Incorporating a company requires careful planning. This article provides a step-by-step guide on how to set up a company in Australia.
When you incorporate a company you establish a separate legal entity that helps limits liability and functions as a catalyst for business growth. So setting up a company structure is an attractive option to many business owners in Australia.
The process to incorporate a company in Australia is fairly more involved in comparison to registering businesses such as sole traders and partnerships. Incorporating a new company necessitates legal compliance and establishes a variety of tax obligations. We’ll proceed to break down the details of how to set up a business in Australia.
How to Register a Company in Australia
The process of setting up a company in Australia involves multiple steps, a large amount of paperwork and a large amount of planning. Company incorporation in Australia is overseen by the Australian Securities and Investment Commission (ASIC).
- The steps in incorporating a company in Australia are as follows:
- Decide on the type of company you want to incorporate
- Establish an appropriate internal governance structure
- Gain consent from proposed directors and secretaries
- Select and register a company name
- Designate a registered address for the company
- Designate a principal place of business
- Establish a share structure
- Submit an incorporation application with ASIC
Obtain a certificate of registration
Choose the Type of Company You Want to Incorporate
- The first step in registering a company in Australia is deciding on the type of company you want to incorporate. This will affect the documents that are required by ASIC in the registration process. If you choose to incorporate a company limited by shares or an unlimited company, there are a number of questions you must answer:
- What class of shares will each member take up?
- Will members beneficially own shares?
- How much will members pay?
- Will members pay fully on registration?
Companies limited by guarantee are less common and require the detail of the proposed amount of the guarantee that each member will agree to in the application submitted to ASIC.
Establish Internal Governance
Internal governance structure is an essential element in company incorporation. An internal governance structure minimizes risk and formalizes the decision making process. There is a sole exception to this rule — proprietary companies that possess a single director and shareholder don’t need a governance structure. All other companies must conform to rules prescribed by the Corporations Act. These rules are non-negotiable.
- A company must establish an internal governance structure for:
- Procedures for director and member meetings
- Share transfers
- Director appointment and removal
Companies may choose to either draft a constitution or use the Replaceable Rules outlined in the Corporations Act. These rules can be adopted in lieu of a constitution, or can be used in combination with a constitution. Companies that establish internal governance structure based on the Corporations Act are automatically compliant and up-to-date with internal governance requirements.
Directors, Secretaries, and Consent
All applicants involved in registering a new company must obtain the written consent of all proposed directors and, if applicable, a company secretary. This is not a mandatory element of registration that is submitted to ASIC during the incorporation process, but must be retained in company records subsequent to incorporation.
Register a Business Name & Create a Shareholders Agreement
Individuals registering a new company are able to select a name for the company. The name must be reserved by the applicant and registered with ASIC. Companies may also choose to use the Australian Company Number (ACN) issued by ASIC in lieu of a company name.
Companies with multiple shareholders must create a formal shareholders agreement. This agreement specifies the agreement between shareholders and defines their responsibilities and roles.
Complete Registration Paperwork & Create a Minute Book
The final step in the process of incorporating a company is registration with ASIC. The individual or firm registering the company must complete the ASIC Form 201 Application for registration as an Australian company and pay the associated fee.
Once ASIC has received and approved an incorporation registration, a Certificate of Registration is sent to the registered office of the company. This certificate must be displayed at the company’s principal place of business.
Appoint an Auditor and Public Officer & Create a Minute Book
Another step in the process of incorporating a company is the appointment of an auditor. Public companies are required to appoint an auditor within one month of incorporation. This appointment must be formally recorded. Public companies also require a public officer tasked with ensuring the company is complying with tax obligations. Public officers must be appointed within three months of incorporation, with the appointment formally recorded.
Companies must maintain a minute book that records the proceedings and resolutions of director and member meetings. Signed minutes legally verify the resolution or proceedings of a meeting.
Maintain Up-to-Date Registers
- The Corporations Act mandates that a company must keep up-to-date registers that record:
- Option holders
- Debenture holders
- Members (i.e. shareholders)
Registers can be recorded in physical or digital form, but digital registers must be stored in a manner that can be converted to hard copy format.
Tax Registration & Compliance
Lastly, all companies must ensure they have completed all relevant tax registrations. Companies must possess an Australian Business Number and a Tax File Number. Depending on the kind of business a company is undertaking, it may require Pay as You Go withholding GST registration. Company bank accounts must be registered in the name of the company.
Compliance and reporting requirements are a critical responsibility of any company and will vary depending on company type. Public companies are subject to more intensive reporting and compliance requirements when compared to proprietary companies. Companies are expected to proactively ensure they are compliant with their obligations under the Corporations Act.
Incorporating a company in Australia is a lengthy process and, if executed incorrectly, can result in costly tax and regulatory liabilities. If you want to incorporate a company in Australia, reach out to Fullstack for business structure guidance today.