The small business specialists
Phone: 13 12 49
Your obligations as a small business operator is an ASIC booklet which makes it easy to understand and comply with the law if you operate a small business as a registered company, or under a registered business name.
A company is a separate legal entity capable of holding assets in its own name and conducting business in its own right. A company can also sue and be sued.
Shareholders own the company while directors run the company. In many cases company directors are also shareholders, along with company employees.
To become a company, an entity must:
Unlike business names, once registered, a company name can trade throughout Australia. Every Australian company receives a unique nine digit Australian Company Number (ACN) which must appear on the company seal (if it has one) and every public document issued, signed or published.
The tax requirements for a company are quite different to the other business structures. It has its own tax income liability which is totally separate to individual income tax. A company pays income tax at a flat rate of 30% on taxable income.
Learn more about the tax requirements of an Australian company at the ATO website
A company’s assets belong to the company and the company is liable for debts incurred which makes this type of business structure appealing to high-risk business ventures.
Generally, the owner’s assets cannot be accessed to pay for any company debts or liabilities. However, there are some exceptions. Financial institutions may require a personal guarantee against loans or overdrafts. A personal liability may arise if debts are caused recklessly, negligently or fraudulently.
A company can sue and be sued in its own right, but the company director can also be held personally responsible for offences under the Corporations Act 2001 or if they are found to have been negligent in performing their duties.
Companies may be formed as either private, also know as proprietary, or public companies that are listed on the stock exchange.
If you wish to operate as a company you may require the assistance of a solicitor or an accountant to prepare the documentation.
A proprietary company has no more than 50 non-employee shareholders and is generally not permitted to offer shares or securities to the public. It must have at least one shareholder and one director, and at least one director must ordinarily reside in Australia.
A public company may have more than 50 non-employee shareholders, can offer shares and securities to the public, and may seek listing on the Australian Stock Exchange.