Company Set Up

Company is a separate legal entity which offers limited liability to shareholders. A private (proprietary) company will be address as XXX Pty Ltd and a public company will be address as XXX Ltd.

Advantages of a company include that:

• liability for shareholders is limited
• shareholders’ ownership can be transferred to other party
• majority of the companies will have its tax rate  decreased to 25%
• company can retain profit after paying income tax and can pay out retained profit later on as needed and franking credit can be passed on to the shareholders
• company has perpetuity and can trade anywhere in Australia
• company can employ directors and shareholders

Disadvantages of a company include that:

• the company can be expensive to establish, maintain and wind up
• the reporting requirements can be complex
• if directors fail to meet their legal obligations, they may be held personally liable for the company’s debts

How to set up a company?

Step one – ASIC registration

You will need to provide:

• Company name & state of registration
• Registered and business address
• Number of shares issued, class of shares, cost per share, total amount paid and unpaid,  whether the shares are being beneficiary hold or not
• Shareholders’ name, date of birth, address, contact details, place of birth and shareholding %
• Directors’ and secretaries: name, date of birth, address, contact details and place of birth

Step two – ATO registration

Once the company is established, you can register ABN, TFN, GST & PAYG withholding by applying to Australian Business Register.

Under section 201A of the Act:

• A proprietary company must have at least 1 director, and that director must ordinarily reside in Australia.
• A public company must have at least 3 directors, with 2 directors ordinarily residing in Australia.
• A proprietary company does not have to have a sectary but a public company has to have one

Other Important issue

If a director or a shareholder happens to be a non – resident, extra information need to be provided to the ATO, such as notarized ID and passport.

In some cases, you need to seek FIRB approval to admit non – resident shareholder.

When a shareholder transfers its shares, market value rule will apply. The transferor might be subject to capital gains tax. The transfer could attract stamp duty where underlying asset is real property.