Setting up your own company can be a rewarding decision, but only if it is done after careful planning and sticking to the legal requirements.
Setting up your company correctly from the outset is essential for long-term success. A well-structured business entity ensures compliance with legal and regulatory requirements and also provides a solid foundation for growth and scalability.
But before diving into the process of setting up your company in Australia, it’s essential that you familiarise yourself with the unique aspects of the Australian business environment.
Choosing the right business structure
In Australia, companies are primarily governed by the Australian Securities and Investments Commission (ASIC) and the Corporations Act 2001. Under these regulations, there are several types of business structures available for entrepreneurs, including:
Sole Proprietorship
Out of all the business structure, a sole proprietorship is the simplest form, where the business is owned and operated by a single individual. While easy to set up, sole proprietors have unlimited liability for business debts and obligations.
Partnership
This business structure involves two or more individuals or entities sharing ownership and management responsibilities. Partnerships can either be general partnerships or limited partnerships.
In General partnerships, all partners have equal rights and responsibilities, whereas, in limited partnerships, some partners have limited liability.
Company Formation
Incorporating a company in Australia involves registering with the Australian Securities and Investments Commission (ASIC). Companies offer limited liability protection to shareholders and are separate legal entities from their owners.
Trusts
Trusts are legal structures where trustee hold and manage the assets for the benefit of beneficiaries. Trusts are majorly used for asset protection, tax efficiency purposes, and estate planning.
Selecting the appropriate business structure is a decision that will impact various aspects of your company’s operations, including taxation, liability, and regulatory compliance. When deciding on the most suitable structure for your business, consider factors such as:
Liability: Assess the level of personal liability protection offered by each business structure.
Tax Implications: Understand the tax obligations and benefits associated with different business entities.
Regulatory Requirements: Familiarise yourself with the reporting and compliance obligations imposed on each business structure.
Before diving into the process of establishing a company, it’s essential to consider various factors that come into play. These factors include:
Complexity and Costs
Establishing a company adds a layer of complexity and incurs costs beyond the initial setup. These may include annual tasks such as ASIC filings and fees. Understanding these financial and administrative obligations is crucial before making a decision.
Types of Companies
There are different types of companies to choose from, each serving different purposes and objectives. It’s important to explore the options available and determine which type best suits your needs. Some common types of companies include:
Not For Profit Pty Ltd: Suitable for organisations pursuing charitable purposes exclusively.
Special Purpose Company: Tailored for specific objectives, such as serving as a trustee for an SMSF or pursuing particular charitable causes.
Public Company Limited by Guarantee: An option often utilised by not-for-profit organisations which cannot pay dividends.
Registering a Company: What You Need to Know
Process Overview
Registering a company involves several steps, and it’s crucial to understand the requirements and gather the necessary information beforehand. Here’s an overview of what you’ll need:
Company Details
Provide essential details such as the company name, principal place of business address, registered office address, and jurisdiction of the company (e.g., registration in Victoria).
Officeholders and Shareholders
Gather information about company officeholders (directors, public officers, company secretaries) and shareholders, including their full names, residential addresses, dates of birth, and appointment dates. Additionally, specify the number and type of shares to be issued to each shareholder.
Documentation
Prepare the required documentation, including resolutions, consents to become a member/officer, and a constitution (depending on the type of company).
Understanding Key Terms
It’s essential to understand key terms related to company establishment and operation:
Shareholders’ Agreement
A shareholders’ agreement is a binding document that governs the relationship between shareholders, management of the company, and procedures for selling shares. It works alongside the company’s constitution.
Australian Company Number (ACN)
An ACN is a unique identifier assigned by ASIC to registered companies under the Corporations Act. It’s essential for identification and compliance purposes.
Australian Business Number (ABN)
An ABN (Australian Business Number) is a unique 11-digit number that is issued by the Australian Business Register to identify businesses or organisations to the government and community. It’s necessary for entities registered for GST and other tax purposes.
Conclusion
Establishing a company requires careful consideration of various factors, including costs, types of companies, registration process, and understanding key terms.
At Clear Tax Accountants, we are committed to helping entrepreneurs understand the complexities of company formation and ultimately achieve their goals. We have helped many companies across various industries (for instance, we provide special services when it comes to company set up for IT consultants).
So, if you wish to register a company, contact Clear Tax Accountants at 1300 417 399 or email us at admin@cleartax.com.au.
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