In our guide Choosing a business structure, we listed the various choices including starting a company. In this guide, we will look at the process to register a company which is more complicated than the other business structures.
A company is a legal entity with higher set-up and administration costs. Companies also have additional reporting requirements.
A company is run by its directors and owned by its shareholders.
While a company provides some asset protection, its directors can be legally liable for their actions and, in some cases, the debts of the company.
Companies are regulated by the Australian Securities & Investments Commission (ASIC).
Australian Tax Office
WHY set your business structure as a Company?
There is less personal liability to its owners.
A company is its own legal entity and as such can borrow money, take legal action, and be legally sued by someone else. As a shareholder of a company whether it be 10% or 100% you are only liable for any unpaid money on your shares. So in theory they cannot come after your house, however as a director of that company if it is found you are in breach of your legal obligations to that company you could be sued. A company is owned by its shareholders but controlled by its directors.
WHAT you need to understand to register a company
A business name is not the same as registering a company name, they indeed can be identical bar the abbreviation but don’t need to be the same. See our separate guide on Registering a Business name. However in the case of a company you must register its name as well. For example you may have a company name “Your Town Fruit Pty Ltd” trading with your registered business name called “Your Town Fruit Shop”. We recommend you go through the process to determine your company name listed on the ASIC website. https://asic.gov.au/for-business/registering-a-company/steps-to-register-a-company/company-name-availability/. A company’s name must show its legal status and include an abbreviation at the end, for example, “Your Town Fruit Pty Ltd”. The abbreviation relates to the liability of its members.
HOW to Register a Company?
At this point it is our strong recommendation that you get assistance from a professional. You can easily find them by Googling “registering a company”. For a minimal fee they will do all the hard work for you based on you answering some questions and providing information. These are usually accountants or solicitors and are known as Private Service Providers. More details can be found https://asic.gov.au/for-business/registering-a-business-name/before-you-register-a-business-name/private-service-providers/
One thing you cannot escape as a company director (assuming you make yourself a director) is your obligations to keep details up to date, maintaining records and details on a register and paying the annual fees. Australian companies also require 1 or more directors to reside in Australia depending on the structure.
The fees to register a company can be found here. https://asic.gov.au/for-business/payments-fees-and-invoices/asic-fees/fees-for-commonly-lodged-documents/starting-a-company/
If you do not go down the Private Service Provider route be prepared to understand and decide on a constitution or replaceable rules, share structures, etc.
SUMMARY – Company means less personal liability
A company structure will reduce your risk of personal liability but is more complicated to establish and maintain. Using a private service provider is an economical and pain-free way to do the setup.