In Short
- Setting up a new company involves initial costs such as registration fees and professional services.
- Ongoing expenses include compliance, taxes, and potential licensing fees.
- Budgeting carefully and seeking professional advice can help manage these costs effectively.
Tips for Businesses
When establishing a new company, plan for both initial and ongoing costs to maintain financial health. Engage professional services to ensure compliance with legal and regulatory requirements, which can prevent costly mistakes. Proper budgeting and planning are essential for a smooth start and sustainable operations.
When operating your business, you may decide to incorporate a company if your business is growing or new equity partners join the operation. Incorporation also limits your personal risk. The process can be done either directly through the Australian Securities & Investments Commission (ASIC) or a private service provider such as an accountant. There are several steps involved in the process, and you will need to pay professional fees to the service provider and any registration costs required by ASIC. This article will explain the cost of setting up a new company in Australia, including annual company review fees and additional corporate governance documentation.
Name Selection
Before proceeding to registration, you will need to choose a name for your company. This can be a new name, your Australian company number (ACN) or a name you have previously reserved with ASIC. The cost of reserving a name through ASIC before registering your company is $61 currently.
You cannot choose a name already in use by another company or a name already registered with another operator. There are also restrictions on using certain words in company names, which might create a false indication that they are related to other Government bodies. Some examples include the following words:
- bank;
- trust;
- royal; or
- incorporated.
Company Type
Once you have chosen an available company name, you need to decide what type of company you will be incorporating. You can choose from the following:
- proprietary company limited by shares (Pty Ltd);
- unlimited proprietary company limited by a share capital (Pty);
- public company limited by shares;
- public company limited by guarantee;
- unlimited public company with a share capital; or
- no liability company (typically mining and resource companies).
For most small business owners, the choice of company type will be a Pty Ltd company. This is the most appropriate structure to divide equity ownership, provide for decision-making processes and limit the owners’ operating risk.
Continue reading this article below the formRegistration Costs of a Company Incorporation
In addition to paying any professional service fees to an individual or business completing the registration process on your behalf, you must also pay a company registration fee to ASIC. The fees are as below:
- proprietary company that has share capital: $597;
- public company with share capital: $597; or
- public company limited by guarantee: $491.
Importantly, these fees are indexed yearly, and change each July. You should ensure you remain up to date with these fee changes and are aware of how they will affect your company expenditure.
Annual Reporting Requirements
After the registration process is complete, you will also be required to pay an annual reporting fee to ASIC. Your annual reporting requirements are necessary to continue the operation of your company. The type of company you choose to operate will dictate what your annual reporting requirements are.
Additionally, each company will receive an annual statement from ASIC, which will contain:
- a statement of the company’s current details;
- an invoice for the company’s annual review fee; and
- the company corporate key.
To maintain your company registration for the following year, you must complete the following steps:
- pay your annual company review fee;
- check and update your company details; and
- pass a solvency resolution.
The annual review fees for each company type are listed below:
- proprietary company: $321;
- special purpose company (proprietary): $65;
- special purpose company (public): $61; or
- public company: $1,492.
Registering a Business Name
If you wish to register more business names to your company in order to trade under names other than the legal name, the fees for registering a business name are $44 for one year and $102 for three years. The fees for renewing a business name are also $44 for one year and $102 for three years. There are no fees associated with updating business name details, cancelling a business name or transferring a business name. However, the person that buys or receives the business name will be required to pay the fee of either $44 for one year or $102 for three years when they register the business under their own details.
Corporate Governance Documentation
Your company structure does not need to have corporate governance documents such as a shareholders agreement and company constitution in place. However, these can be useful when navigating through how the company will deal with specific events such as shareholders exiting and entering, third party sales, and disputes between shareholders. It is best practice to have these documents in place so that all members understand their obligations, hence, avoiding disputes. In drafting these corporate governance documents, you will need to engage a lawyer to ensure these documents are tailored to your business. The additional costs for drafting these documents will vary.
Additional Costs to Consider After Incorporation
There are costs that occur after the initial company has been incorporated that will vary depending on the type of business that you choose to operate. The following are different costs to consider when setting up a company:
- Premises Costs: If you’re not operating from home, you’ll need to factor in costs for office or retail space. These can vary dramatically based on location and size, but could easily run into thousands of dollars per month in major cities;
- Licenses and Permits: Depending on your industry, you may need specific licenses or permits. Costs vary widely, from under $100 to several thousand dollars;
- Website and Domain Registration: A domain name typically costs around $20-$50 per year. Website development costs can range from a few hundred dollars for a basic site to tens of thousands for a more complex e-commerce platform;
- Employee Costs: If you plan to hire staff immediately, factor in recruitment costs, wages, superannuation, and workers’ compensation insurance;
- Initial Stock or Equipment: Depending on your business type, you may need to invest in initial stock or equipment, which can represent a significant upfront cost; and
- Intellectual Property Protection: If you need to register trademarks or patents, costs can add up quickly. A standard trademark application fee starts at $250 per class of goods or services.
Not all of the above considerations may apply to your business. We recommend that you speak with our experienced lawyers who will be able to assist you in working out what your legal needs are before, during and after incorporation of your company.
Know which key terms to negotiate when buying a business to protect your interests and gain a favourable outcome.
Key Takeaways
Incorporating a company can be an exciting way to change your business’s operation as it grows. However, incorporation is a multi-step process, and you can incur multiple costs along the way. Importantly, these costs can vary depending on what type of company you choose to incorporate. Some key fees you will need to pay as a company include:
- a name reservation fee;
- a registration cost; and
- annual review fees to comply with relevant reporting requirements.
If you require assistance with setting up your company, our experienced business lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to 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.
Frequently Asked Questions
There are several steps to incorporating a company. The first is to choose a business name and register your company with ASIC. Secondly, you need to decide what type of company you will be incorporating. Next, you may decide to set up a company constitution or draft a shareholders agreement. Each step will have varying costs attached to them.
Yes, you must also pay a company registration fee to ASIC. The fees differ depending on the type of company you are incorporating. The registration fee for a proprietary company that has share capital is $597. For a public company with share capital, the fee is also $597. For a public company limited by guarantee, the fee is $491.
After the registration process is complete, you will also be required to pay an annual reporting fee to ASIC. Your reporting requirements will differ depending on whether you are a ‘small’ or ‘large’ Pty Ltd company.
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