Boasting the 12th-largest economy based on nominal GDP, Australia is an ideal location to set up business in due to its strong and steady economic growth, as well as its easy incorporation process and pro-business environment. Located relatively close to Asia, Australia is a good starting point for companies that wish to gain access to the huge Australian market and Asian market. While setting up a company in a different jurisdiction may seem like a daunting task, it is a relatively simple process here in Australia. Below are the four essential steps you should follow when register company in Australia.
1) Select a Business Entity
The type of business entity you choose to set up will differ based on your business structure, trading activities and long-term goals. Since the requirements and documents needed for each business entity will be different, it is important to select your business entity before you incorporate your company.
Proprietary Limited Company (Pty Ltd)
In Australia, the most common type of business entity chosen by foreign owners is a Pty Ltd company. This is the equivalent of a Limited Liability Company (LLC) in other jurisdictions. In a Pty Ltd company, shareholders are a separate legal entity from the corporation. This means that shareholders will not be held liable for any liability incurred by the company except for the amount of share capital they hold in the company. To set up a Pty Ltd company in Australia, you will need at least 1 local resident director and 1 shareholder.
Partnership
A partnership is a business owned by more than one individual or corporate entity. There are three types of partnerships in Australia: General Partnership (GP), Limited Liability Partnership (LLP) and Incorporated Limited Partnership (ILP). While partners in a GP are subjected to unlimited liability, partners in a LP or ILP are subjected to limited liability. An LLP is the more common type of partnership because it allows partners to be held liable only to the amount stated in the partnership agreement. To set up an LLP, at least one of the two partners must be a local resident. In addition, there must be at least 2 shareholders in the LLP.
Branch
A branch is an outlet of the parent company that operates in a different jurisdiction from the parent company. In Australia, a parent company must be registered as a foreign company under the Corporations Act 2001 because it will be held fully liable for all the debts and obligations incurred by the Australian branch. In essence, the branch in Australia will not be regarded as a separate legal entity from the parent company. To register a branch in Australia, 1 local resident agent and 1 local resident public officer are required.
Representative Office
A representative office can be established in Australia if the foreign company does not plan to undertake business activities in Australia. A representative office is only allowed to conduct non-commercial activities that do not generate revenue. This business entity is a popular choice for foreign investors who wish to establish new business connections, expand their marketing campaign, or conduct research in Australia at a low cost. A representative office must have at least 1 local resident director.
2) Decide on the Structure of Internal Governance of the Company
The next step is to decide on the rules and regulations your company will be governed based on. A company can operate based on replaceable rules or a constitution. Both replaceable rules and the constitution must include the procedure for the Board of Director and member meetings, the rights of all members and officeholders, the rules to appoint and remove a director and the company’s share structure. While replaceable rules are made up of a basic set of rules listed in the Corporations Act 2001, a constitution consists of a more comprehensive set of rules drafted by the company.
The main advantage of replaceable rules is that they are readily available without a cost. However, any violation of the replaceable rules will not constitute a breach of the Corporations Act. In the case that a company wishes to make amendments to a replaceable rule, the company will have to draft a constitution to outline the new changes. Typically, a company that operates on a larger scale will opt to apply a constitution instead because of the greater certainty and flexibility offered by a constitution that allows you to specify terms and conditions to match the needs of the company.
While only public companies are required to register a copy of its constitution with the Australian Securities and Investment Commission (ASIC), all companies are expected to keep a copy of its own constitution for record purposes. An updated copy of the constitution should be provided to members of the company as long as they request for it.
3) Reserve your Company Name
After you have decided how your company’s operations will be governed by, you will have to check for the availability of your company’s name through the ASIC Registers. It is also important to check if there are companies with a similar name through IP Australia as legal action can be taken against your company if your company is suspected to have infringed on the goodwill of existing companies with registered trademarks. After you have confirmed the availability of your company name, you can then proceed to reserve your company name with the ASIC through Form 410A. The company name will be reserved for up to 2 months from the date of approval.
4) Prepare the Necessary Documents and Register your Business
Finally, you can register a business in Australia via the Australian Government’s Business Registration Service (BRS). You will be required to provide the following information:
- Proposed business name (up to 5 names – for inspiration, check out How To Come Up With A Business Name)
- Proposed/Reserved company name
- Name and contact details of the applicant
- Registered address and contact details of the business
- Details of officeholders and proof of identity
- Business plan
- Business structure and company structure
- Details of shares issued
- Current/Projected annual turnover
Upon successful incorporation, you will receive an Australian Company Number (ACN), Australian Business Number (ABN) and a Certificate of Incorporation. When you register your company via the Australian BRS, you can also choose to register for Goods and Services Tax (GST), luxury car tax, wine equalization tax and other taxes concurrently.
Conclusion
After your company has been registered, you can start operations in Australia! All companies are required to keep accounting records and file an annual tax return through a registered tax agent even if they do not meet the threshold for corporate taxes. Companies that meet the threshold for small businesses will only be subjected to a corporate tax rate of 25% if their annual turnover falls below AUD$50 million. All other companies will be subjected to the standard corporate tax rate of 30%. In addition, all Australian companies must submit annual financial statements audited by a licensed auditor in Australia.
An Australian company is also expected to hold its first Annual General Meeting (AGM) within 18 months from the date of incorporation. Subsequently, the Australian company will be expected to hold an annual AGM within five months before the end of the company’s financial year.
