Before you set up a company it’s important to know that there are many ways to structure a business. Each carries with it different rights and obligations of which you should be aware before choosing the structure for your business.
One type of business structure is a company. A company is a legal entity that is separate from those individuals involved with it, must be registered with the Australian Securities and Investments Commission (ASIC) and enables those behind the company to operate their business throughout Australia without needing to register in each Australian states and territory.
Assuming you have chosen a company as your business structure, the steps to set up a company are set out below.
1. Will you set up a company yourself or use a service provider?
You can register a company yourself using ASIC Form 201, which is available on the ASIC website, and by paying the applicable ASIC company fee. Alternatively, you can register a company using a service provider that has software that deals directly with ASIC. You can deal with the service provider online or using hard copy forms, but in either case you pay a fee to the service provider in addition to the ASIC company fee.
2. Choose a company name
In choosing a company name you should consider the following:
- you must choose a company name. If you do not use a company name then the company’s Australian company number (ACN) can be used as the company name;
- your company name must show the company’s legal status. For example, in Australia most companies are proprietary limited or pty ltd companies. These are companies where the liability of the company’s members is limited to the amount unpaid on shares in the company;
- you can only choose a name that is available, this can be searches and names can be reserved prior to registering a company;
- there are limitations on what words and phrases can be used in a company name.
3. Choose your company’s rules
Before you set up a company you must decide what rules will apply to govern the company. This can generally be:
- the replaceable rules from the Corporations Act, which means that the company does not require its own written constitution; or
- a constitution; or
- a combination of the two.
However, if the company is a sole director/member proprietary company then a constitution is not required.
4. Choose your shareholders and directors
You must decide who will be the shareholders (also known as members) and directors of the company. A company’s directors are the people who control the company. You must have at least one director ordinarily resident in Australia and each director must be at least 18 years of age.
You must obtain a written consent from each person who has agreed to act as a director of the company and who has agreed to become a shareholder of the company.
5. Choose your share structure
After you have chosen your shareholders you must decide how many shares will they each own and what class of shares will they own. Ordinary shares are the most common.
6. Choose the state/territory in which your company will be registered
A company can be registered in any state or territory of Australia. You must set up a company in one of the states or territories.
7. Choose the principal place of business and registered office
A company must nominate a principal place of business and registered office. If the registered office is not at premises occupied by the company then the occupier’s consent must first be obtained.
8. Complete the relevant paperwork or online form
After you have made all the decisions in steps 1 to 7 above and obtained the relevant consents then you can register the company (see step 1).
Setting up a company requires some planning and know-how, but it’s not that difficult. Make sure you follow this checklist!
By Lachlan McKnight. Lachlan is the CEO of LegalVision. He’s an experienced corporate lawyer with particular expertise in banking and finance and general corporate matters.
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