When registering a company, you are creating an entity that has its own legal obligations - so it's important to make sure that the structure is right for you.
The laws and regulations surrounding business structures can be complicated in Australia, so ensure that you know the key differences before committing to registering a company. This type of business structure has different legal, financial and record keeping responsibilities when compared to other types of business structures, so it’s important that you have a clear idea as to what’s involved.
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. While this business structure provides more 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.
However, that’s not to say that choosing a company as your preferred business structure doesn’t have it’s perks. Opting for a company business structure provides owners with:
The flexibility to expand
The resources to bring on new partners
The ability to take advantage of a capped taxation rate
The comfort of a reduced level of personal liability
Purposefully designed to grow wealth
Access to range of Government grants, funding and incentives
Once you’re committed to the idea of a company business structure and have all of your figurative ducks in a row, it’s time to follow a few key steps in order to bring it to life.
A Beginner’s Guide To Registering A Company
In order to legally trade in Australia, you must register a company with the Australian Securities and Investments Commission (ASIC). This enables those behind the company to operate their business throughout the entire nation without needing to register in each Australian state and territory - but trading as a company isn’t quite as simple as that, so where do you start?
Step One: The Set Up - 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. Muro can help with this!
Step Two: Your Business Name - 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”. Muro can assist with this!
Step Three: Write Your Rules - Before registering, you will need to decide how your company will be governed. Your company can be governed by replaceable rules from the Corporations Act, it’s own constitution, or a combination of the two. However, if the company is a sole director or member proprietary company, you do not need a constitution
Step Four: Pick Your Team - Also known as members, you’ll need to decide on who will be the company shareholders, as well as the directors (who control the company) plus get a copy of their written consent. At least one director must be 18+ and a resident of Australia.
Step Five: Share Structures - After you have selected your shareholders, you must decide how many shares and what class of shares they will own. Officeholders are also responsible for a company's adherence to the Corporations Act.
Step Six: Register For GST - If your gross profit per annum is predicted to be over $75, 000, you must register your company for GST. This can be done online, by phone or through your registered tax or BAS agent
Step Seven: Choose Your Home Base - A company must nominate a principal place of business and registered office. If the registered office is not at premises occupied by the company then the occupier’s consent must first be obtained.
Step Eight: Do The Paperwork - After the above steps are completed, you can register a company using the Australian Government's Business Registration Service (BRS), which combines several business and tax registrations conveniently in one place.
Sourcing Help With Registering A 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 for the first time. In fact, many businesses (big and small) 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.
The tax requirements for a company are different to those of other business structures. A company pays income tax on its income (or profits) at the company tax rate. There is no tax-free threshold for companies and tax is paid on every dollar earned. Due to the more complex legal obligations and tax requirements that businesses structured as a company face, it’s rare to find a successful one that hasn’t already enlisted the services provided by an accountant.
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 as we head into 2021.