into the company, which can be useful when the business needs money for growth, debt, staff or equipment. The important point is that issuing new shares can dilute existing shareholders because the total number of shares has increased.

New Zealand companies can issue additional shares to raise capital, but the issue must follow the Companies Act 1993 and the company's constitution, if it has one. The company must also file notice of the issue with the Companies Office within the required time.

6. Selling existing shares

Selling existing shares is different because no new shares need to be created. If you own 100 shares and sell 20 to another person, you keep 80 and they get 20. The total remains 100 shares, so there is no dilution from creating additional shares.

The other big difference is where the money goes. If the buyer purchases your shares from you, the purchase money is generally paid to you as the seller rather than injected into the company.

Share sales can have tax consequences depending on the circumstances. Inland Revenue says gains from selling shares in a company you operate a business through are usually non-taxable, but exceptions include shares originally acquired for resale and share dealing. Other sale terms and changes in ownership can also affect tax losses and imputation credits. Get the specific transaction checked rather than assuming every share sale is tax-free.

7. Option to buy shares later

An option gives someone a possible route into ownership without making them an owner today. For example, you could employ someone and agree that after 12 months they have the right to buy 10% using a price or valuation formula agreed in advance.

They can work inside the business first, understand what they are potentially buying and decide whether they still want it. You also get time to see whether you actually want them as a shareholder.

If the option is given because of employment, it can fall within New Zealand employee share-scheme rules. Check the tax side when the arrangement is created rather than waiting until the option is exercised.

8. Vesting

Vesting means someone earns shares or rights gradually rather than receiving the entire benefit immediately. You might offer someone up to 10% over three years with a 12-month cliff. If they leave after 10 months, they get nothing because they did not pass the cliff. If they stay, part of the benefit begins to vest under the agreement.

This gives the person a long-term path to ownership while protecting the company if they leave quickly. The documents should distinguish between shares already issued, rights to receive shares later and options, because they can produce different legal and tax outcomes.

When vesting is connected with employment, employee share-scheme tax rules may apply. Inland Revenue specifically addresses shares, share rights and vesting under its ESS rules, and employers can have reporting obligations for taxable ESS benefits.

9. Phantom equity

Phantom equity is not actual equity. The person does not own shares, does not automatically receive shareholder voting rights and does not become a legal owner simply because the agreement uses a percentage.

It is a contractual financial arrangement designed to reward someone as the business grows. For example, you might agree that a manager receives a bonus calculated as 5% of agreed annual profit. You could also agree that if the company is sold while they are still employed, they receive another payment based on a formula.

The agreement should clearly state when payments are earned, how the calculation works, how the payment is taxed, what happens if the person leaves and whether any sale-related benefit survives after employment ends.

10. Silent investor

A silent investor puts money into the company and receives ownership but does not normally work in the business. Someone could invest for 15% while the existing owner and managers continue handling customers, employees and daily decisions.

This can work when the business needs capital but does not need another manager. However, silent does not mean the investor has no rights. A shareholder can still have voting, information and distribution rights depending on the shares, constitution and other company documents, even though shareholders do not automatically participate in day-to-day management.

11. Separate joint venture

A separate joint venture can make sense when the new person is only contributing to one part of the business. Imagine you already operate several branches and someone wants to build a new regional operation with you.

Instead of giving them 30% of everything you already own, you could create a separate company for the new operation and agree that they own 30% of that company. They then participate in the part they are helping to build rather than automatically getting ownership of the existing business.

A joint venture is not automatically a separate company; it can be structured in different ways. A separate entity can create clearer boundaries, but it also brings legal, tax, accounting and administrative work. The parties should document funding, control, profit allocation, intellectual property, liabilities and exit rights.

12. Preference shares

Preference shares can be useful when an investor wants financial rights but you do not necessarily want every shareholder to have exactly the same rights. An investor could receive a class of shares with specially agreed rights around distributions, voting or repayment priorities.

This is more complicated than issuing ordinary shares. The rights need to be documented properly in the share terms and, where relevant, the company constitution. The terms of a share issue and provisions in a company's constitution can affect voting and other shareholder rights.

Decide how the relationship ends before it starts

Getting someone into the business is only half of the deal. You also need to decide what happens if they want to leave, stop working, die, become unable to work or simply stop getting along with the other owners.

A shareholders' agreement should address topics such as:

• who makes major decisions
• what happens if the owners reach a deadlock
• how shares will be valued
• whether existing shareholders get the first opportunity to buy
• what happens to shares if someone leaves their job
• confidentiality and appropriately drafted restraint provisions
• how an owner can exit

It is much easier to agree on these rules while everyone is getting along. Business.govt.nz recommends understanding the business's assets and liabilities, obtaining an appropriate valuation and documenting an exit or succession plan instead of waiting until someone wants to leave.

Keep work, investment and ownership separate

A person can contribute three different things: their work, their money and their ownership risk. They do not need to be bundled together.

If someone works full time, you can pay them for the job they do. If they also invest $50,000, you can separately decide what that investment buys. If they earn shares through performance, you can separately decide when those shares vest and what happens when they leave.

Keeping these parts separate makes the arrangement easier for both sides to understand. If you are still deciding between employment and contracting, compare the costs with TaxPop's Employee Cost vs Contractor Calculator.

Watch the tax side when employees receive shares

This is particularly important with earn-in shares, vesting and options. If an employee receives shares or rights to shares because of their employment, an employee share scheme may exist.

Inland Revenue says an ESS benefit is generally treated as income. Employers must report the value of an ESS benefit even in situations where they do not withhold tax from a share-settled benefit. From 1 April 2026, qualifying unlisted companies can also elect to use employee deferred share rules in certain circumstances.

For the wider tax position, see TaxPop's guide to how company tax works in New Zealand and use professional advice for the proposed transaction.

Start with the problem, not the percentage

If you only need someone to manage the business, an employee with a good performance bonus might be enough. If you only need money, a loan or investor may be more suitable. If you want someone to work in the business, grow it and eventually become a long-term owner, an earn-in, option or vesting arrangement might make more sense.

There is no reason to start the conversation with, How much of the company should I give them? Start with, What do I actually need this person to bring? Once you know whether you need money, management, growth or long-term ownership, choosing the structure becomes much easier.

Check the official guidance

• Inland Revenue: employee share schemes
• Companies Office: shares and shareholder rights

General information only. Get legal and tax advice before money or shares change hands.