Company Setup Guide
Get in touchStarting your own business can be both exciting and overwhelming. It’s not just about having a great idea—it’s about turning that idea into reality with careful planning and smart decisions.
From drafting a business plan to handling paperwork and ensuring legal compliance, each step lays the foundation for your success. Rushing through or skipping steps can lead to costly mistakes later, but doing the work upfront gives you the confidence to move forward.
Think of it like building a house. A strong foundation ensures stability, while shortcuts risk everything collapsing. The same principle applies here: the time and effort you invest now will pay off in the long run.
Starting a business isn’t easy, but it’s worth it. With a clear plan and careful execution, you can avoid common pitfalls and set yourself up for success.
What is a Company?
A company is a legal entity distinct from its owners, known as members or shareholders. Each company must have at least one member. Its separate legal status allows it to function much like a natural person—it can incur debt, enter contracts, sue, and be sued.
The management of a company is handled by its officers, typically directors and company secretaries, who are responsible for its operations and decision-making. This structure ensures that the company operates independently of its owners while granting it the same rights and obligations as an individual.
Reasons For Company Setup
Separate Legal Entity
A company exists as a legal entity distinct from its members. This means it can own assets, incur debts, and enter contracts independently of its owners.
Limited Liability
Members or shareholders enjoy limited liability, ensuring their personal assets are protected from the company’s obligations.
Ease of Share Transfer
Shares in a company can be transferred, allowing for flexibility in ownership and attracting potential investors.
Benefits of Company
Using a company structure for your business offers several advantages:
Limited Liability: A company is its own legal entity, which limits the liability of its members or owners. In most cases, members are not personally responsible for the company’s debts. However, exceptions apply, such as when personal guarantees are given for loans.
Lower tax rate: Companies benefit from a lower tax rate compared to the highest marginal tax rate for individuals. This lower rate applies to the first dollar of income earned by the company, offering potential tax savings.
A company’s separate legal status brings additional responsibilities for its officers under the Corporations Act. Directors and company officers must comply with legal requirements and act in the company’s best interests. Failure to meet these obligations can lead to enforcement action by ASIC against the company or its officers.
Steps to Apply
WHAT YOU NEED TO DO
Step 1: Apply DIN (If you already have it, then move to step 2)
Step 2: Fill in the details in the email and send it to us.
Step 3: Reply to request for further info email.
Step 4: You will receive documents from us for your new company
Step 5: Set up an accounting software where Clear Tax can assist you (Eg. QuickBooks / Xero, etc.)
Step 6: You will receive a welcome call/email with the details of your account manager, whom you can contact for any further queries.
After the Setup is Complete
- Set up a bank account (either online or in the branch. All you need is an ABN. If there are multiple directors, then all directors might have to verify their IDs with the Bank.
- Buy relevant Insurance, including Public Liability and Professional Indemnity (Check the information below).
- Going forward, all your expenses related to the business should be done by the company bank account.
- Register Work Cover Insurance if you are hiring people or taking directors’ fees.
Frequently Asked Questions
What are the different types of companies in Australia?
There are several types of companies in Australia, including proprietary, public, and foreign companies.
What is a proprietary company?
A proprietary company is a type of company that has limited liability, but cannot have more than 50 non-employee shareholders.
What is a public company?
A public company is a type of company that can have more than 50 non-employee shareholders and may be listed on a stock exchange.
What are the legal requirements for setting up a company in Australia?
To set up a company in Australia, you will need to register with the Australian Securities and Investments Commission (ASIC), obtain an Australian Business Number (ABN) and register for Goods and Services Tax (GST) if applicable.
What is a foreign company?
A foreign company is a company that is incorporated outside of Australia but carries on business in Australia.
What are the legal responsibilities of company directors?
Company directors have a range of legal responsibilities, including a duty to act in the best interests of the company, a duty to exercise care and diligence, and a duty to avoid conflicts of interest.
What is the role of director ?
The role of a director can vary depending on the specific industry and context, but in general, a director is responsible for overseeing and managing the operations of an organization or a specific department within an organisation.
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How to select Company name?
Can you imagine a business without a name?
It might sound strange, but the truth is, your company name carries a lot of weight. It’s the first thing your clients and stakeholders will see, and it sets the tone for their expectations. A great name doesn’t just describe what you do—it reflects your brand, values, and vision.
Here are some practical tips that will help you choose the right name for your company:
Make it Unique:
First, make sure your company name isn’t already taken or is not too similar to an existing business. You can use the ASIC Connect Name Availability Search tool to check if the name is available and avoid any potential legal issues.
Make it Relevant:
Your name should reflect what your business is all about. It should give people an idea of what you do or the industry you’re in, helping potential clients understand your services right away.
Make it Easy to Remember:
A name that’s simple and catchy is more likely to stick with your clients. Aim for something memorable that’s easy to say and share.
Make it Appropriate:
Your company name should be professional and respectful. Avoid anything that could be seen as misleading or offensive, as this can hurt your credibility and trustworthiness.
Consider Domain availability:
Today, your online presence is everything. Make sure the domain name for your company is available to maintain consistency across your business’s digital platforms. Consistency across your business name and website will help establish a strong, recognisable brand.
Should I register my company for GST?
So, you’re wondering if you should register your company for Goods and Services Tax (GST). It’s an important decision, but it really depends on your business’s size and what you’re offering.
If your business has a turnover of $75,000 or more a year (or $150,000 for non-profits), you’re required to register for GST. But even if your turnover is below this threshold, you might still want to register voluntarily. Why?
When you register for GST, you can claim back the GST you’ve paid on business expenses. Think about all the things you buy for your business—whether it’s equipment, supplies, or services—GST paid on those purchases can be refunded. Plus, registering can add credibility to your business, showing that you’re serious and compliant with tax laws.
Of course, there’s another side to this. When you register for GST, you’re obligated to charge GST on your sales and regularly lodge Business Activity Statements (BAS). You’ll also need to ensure any GST owed is paid to the Australian Taxation Office (ATO) on time. It’s not just about getting refunds—you’ll have to stay on top of your records and reporting, which could add some extra work to your plate.
While registering for GST can have its advantages, it’s not something to jump into lightly. Consider the nature of your business, your revenue, and your ability to manage the paperwork involved.
Should I register my Company for PAYG?
If your company has employees or pays salaries to directors, then yes, you are required to register for Pay As You Go (PAYG) withholding with the Australian Taxation Office (ATO).
PAYG withholding is the system used by employers to collect and remit income tax on behalf of their employees, including other taxes like the Medicare levy and the Temporary Budget Repair Levy (if applicable). By registering for PAYG withholding, you ensure that the correct amount of tax is deducted from your employee’s wages and sent to the ATO. This makes sure that your employees meet their tax obligations without any hassle.
Not registering for PAYG withholding or failing to withhold the correct tax can lead to severe consequences for your business. Penalties and fines from the ATO are a real possibility, and on top of that, it can harm your business’s reputation. Avoiding this is as simple as ensuring you’re fully compliant with your PAYG obligations.
To understand the complexities of PAYG withholding, it’s wise to seek advice from a tax accountant or business advisor. They can help you ensure you’re meeting your PAYG obligations on time, avoiding mistakes, and keeping your business in good standing with the ATO.
Being compliant might feel like a lot to manage, but it’s essential to avoid potential financial setbacks and reputational damage. So, if you’re unsure about your PAYG obligations, don’t hesitate to reach out to a professional who can guide you through the process with ease.
What are the ongoing compliance obligations for companies in Australia?
Once your company is registered, there are ongoing obligations you must meet to stay compliant. These include maintaining accurate company records, lodging annual statements with the Australian Securities and Investments Commission (ASIC), and paying annual fees.
For public companies and large proprietary companies, the requirements go further. These businesses must also prepare and lodge annual financial statements to meet regulatory standards.
Can I use a registered office address as my business address?
Yes, your company’s registered office address can also serve as your business address. However, keep in mind that this address will appear on the public ASIC register, making it accessible to everyone.
Before making decisions about your company setup or business operations, it’s a good idea to seek professional advice. The information here is general and may not apply to your specific circumstances.
What is WorkCover Insurance?
In Australia, Workers’ Compensation Insurance is commonly known as Work Cover Insurance. It is a compulsory insurance policy that provides protection to employers and employees in the event of a work-related injury or illness.
WorkCover insurance provides financial support to employees who are injured or become ill as a result of their work. This can include medical expenses, rehabilitation, and lost income. It also provides protection to employers by limiting their liability for workplace injuries and illnesses, which can help to reduce the financial impact on the business.
Under the WorkCover scheme, employees who are injured or become ill as a result of their work can make a claim for compensation. This includes injuries that occur on the worksite, during work-related activities or while travelling for work. Employers are required to take out WorkCover insurance to ensure that they can meet their obligations under the scheme.
Each state and territory in Australia has its own WorkCover authority, which is responsible for administering the scheme and providing support to employers and employees. The exact requirements and regulations for WorkCover insurance can vary between states and territories, so it’s important to check the relevant authority in your area for more information.
What are Public Liability and Public Indemnity?
Public liability insurance and public indemnity insurance are policies designed to protect businesses and individuals against claims from third parties.
Public liability insurance covers costs related to third-party property damage or personal injury caused by your business activities. For instance, if a customer slips on a wet floor in your store and seeks compensation for medical expenses, this insurance can help cover legal fees and any payouts.
Public indemnity insurance, however, focuses on claims arising from professional services, such as advice or recommendations. For example, if a client experiences financial losses due to your advice and decides to sue, public indemnity insurance may cover related legal and compensation costs.
Both types of insurance are designed to protect businesses and individuals from financial loss due to unforeseen events or accidents that can lead to expensive legal proceedings. It is important to note that the specific coverage and exclusions of public liability and public indemnity insurance policies can vary depending on the insurance provider and the specific policy.
