What you need to know about company registration
Starting a company is a little more complicated to set up than a Sole Trader or Partnership. There is more paperwork involved, but the legal protection it offers could be better for your business in the long run. In this blog we will discuss what it means to register a company in Australia and show you how to start one.
- Limited liability for shareholders
- Easy to transfer ownership by selling shares
- More favourable tax rates
- Ability to raise capital
- Expensive to set up
- More regulatory requirements
- Profits distributed to shareholders are taxable
What is a Company?
A company is an entity that has a separate legal existence from its owners. Think of a company like a natural person. It can incur debt, sue and be sued, get business names and it even has its own taxes. This is the most complex of the three major entity types and people often only incorporate a company after they have been a sole trader or in a partnership for a while.
How does it work?
The main reason people incorporate a Pty Ltd company structure is to protect their personal assets. Pty Ltd stand for Proprietary Limited, which means that youhave limited liability. Unlike a partnership or sole trader, you aren’t personally liable for any debts incurred by the company. In other words, if your company were to go bankrupt, the bank cannot use your personal assets to pay it off. Although there is high start up costs, this is a great incentive to start your company.
Who runs it?
Companies have a more complex organisational structure than other entity types. The two main positions are shareholder and director. Shareholders own the company whereas the director controls and manages the operations. In almost all companies, the director is also a shareholder. Other positions include the treasurer and secretary who is established when the company is formed.
What you need to set up
In Australia, starting a company requires that you get an Australian Company Number (ACN). Additionally you will need to apply for a company TFN and an ABN.
You can get all your company registrations in Honcho. Get started today!