How to Set up a Company in Australia?
As an investor, you might be looking into setting up your own company in Australia. Setting up a company is a relatively more complex and costly process. Unlike the other forms of businesses such as sole proprietorship and the partnership, a company is considered to be a separate legal entity. That means that a company has similar rights like any individual. It can have debts, assets, liabilities, bank accounts and it can also sue or get sued like any other person.
This also means that there’s a lot more reporting and paperwork involved for setting up and running a company in Australia. In a company structure, all the assets and liabilities of a company are separate from that of the shareholders or the directors. The distinction between the shareholders and the directors comes from the fact that the former group is the actual owner of the company; and the latter are appointed or voted by the shareholders to run the company. Sometimes, the directors can also own a certain portion of the company shares, in which case they play both the roles.
Since, the company’s assets and liabilities are separate, director’s personal wealth can’t be used to pay off company debt in case something goes wrong. However, if the directors are found to be in violation of their responsibilities, their personal assets may be used to pay off the company stakeholders.
The company’s profit and loss statements are separately reported to the Australian Tax Office (ATO), which are subjected to the company tax rate. A company needs its own Tax File Number (TFN) but one does not need to register the company for that as the ATO will create a TFN by default. However, it’s important to know that a company needs to have a public officer, and they also have to notify the ATO about that.
A public officer is hired to ensure that the company is following all the tax laws and regulations, keeping detailed tabs of all the transactions and business operations. They also submit the company’s tax returns and in case of any issue regarding the company, the ATO contacts them.
The company can employ staff, in which case the company needs to ensure that the staff are getting their minimum entitlement. The company is also required to set up and give superannuation to their employees.
While setting up the company, it’s important to remember what kind of company is suitable for your business. There are two types of companies:
- Proprietary limited company
- Public company
Both these types of companies need to be registered with the Australian Securities & Investment Commission (ASIC). ASIC is a national corporate regulator that enforces laws to ensure the safeguarding of consumers, inventors and creditors.
The proprietary limited companies are the most common type in Australia and are subject to certain restrictions.
- Firstly, they cannot raise any money from the general public. They need to have a minimum of 1 shareholder, and cannot have more than 50 non-employee shareholders.
- In addition to that, there must be a minimum of one director, living in Australia, to help run the company.
As an investor if you want to be the sole shareholder and want to run the company by yourself, then this company structure allows you to do so. You can take the role of both the single shareholder and the director. The perk to running a limited company is that in case the company goes into bankruptcy or incurs losses, as a shareholder your liability is only limited to the capital you have invested in this company, rather than having any of your personal assets seized to pay off the company debt.
On the other hand, a public company can raise money from the public.
- They don’t have any limit to the number of non-employee shareholders.
- To set up a public company, it needs a minimum of one shareholder, one secretary and three directors.
- Among the directors, at least two of the directors must be living in Australia.
- Similarly, the secretary should also be living in Australia.
- The company is also obligated to notify the ASIC in case of any changes to the officeholders, failure to do so might result in hefty penalties.
To sum up, the all the different registrations you need to undertake to set up your business are as follow:
| Company Registration | $506+ | Mandatory |
| Australian Business Number (ABN) | No Cost | Mandatory |
| Business Tax File Number | No Cost | Not mandatory to register as ATO creates one by default |
| Business Name | $37+ | Optional, you can use your own name |
| Pay As You Go (PAYG) Withholding | No Cost | Mandatory if employee is hired |
| Fringe Benefits Tax (FBT) | No Cost | Mandatory if Fringe Benefits are offered |
| Goods & Services Tax (GST) | No Cost | Mandatory if annual GST turnover is worth $75,000 or over |
As a foreign investor another important thing to note is what kind of visas are applicable for you, so that you are able to legally set up and operate your business. Currently business visas are provided under the Business Innovation and Investment Program (BIIP). There are four classes of BIIP:
- Business Innovation Visa (188A);
- Business Investor visa (188B);
- Significant Investor Visa (188C);
- Entrepreneur Visa (188E).
In order to understand which 188 visa class is suitable for you, you can seek professional and reliable immigration legal advice.
At Path Migration, we have a team of immigration lawyers who are specialists in this field, therefore, if you have any questions please do not hesitate to contact us or book a consultation.
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