When starting a business there are many decisions to make. Deciding the legal structure of your business is vital and it is common to choose a company structure; as this provides a number of benefits including asset protection and greater access to finances. It is important to seek professional advice when making this important assessment.
If you decide that a company structure is best for your business you will need to undertake the process of registering a company and you need to understand your responsibilities. The company registration process includes applying to the Australian Securities and Investments Commission (ASIC), the government body responsible for overseeing all companies registered in Australia.
You will need to register a name that is different from other company names already registered with ASIC; a number of online company registration service providers will help you check available names. The company registration occurs when ASIC accepts the company name submitted and issues a unique nine digit Australian Company Number (ACN) - this number which must appear on public documents and cheques used by the company.
An Australian registered company must have a registered office in Australia where communications and notices relating to the company can be sent, however your office does not need to be open to the public. ASIC must be notified of this address at the time of company registration, and at any time the location changes. If the company does not occupy the premises of the registered office, the occupier must indicate in writing at the time of registration that they have agreed that the company registered office can be located there; it is also worth noting that a Post Office Box cannot be used.
A number of business service providers in Australia offer an online company registration service that links directly to ASIC. Some online company registration facilities will allow you to check the availability of a company name, fill out the necessary forms through an online ordering system, register for a domain name and receive an ACN for a low company registration fee.
Once the company registration is complete, company registers must be kept to record details of the company (including a register of shareholders and a register of charges). These company registers can be a bound or loose leaf book, or on a computer that allows documents to be printed out. The records must be kept at a place approved by ASIC.
Your company will also need to obtain a Tax File Number (TFN), which can be applied for through the Australian Tax Office (ATO).The TFN is unique number to be used on correspondence with the ATO relating to the company and when lodging the company’s tax return.
Company registration establishes a separate legal entity to that of its owners, with the company having its own powers and responsibilities. The company can be a public company, which means that it can have an unlimited number of shareholders; or a proprietary company, which is restricted to 50 shareholders. Proprietary companies have greater restrictions compared to public companies, including the inability to buy or sell shares to the public. A proprietary company (often called a ‘private company’) is the most common structure used for small businesses and is identified with the words “Pty. Ltd.” included on the end of its name.
The powers and responsibilities of a registered company are set out in the Corporations Act. All assets within the business (such as cash in the bank and equipment used to run the business) belong to the company and must be used for the company’s purposes. As such, a company has the powers of an individual, including the power to:
•own and dispose of property and other assets
•enter into contracts
•sue and be sued.
Ownership of a company is made by way of shareholding; there must be at least one shareholder. For a small business operator, the owners would most probably choose to be the shareholders when registering a company. One of the main advantages of company registration for small business operators is that the shareholders of the company are not liable for the company’s debts, so the liability of the shareholders is limited. The only obligation on the shareholders is to pay the amount owing to acquire the shares in the company, which can be as little as $1.00 a share. So if a company fails the total amount a shareholder can lose is the value of their shares.
Directors of a company manage the business on behalf of its owners, the shareholders. The directors may in fact also be shareholders of the company, but do not need to be. They are formally appointed by the shareholders. A director of a company does not need to have any specific qualifications but does have a duty to:
•act in good faith in the best interests of the company,
•to act in their role as director with care and diligence,
•avoid using their position of director to conflict with any interests they may have outside the company,
•not misuse any information they obtain on the company in their position as director of that company.
A director may be liable to compensate the company for any losses the company suffers from a breach of their duties.
There are number of finance options available to fund company operations, however it important to note that if a shareholder personally guarantees a loan to the company, then they will be personally liable for the repayment if the company is unable to do so. Directors of a company may also be liable for the company’s debts if they provide a personal guarantee of the company’s liabilities and the company is unable to pay these debts when they are due.
A shareholder may sell their shares, but only if the sale would not breach company rules, as set out in its constitution, or the Corporations Act; directors have the discretion to refuse to register a transfer of shares. A company continues to exist even if one or more of its shareholders sells their shares, dies or leaves the company. If the company has only one shareholder who dies, their personal representative is able to ensure the company can continue to operate.
A company may be wound up by order of a Court or voluntarily by the shareholders. At the time the company is wound up, if there any assets left over after the company debts have been paid, the surplus can be distributed to the shareholders. If a company ceases trading or has been wound up it will remain on ASIC’s register until it is deregistered.
Published At: Isnare.com
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