The Cost Of Setting Up A Company
While many budding entrepreneurs often underestimate the true cost of setting up a company, the reality is that it's still a viable option in the long term.
Did you know that on average, Australians can spend anywhere between $3,000 - $5,000 on starting a small business, with some dropping as much as $10, 000 depending on the sector? Even for small scale operators looking to crack the big leagues, the cost of starting a business is often underestimated, with the process of setting up a company being even more complex.
While this type of business structure often provides greater asset protection, in some cases it’s directors can be legally liable for their actions and, in some cases, the debts of the company and its shareholders. When compared to other formats like sole traders and partnerships, companies are regulated by the Australian Securities & Investments Commission (ASIC), and usually incur higher administrative costs, set up fees, and more reporting obligations - but what does the cost of setting up a company actually amount to?
The Price Of Establishing A Company From Scratch
Before you dive headfirst into the process of registering a company, consider if you would prefer to outsource this task. Some people prefer to use a third party service provider to take care of the paperwork, and deal directly with ASIC on your behalf. Be aware that you are still required to provide all of the details that apply, and that it generally costs more as opposed to undertaking the task yourself.
However, outsourcing the work to a reputable accountant also removes the stress of the exercise and minimises the chance of making a mistake with the registration process. While this often amounts to a reasonable bottom line, if you’re determined to go it alone, it’s important to first be aware of the cost of setting up a company - so what does it all involve?
Name Registration - A company's name cannot be identical to an existing company’s name. To see if your desired choice is available, use ASIC’s check name availability search tool. Your registered name must also show the legal status of your company, such as “Proprietary” or “Proprietary Limited”. From July 1 2021, the cost of reserving a name through ASIC before registering your company is $52.
Company Registration - Once you’ve registered a name and have decided on the type of company structure you want, in addition to paying any professional service fees to an individual or business completing the registration process on your behalf, you must also pay a company registration fee to ASIC. From 1 July 2021, the most common fee chosen is $512 for a proprietary company that has share capital.
Annual Reporting Fee - To maintain your company registration each year and meet the relevant obligations, you must pay your annual company review fee, check and update your company details and pass a solvency resolution. These costs vary, with $273 charged for a proprietary company, $55 for a special purpose company (proprietary), $51 for a special purpose company (public), or $1267 for a public company.
If understanding your finances or the in’s and outs of business finance isn’t your strong point, then it may be reassuring to know that you’re not alone - particularly if you’re setting up a new business or company for the first time. In fact, many businesses of all shapes, sizes, industries and sectors enlist the services of an accountant and business coach in order to free up their time, while knowing that their financial obligations are already taken care of by the professionals.
Partner With The Business Finance Professionals
Whether you’re starting a business, purchasing an existing one, or even reevaluating where your current enterprise stands - you will require some form of financial know-how if you hope to successfully navigate your legal requirements as well as hitting your financial and business goals.
As a bonus, many accountants are also registered private service providers (PSPs), which translates to an industry professional that can liaise and lodge documents with ASIC on your behalf. The bottom line? Taking care of your business finances, planning and legal obligations with just the one reputable industry professional, is a surefire way to position your brand or business for it’s best shot at success.
At Muro, we are more than just accountants - we offer our clients strategic business advice and ongoing support to help them reach their business and financial goals, and offer the services of both an award winning accounting firm and business coaching services. Get in touch with us at Muro today to ensure that you’re on the right path for success.