How to legally register and structure a company in Australia
Companies are a type of business structure that are separate legal entities from you. The company is owned by members (shareholders) and managed by directors. You can, however, set up a company that has a sole director and member if you’re an independent contractor. In addition to being listed as public companies, companies can also be marketed as private companies.
You should know what laws you need to follow when starting a new business. To understand which laws you will have to follow, you should consult a lawyer or business advisor. Entrepreneurs should ensure that their new businesses comply with all Australian laws and regulations before beginning any business activities.
Ensure that you comply with, understand, and adhere to the following considerations:
- Business structure
- Business registration
- Liability and legal compliance
Business structure
Decide which structure works best for your venture and the goals you have for the future.
It is essential to decide whether your business will be incorporated as a corporation, a partnership, a trust, or a sole proprietorship. Taxation, safety obligations, health, and regulatory requirements are different for each business structure. Consult a trusted lawyer and accountant if you need advice on which business structure is best for your needs.
The following are some of how you can structure a company before setting it up. Before choosing the structure for your business, you should be aware that each entails different rights and responsibilities.
Among the types of business structures is the company. The legal entity that runs the company is separate from the people who operate it. To operate your business throughout Australia, you must register your company with the Australian Securities and Investments Commission (ASIC). Additionally, you need a Business Number (also called an ABN). You can register a company online.
Below is a list of the steps to setting up a company if you have chosen a company as your business structure.
- Decide whether you will set up your company on your own or have a service provider do it for you
- Pick a name for your company or business
- Create a set of rules for your company
- Select Your Directors and Shareholders
- Decide how to structure your shares
- Decide which state or territory you want to register your business in
- Select the registered office and principal place of business
- Fill out any relevant paperwork or online forms.
Business registration
A business name and a business registration are fundamental for any business owner. The new business may have to pay certain taxes. Law prescribes specific considerations regarding the registration process.
Among them are:
- An ABN is a unique number assigned to a business in Australia
- The GST (Goods and Services Tax)
- TFN (Tax File Number), and
- Withholding tax for Pay As You Go (PAYG)
An individual or legal entity uses a business name, also called a trading name, if they trade or conduct business under that name, in addition to identifying a business to clients and distinguishing it from competitors. The reputation of a business organization is one of its most valuable assets, if not its most valuable asset. Business names are linked to ABNs when registered.
When choosing a name for your business, ensure that it suits the products and services you offer. Using ASIC’s site allows you to conduct an online search to see if the name is still available.
There is no automatic link between a business name and a trademark. Make sure the business name is trademarked if it needs exclusive rights to that name. To avoid trademark infringement rights issues, determine whether the name already has a trademark registration. If you wish to do a trademark search on the Australian government’s IP Australia website, you can do so with the Australian Trade Mark Search.
As a business, you will need to register with ASIC and pay the following fees:
- $82.00 for three years
- $35.00 for one year
The average time to register online is 12 minutes. A business owner will receive a confirmation of their ABN if they have already obtained an ABN, submitted all the required documents, and paid all fees. The confirmation of credit card payment may take up to two business days. You can expect to receive a confirmation five business days after making payment via bank transfer, BPay, or EFT.
Liability and legal compliance
ASIC’s legal obligations
Corporations Act 2001 (the Act) requires companies to adhere to strict standards. The Act requires companies to report to members and ASIC.
Company and director legal liability
Despite the limitation of liability for corporations, directors are personally liable under the Act if they commit fraud, negligence or recklessness.
A company structure may be particularly suitable for high-risk businesses due to its limited liability. In practice, however, significant creditors sometimes require directors to guarantee a company’s obligations personally.
If the director or employee commits a statutory offense or is found negligent in their duties, they can also be held personally liable. Companies are also capable of suing and being sued.
The licensing and registration of a company
ACN (The Australian company number)
ASIC issues 9-digit Australian company numbers (ACNs) to identify businesses while transacting business. Among other things, you must display your ACN on the following documents:
- Invoices
- Cheques
- Business letterheads
- Official company notices
(ABN) Australia’s business identification number
It is possible to substitute the ABN for the ACN if your company already has an Australian business number (ABN). This must be done as follows:
- ABNs include 9-digit ACNs
- Your ACN appears in the same place on invoices, receipts, and other documents as your SSN.
TFN (The Tax File Number)
Tax returns and business tax file numbers (TFNs) are unique to each company.
Business name
Business names are not the same as company names.
As a legal entity, a company is an independent agency capable of conducting business independently. In Australia, you have the exclusive right to your company’s name. That means no one can use your business name.
An entity’s or person’s business name is known to the public under which it conducts business. It is necessary to register your business name if it is different from the name under which your company operates.
Business names are not exclusive to the person who registers them. To prevent others from using the business name, you must also trademark it.
Permits and licenses
If you require additional licenses, registrations, and permits for your business, you can find them through ABSLIS (Australian Business Licence and Information Service).
Other considerations
Tax obligations
Taxes on personal services and GST
The Australian Taxation Office (ATO) requires companies with an annual turnover greater than $75,000 to register to collect GST and company tax.
There can be a salary paid to the owner of a one-person business. If you are a consultant or contractor with your own company, the ATO’s personal services income rules may apply to you. Please contact the ATO for more information.
Income tax on profits
The ATO collects quarterly tax from the company in its own right. Company dividends are subject to a tax credit equal to the company’s tax liability. All profits are subject to income tax. It is generally 30%.
An ATO company tax return provides more information.
Employing staff
When a company hires people, it has certain obligations, including:
- Reporting and paying taxes on fringe benefits, including payroll tax and pay-as-you-go withholding (PAYG)
- Employees eligible for superannuation payments
Employers with eligible employees must make super guarantee contributions on their behalf by paying a minimum of 9% of their ordinary time earnings. If you’re a director of the company and any other company director, you are responsible for these payments.
For further details, please contact us for legal advice on the dot.
