Forming a company in Australia carries many benefits such as access to a wide range of preferential trade environments, government support and foreign investment. The South Pacific country’s close geographic proximity to Asia and other major markets fuel strong returns on international business. Attractive legal framework for investors in this island nations is a pillar of stability for Australian businesses.
It’s no wonder then that companies are expanding to Australia to conduct business. We outline the key steps to forming a company in Australia to help you get amongst the action.
Key steps to company formation
There are 7 steps to form a company in Australia:
- Decide on your business structure
- Grant Power of Attorney to your legal representative
- Decide how your company will be governed
- Appoint officeholders
- Reserve a company name
- Register your company
- Open a corporate bank account.
The Australian Securities and Investment Commission (ASIC) is the local authority that oversees and regulates this process.
Thankfully, Australia offers a cost-effective and straightforward online process for registering your company and its tax requirements.
1. Decide on your business structure
Decide on the type of company that will best suit your intended operations. There are four main types of companies that you can start:
- Proprietary Limited Company: This is a company where the number of shares dictate shareholder liability. There must be no more than 50 non-employee shareholders.
- Sole Trader: This is a person who is the exclusive owner of a business, entitled to keep all profits after tax has been paid but liable for all losses.
- Trust: This is a form of business organization which is similar to a corporation, in which investors receive transferable certificates of beneficial interest.
- Partnership: This is a legal form of business operation between two or more individuals who share management and profits.
The vast majority of companies are started in Australia are Proprietary Limited Companies. As stated before, these are when shares among the owners limit liability. The benefit of a Proprietary Limited Company is the liability of shareholders are limited to the share capital they have subscribed and any debts which they may have personally guaranteed.
2. Grant Power of Attorney to your legal representative
Prepare a document granting authority to your legal representative to take the required actions to set up a company in Australia. This is known as a Power of Attorney (POA). POAs have the authority to act on behalf of an individual or business on legal and financial matters.
Your POA can then represent you or your foreign company in Australia and ensure you stay legally compliant during the company formation process.
3. Decide how your company will be governed
Company constitutions or bylaws outline how your company will be governed. The bylaws must be presented as a formal document outlining the rights, powers and duties of the company, board, directors and shareholders.
These internal governance matters include procedures for meetings for directors and other members, director appointments and removal, and share transfers.
In Australia, a company can choose to draft a constitution or use the Replaceable Rules in the Corporations Act. These provide a useful framework for your company’s governance that you can modify to suit your business needs. If desired, companies can strike a balance of using some Replaceable Rules and drafting a constitution for the remainder of governance matters.
Note that this does not apply to private companies with a single shareholder who is also the sole director. In this case, the Corporations Act prescribes non-negotiable rules.
4. Appoint officeholders
An officeholder is different from being the holder of a business name. The company officeholder (director of secretary) has a number of responsibilities. These responsibilities include: financial records, passing solvency resolutions, and keeping company details up to date.
You will need to appoint company officeholders. Australian law requires you to appoint three officeholders. This must include two directors that live in Australia, and a secretary.
5. Reserve a company name
Before you register your company, you can choose your company name, though this step is not mandatory. To do this, fill out an application form with ASIC and lodge it online. This costs AU$70 (around US$48), and the reservation will hold for 2 months before expiring. The name must show the legal status of the company (e.g. abbreviations ‘Pty’ or ‘Ltd’ identify proprietary companies and the liability of its members).
If you choose not to have a company name, your company will be identified by its unique Australian Company Number (ACN).
Be aware that company and business names are different from each other. The business name is simply a name under which you conduct business, whereby the company name is a legal entity registered with ASIC.
The Australian registration process doesn’t necessarily make your business name unavailable to others. Authorities tend to identify a business by its Australian Business Number (ABN), as opposed to a unique name. This means there’s a chance that you could be operating with the same name as another business. For extra protection of your company brand, you can decide to register a trademark for your business name.
6. Register your company
Australia’s Department of Industry, Innovation and Science offer a multifunctional online service called the Business Registration Service (BRS) for the registration process.
You can use BRS to register for:
- A company name and/or Australian Company Number (ACN)
- An Australian Business Number (ABN)
- GST and other taxes
- An AUSkey, which gives you online access to manage the registrations under your ABN and also allows you to give access via AUSkeys to business associates.
Associated costs and required information
It’s free to register an ABN. A business name costs AU$36 (US$25) for one year or AU$84 (US$58) for three years to maintain.
It costs AU$488 (US$336) to register a Proprietary Limited Company.
For the application process you’ll need to be prepared to provide information regarding:
- (if chosen) your company name
- the state/territory of registration
- registered office and business addresses
- ultimate holding company (UHC): if your company has a UHC, provide the name, ACN/ARBN/ABN and its country of incorporation (if not Australia)
- details of company officeholders: name, date and place of birth, residential address
- share class or classes and the number of shares and the dollar amount to be paid
- consent from shareholders about the amount of shares they will hold and amount to pay.
Open a corporate bank account
The last step is to open and activate a corporate bank account. If you have recently registered a company in Australia you need to have a separate bank account for tax purposes. Sole traders are the only exception to this.
To open a corporate bank account you will need:
- Certificate of registration of the company
- Australian Business Number
- Proof of identity documentation
- Additional company documentation for due diligence purposes (such as example invoices and contracts, brochures, website).
Costs to set up a bank account may vary depending on the bank you choose.
Reach out for help
These are the initial steps that you will need to follow if you are thinking about incorporating your business in Australia. It’s wise to partner with a local company to ensure you remain compliant every step of the way.
Biz Latin Hub offers customized business solutions in a number of market-entry and back-office services. This includes company formation and legal and financial representation. Our Australia team offers expert support to ensure a smooth process for you and your business.
Our recently-received award for Business Excellence by the Australian-Latin America Business Council demonstrates the support we receive from Australian institutions.
Contact us at [email protected] and we’ll help you design a strategy to capitalize on your commercial opportunities.