A number of business structures are available in Australia and each has its own regulations. A number of important factors have to be taken care of by the investors before planning company registration in Australia. It is essential for the business owners to select amongst the new company, a foreign company or acquiring an existing company.
Types of business entities in Australia.
1. Sole Proprietorship :
In case of a Sole Proprietorship, the owner of the business has complete responsibility for all the business activities. He has unlimited liability and is solely liable for all the debts and losses occurring from the business. Setting-up a Sole proprietorship in Australia is very easy and cost-effective. As a sole trader, the owner is the controller and manager of the entire business. The business owner is liable to file tax returns using Tax File Number(TFN).
2. Limited Liability Company :
The structure of a limited liability company is a little more complex. These type of companies have a separate legal entity and the directors and shareholders are not personally liable for any liability that arises in the company.
Registration of a limited liability company in Australia is done through the Australian Securities and Investments Commission (ASIC). Directors are responsible for the business operations and shareholders own shares of the company. The company has to file tax returns with ATO annually.
3. Partnership Firm :
A partnership firm is a business structure in which two or more people come together to start a business. The maximum number of partners in a partnership in Australia is 20.
There are two types of partnerships structures in Australia– General and Limited. Formation of the partnership is quite easy and cheap and requires a separate Tax File Number. The partnership is not a separate legal entity and .e. all the partners are personally liable for debts of the business and all the liabilities incurred.
The tax return is filed with the Australian Taxation Office (ATO) annually and requires individual Tax File Number . If the turnover of a partnership is more than $75,000 than registration for GST is mandatory.
Benefits of incorporating a company in Australia
Lower tax rates - Small Proprietary Limited Companies pay a corporate tax of 27.5%, which is considerably lower than the highest tax rate for individuals, which currently stands at 49 percent at the highest bracket. Thus, conducting business through a private limited company enables you to reduce your firm’s overall tax bill in Australia.
Access to the Australian Market - Incorporating a company in Australia allows you to take advantage of Australia’s large, mixed-market economy. With a 24.6 million population and a GDP per capita of US$53,799.94 as of 2019, the country offers some of the most diverse and lucrative market opportunities in the world. In addition, operating in Australia allows you to take advantage of the numerous free trade agreements, offering truly enormous potential as a foreign investor, with access to Europe, Asia, and America.
Anonymity - One of the best advantages of incorporating a private limited company in Australia is that under Chapter 6D of the Corporations Act 2001, the company is not required to disclose its investors or shareholders. As a business owner, this allows for greater levels of anonymity when operating a business. As regulatory burden is much lower you are able to conduct business freely and without the threat of competition stealing your customers.
How to register a company in Australia?
Company name - Before applying for registration of a company in Australia, it is important to check for the availability of the proposed name. It is essential that you select a simple and unique name for your company which is not abusive and does not have any spelling mistakes.A proprietary company should necessarily have the word ‘Proprietary’ or the abbreviation ‘Pty’ in its name. The company can use the Australian Company Number (ACN) given to the company as their name. ACN is a unique number which is given to a company by ASIC.
Filing the application form - The next step involves filing the ASIC Application Form 201(Application for Registration as an Australian Company) in all respects. The form once duly filled has to be submitted to the Australian Securities and Investments Commission (ASIC) for the registration of the company.
Each director and shareholder of the company must give their consent in writing to become the director and shareholder of the company.
It is mandatory to have one director and one company secretary (If appointed) as Australian citizens.
Depending upon the business and location of the company, the company must comply with the respective taxation requirements.
A certificate of incorporation is issued by ASIC upon incorporation, which is an evidence that the company has been incorporated on and from the date of issuing the certificate.