When planning to set up a business in Australia, you might be carried away by the excitement. However, as an entrepreneur, it is important to understand that there are many things to be considered, along with certain obligations to be followed, in your journey to establish your Australian business successfully.
There are two options to choose between when it comes to deciding upon a business entity. You can either choose to be a sole trader, or work as a corporation. Usually, the companies conducting business in Australia have a partly or wholly owned subsidiary, or own an Australian branch. Companies limited by shares is the most common type of business entity. These include public companies or proprietary companies.
What is a proprietary company?
Also known as a private company, a proprietary company is set up for a private endeavour. It can have 50 non-employee shareholders at most. Apart from a few situations, a proprietary company is not applicable to perform fundraising activities which require a product disclosure statement. It is important for a proprietary company to have at least one resident director.
A proprietary company is further divided into a small proprietary company and a large proprietary company. The former has lesser number of demanding audit as well as financial reporting obligations compared to the latter. A small proprietary company is exempted from providing audited financial statements while there are strict regulatory requirements for a large company.
Understanding a public company
Unlike proprietary companies, a public company is established when the focus is to work on a large venture where the funds are raised from the public. This type of company is required to have at least three directors, two of which should be resident directors.
Steps involved in setting up a business in Australia
Usually, a company planning to expand in Australia forms a proprietary company as subsidiary. The process follows as mentioned below:
- Primarily, business owner decides upon the name of the company, following which the Australian Securities and Investment Commissions (ASIC) business names register is consulted to ascertain the availability of chosen name.
- The required application forms are completed with the ASIC, including the application fee. This is when an entrepreneur needs to provide information such as the place where he intends to do business in Australia, what is the share structure, who are the shareholders and directors.
- Next, the company is required to bring the Public Officer on board whose responsibility includes ensuring that the company adheres to Australian income tax legislation. The professional chosen as the Public Officer must be a resident of Australia.
- After the Public Officer is appointed, the company needs to apply to the Australian Taxation Office (ATO) for Australian Business Number (ABN) as well as Tax File Number (TFN).
- After a company is established, it is the responsibility of the directors to ensure that the company complies with corporate obligations.
The need to appoint company officeholders
According to the Corporations Act, a company is required to hire officeholders who can represent the company. Their sole responsibility is to ensure that the company adheres to the Corporations Act, which states that:
- A public company must have at least three directors, two being the resident directors. Additionally, the company needs to appoint a company secretary, who also needs to be an Australian resident.
- A private company must have at least one director, who must be a resident of Australia. However, a private company need not appoint a secretary.
- A company conducting a business in Australia must have a Public Officer on board, who also needs to a resident of Australia.
For those who do not wish to incorporate an Australian subsidiary can set up an Australian branch. However, it is important for them to register their foreign company with ASIC, and they need to hire a local agent. The owner of a company with an Australian branch must ensure that the annual accounts of the company meet the reporting requirements.
There are many formalities to be taken care of when establishing a business in Australia. It is viable to seek professional help of Chief Financial Officers Australia who can handle every aspect of setting up a business on a foreign land, and make your journey hassle-free and successful.