Are you deciding to run your business as a company? People’s preference to operate their businesses as companies has gone up in the past couple of decades. However, this business structure is not suitable for every business.
You need to fulfil some legal obligations to set up a company. A company has multiple advantages, but a few factors may be disadvantageous for your business.
Read this article to determine if a company is the right business structure for you. But first, you should understand what a company is.
Under Australian law, a company is a legal entity separate from its owners. It is treated like a legal person, meaning it can incur debts, sue others or be sued by them. Compared to other business structures, this one is more complex to set up and operate.
Setting Up a Company
Setting up a company takes work. You have to take multiple things into consideration and fulfil the requirements set by legal authorities. Here are those responsibilities:
- Check if you need to register trademarks.
- The company’s name has to be unique. You must ask the ASIC for the name’s availability; if not, consider other options.
- You have to choose a director who can handle this role’s responsibilities.
- Similarly, you have to choose your company officeholders carefully.
- An official address is required to register your business.
- You must register your ABN and TFN.
- Registrations for PAYG payments and GST are also mandatory.
- How will you pay GST? One can pay it monthly, quarterly or annually.
- You have to choose the appropriate insurance for your business.
Setting up a company demands a lot of work on your end. It is also recommended to search for good tax accountants at this stage. You might not need their services at this stage, but once the business starts running, you may not get time to do so.
Pros And Cons of Having A Company
To decide if this business structure suits your business goals, consider its advantages and disadvantages.
1. Easy Expansion
When starting a business, everybody wishes to expand it soon. Start a company if you want a business structure that allows easy expansion. New co-owners, investors and shareholders can be added easily, and new shares can be issued.
2. Limited Liability
Since a company is a distinct legal entity, a business owner’s liability is limited. Thus, you get protection for your personal assets. Such limited liability is an attractive feature for a lot of investors.
3. Unlimited Lifespan
Unless it is dissolved, a company continues to run indefinitely. Hence, if you want to have a source of generating wealth that runs forever, choose this business structure.
1. Higher Fees
Among the four business structures in Australia, the cost of setting up and administering a company is the highest. Somebody who cannot spend this amount initially should consider other business structures.
2. Reduced Control
You cannot have much control over the business with directors and shareholders involved. All the shareholders need to agree to a decision for it to apply.
3. Business Understanding Needed
You will need a higher understanding of business; otherwise, you are set for failure. In-depth reporting is required, along with some legal obligations. Taxes can be too complex for some, but a tax accountant can help you.
If you do not think the disadvantages hinder your business goals, this business structure is perfect for you and for your business taxes, contact Clear Tax Accountants.
Disclaimer: The information on this website is for general purposes only and should not be relied upon for making legal or other decisions. The advice provided in this article is general in nature and is not subject to the personal financial situation and needs of any individual. Clear Tax tries to keep the information accurate and up-to-date; however, you should bear in mind with changing circumstances, the accuracy and reliability of the information will not necessarily remain the same. The information is by no means a substitute for financial advice.