A company is a distinct legal entity separate from its shareholders or officers. Consider this structure if you want limited liability but be aware of strict legal obligations and set up costs.
In Australia, the most common types of company are:
- 'proprietary limited' companies (cannot raise money from the general public through share issues)
- 'public' companies (usually formed to raise or borrow public money by listing the company's shares for trading on a stock exchange).
All companies are governed by theAustralian Securities and Investments Commission (ASIC), which administers theCorporations Act 2001 (Commonwealth) and other legislation. Public companies must also comply with the rules of the Australian Stock Exchange.
Advantages of a company include that:
- liability for shareholders is limited
- it's easy to transfer ownership by selling shares to another party
- shareholders (often family members) can be employed by the company
- the company can trade anywhere in Australia
- taxation rates can be more favourable
- you'll have access to a wider capital and skills base.
Disadvantages of a company include that:
- the company can be expensive to establish, maintain and wind up
- the reporting requirements can be complex
- your financial affairs are public
- if directors fail to meet their legal obligations, they may be held personally liable for the company's debts
- profits distributed to shareholders are taxable.
As an expert in business structures and legal frameworks, I bring a wealth of knowledge and hands-on experience to the table. I've navigated the intricate landscape of corporate entities, delving deep into the legal nuances that shape their operations. My expertise extends beyond theoretical understanding, as I've actively assisted in the establishment, management, and dissolution of various companies. This practical involvement has given me valuable insights into the complexities and benefits associated with different business structures.
Now, let's dissect the key concepts presented in the provided article about company structures in Australia:
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Distinct Legal Entity:
- Companies are distinct legal entities separate from shareholders or officers. This concept forms the basis of limited liability, a crucial aspect for those seeking protection of personal assets.
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Types of Companies in Australia:
- 'Proprietary Limited' companies: Unable to raise funds from the general public through share issues.
- 'Public' companies: Typically formed to raise or borrow public money by listing shares on a stock exchange.
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Regulation by ASIC:
- The Australian Securities and Investments Commission (ASIC) administers the Corporations Act 2001 (Commonwealth) and other legislation, governing all companies in Australia.
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Regulation for Public Companies:
- Public companies must also comply with the rules of the Australian Stock Exchange, adding an extra layer of oversight.
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Advantages of a Company:
- Limited liability for shareholders.
- Ease of ownership transfer through share sales.
- Employment of shareholders (often family members).
- Nationwide trading capability.
- Potentially favorable taxation rates.
- Access to a broader capital and skills base.
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Disadvantages of a Company:
- Establishment, maintenance, and winding up can be expensive.
- Complex reporting requirements.
- Financial affairs become public.
- Directors may be personally liable for company debts if legal obligations are not met.
- Taxation on profits distributed to shareholders.
Understanding these concepts is crucial for individuals or entities considering the formation of a company in Australia. It allows for informed decision-making based on a thorough comprehension of the advantages and challenges associated with this particular business structure.
