When incorporating a company in Australia, it is important that you select the appropriate business entity structure so that you can trade, operate and distribute assets in a way that suits your directors and shareholders. As a foreign investor, the chances are that Australian business entity types will be different from those in your home country, so familiarizing yourself with the types of potential legal entities before getting started will ensure that you select the correct entity type.

Legal Structure Type 1 – Proprietary Limited Companies

The business structure closest to a Limited Liability Company is the Proprietary Limited company (“Pty Ltd”). It’s the most common company structure in the country and is one of the most suitable entities for foreign investors looking to trade in the country. Incorporating a Pty Ltd company requires at least one resident director (if you don’t live in Australia, you’ll need to find a director who does, or work with a company who can provide a nominee director). Pty Ltd companies can be 100% foreign-owned and the initial share capital is as little as $1. As with all businesses in Australia, a Pty Ltd company must register for the Goods and Services Tax should its annual turnover exceed AU$75,000. They must also appoint a Public Officer for tax purposes. Pty Ltd companies can have no more than 50 shareholders.

Legal Structure Type 2 – Australian Public Companies (ASX)

For businesses hoping to make an Initial Public Offering (IPO) on the Australian Stock Exchange, a Public Company is the usual business structure to assume. Public companies in Australia are usually created by businesspeople who want to attract capital from a wider range of shareholders than Pty Ltd companies. Often the management team is separate from the owners of the firm. This entity type follows a similar incorporation process to that of a Proprietary Limited Company, although you will need at least three directors (including two Australian resident directors) for your registration to be approved, as well as a Company Secretary, and a Public Officer for tax purposes.

Legal Structure Type 3 – Partnership

Business Entity Types in Australia

Australian partnerships make individuals liable for profit and loss.

Partnerships in Australia are most commonly used to offer legal and accounting services to clients and can be set up by general partners who are liable for the partnership’s activities or be liable only for their own contribution in the partnership. In order to incorporate in Australia, you will need at least one Australian resident partner; an Australian Investor Visa may help.

Income and losses will be shared amongst partners, and the partnership must lodge annual tax returns which show where income has been distributed. Although a partnership does not pay tax on the profit it earns, each partner must report their share of earnings and pay their own income tax. Registration for the Goods and Services Tax is compulsory if turnover exceeds AU$75,000.

Legal Structure Type 4 – Australian Trust

Another popular business structure for small business in Australia is a Trust. Family-owned businesses generally use discretionary trusts, while larger businesses with more than one family involved tending to use unit (or fixed) trusts. Trusts are not separate legal entities and do not pay tax in their own right, provided that all of the Trust’s income is distributed to its beneficiaries. The beneficiaries will then be liable to pay their own personal income tax on such earnings. Trusts are established by deed and do not have to register with the Australian companies registrar (“ASIC”). As with companies and partnerships, trusts carrying on a business must apply for an Australian Business Number and Tax File Number. You’ll need to appoint a trustee and a public officer who is resident in Australia. The trust’s beneficiaries are able to reside in other territories, although withholding taxes may to distributions to non-resident beneficiaries.

Legal Structure Type 5 – Australian Branch Office 

To create an Australian branch office as part of an international expansion plan, a foreign company can register with ASIC and the Australian Taxation Office. A branch office is an option for businesses that want a presence in Australia, and want to consolidate earnings in their home country. You’ll need to appoint a local agent who can accept notices on your company’s behalf, and register an address in the country. Branches are taxed in Australia on their Australian profits and must submit annual financial statements to ASIC.

Business Entity Types in Australia

If you’re looking to conduct marketing and research, then you may want to set up a Representative Office.

Legal Structure Type 6 – Representative Office

Finally, there’s the Australian Representative Office. If you’re looking to conduct marketing and research in Australia but do not wish or intend to conduct business, then you may want to set up a Representative Office. This business entity type allows you to conduct limited and non-commercial activities, making it a popular choice for businesses who want to increase their worldwide presence or do research and analysis before entering the market properly. It is relatively simple and straightforward to set up a Representative Office, however, it may be more cost-effective to set up a Branch or another business type to save time down the line.

Let Biz Latin Hub Help You

If you’re finding it difficult to navigate the Australian business world and require assistance in incorporating a business or getting to grips with Australian business law, you can depend on the experts at Biz Latin Hub, a global law form with a local perspective. With more than five years’ experience in the industry, we’ve helped businesses from around the world plan and execute their business expansion into Australia, unlocking revenue streams and diversifying businesses in a whole host of niches.

To find out more about legal entity types and/our range of back-office services, which include everything from due diligence to recruitment to commercial representation, email us on [email protected]. Our Australian CEO, Mr. Craig Dempsey will get back to you with a personalized strategy in no time, and show you how the Biz Latin Hub Team can assist in your expansion and growth.