8 Steps to Set Up a Company in Australia

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Table of Contents

• 1. How Will You Register Your Company?
• 2. Choose a Company Name
• 3. Choose Your Company’s Rules
• 4. Choose Your Shareholders and Directors
• 5. Choose Your Share Structure
• 6. Choose the State/Territory to Register Your Company In
• 7. Choose the Principal Place of Business and Registered Office
• 8. Complete the Relevant Paperwork or Online Form
• Key Takeaways

Before you register a new company, it is 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 separate legal entity from the individuals who run it. You must register a company with the Australian Securities and Investments Commission (ASIC). If you will be operating a business through the company, you will also need to register an Australian Business Number (ABN). You can complete the company registration process online however there are certain circumstances where you may have to register your company using a paper form. This article discusses the important steps to set up a company.

1. How Will You Register Your Company?

You can complete the company registration process yourself with the assistance of a lawyer or an accountant. You can register a company online or via a paper form. 

Once you submit the online registration application and ASIC processes and accepts your application, your company will be instantly registered. Provided ASIC has no objections to your registration application, your company should be registered within 20 minutes of submission.

There may also be certain circumstances where you will need to register your company using a paper form. Such circumstances include, but are not limited to:

• the price per share upon incorporation being more than two decimal places;
• a director or shareholder wanting to suppress their residential address and use an alternate address. 

In these cases, you will need to obtain an ASIC Form 201, complete it and mail it to ASIC along with ASIC’s company registration fee. Registering your company using this method is timely. Once ASIC receives your registration application, it may take up to three weeks for them to process the application. ASIC will then mail you notice of your application’s acceptance and the relevant incorporation documents (i.e. registration certificate). 

2. Choose a Company Name

You must have a business name to set up your company. You may choose your own name, provided it is available for use, or you can use the company’s Australian company number as the company name. 

On your registration application, your chosen company name must not be similar or identical to an existing company’s name or an existing registered business name. When deciding what company name to use, you should check the ASIC Register for existing companies. Likewise, determine whether the name you have in mind would be considered similar or identical to that existing company’s name. You should also check the business names register for the same reason. Further, you should also check IP Australia’s Australian Trade Mark Search to see if your chosen company name is already registered as a trade mark. If it is, you may run into trade mark infringement issues. 

There are also certain restricted words which, if included in your chosen company’s name on the registration application, will mean your application will be rejected. You can find a list of restricted words and expressions on ASIC’s website.

3. Choose Your Company’s Rules

Before you start a company, you may want to decide what rules will apply to govern the company. This can generally be:

• the replaceable rules from the Corporations Act 2001 (Corporations Act), which means that the company does not require its own written constitution; 
• a constitution; or
• a combination of the two.

A company constitution is a document that contains the rules governing a company’s

operation. It can determine the threshold for making certain decisions and the processes in certain situations, amongst other matters. It also defines the rules your company’s directors and shareholders must follow when operating the company.

The replaceable rules found in the Corporations Act will automatically apply if your company does not have a constitution. Unlike the replaceable rules, a constitution will not automatically apply to your company. If you would like to adopt a company constitution, you will need to draft one. It is generally best practice to engage a lawyer to draft one for you. 

Broadly, a company constitution is a bespoke agreement that you can tailor to the specific needs of your company.

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. They take a hand in the day-to-day operations of the company. An Australian private company must have at least one director ordinarily residing in Australia and each director must be at least 18 years of age.

You must obtain written consent from each person who has agreed to act as a director of the company.

5. Choose Your Share Structure

After you have chosen your shareholders, you must decide how many shares they will each be issued and what class of shares they will own. 

The class of the shares will determine the rights and restrictions of those shareholders. Generally, the standard and most common class of shares issued are called ordinary shares. If a shareholder holds ordinary shares, they will receive the right to:

• vote at shareholder meetings;
• receive dividends; and
• participate in surplus assets upon winding up of the company. 

For example, you can create preference shares which generally attract the following enhanced rights, amongst others:

• priority to receive dividends over all other classes of shares;
• priority to receive the amount paid on the shares upon winding up of the company; and
• anti-dilution rights.

The company can also create a new class of shares which has restricted rights such as:

• no right to vote at shareholder meetings;
• right to receive dividends;
• right to receive surplus assets upon winding up of the company; or 
• any combination of the above, amongst others. 

Notably, if you select a class of shares other than ordinary shares in your registration application, having that class of shares will not mean anything if that class of shares does not have the rights and restrictions attached to those shares set out in the company’s constitution. 

For example, if you select “Founder” class shares and there are no specific rights or restrictions attached to that class of shares set out in the company’s constitution, owning this class of shares does not carry much value. 

6. Choose the State/Territory to Register Your Company In

You can set up a company in any state or territory of Australia. However, you can only register the company in one state or territory. The state or territory of incorporation does not affect the company’s ability to trade in various states or territories. Still, it does affect which government grants it can apply for and receive. 

If you apply for government grants, it is vital you determine the state or territory you must register your company in. Changing the state or territory of incorporation after incorporation is a complex and lengthy process. It generally involves the following:

• approval from shareholders; 
• notifying ASIC; 
• obtaining the relevant Minister’s written approval; and 
• ASIC being notified of the Minister’s approval along with the payment of a fee. 

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. The registered office and principal place of business addresses are not able to be PO boxes. 

ASIC uses these addresses to contact the company where necessary. On this basis, it is important you or your registered ASIC agent update the company’s addresses when they change. If a change in address occurs, you must notify ASIC within 28 days or risk receiving late notification fees payable by the company. 

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, you can register the company (see step 1).

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Key Takeaways

Setting up a company requires planning and an understanding of the various components that go into the registration process. It is best practice that you consult a lawyer to understand your obligations as a director or shareholder and how a company operates a business. If you register your company with incorrect details, it may be a costly and lengthy exercise to correct those mistakes.

If you need to set up your company, our experienced business lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers who can answer your questions and draft and review your documents for a low monthly fee. Call us today on 1300 544 755 or visit our membership page.