The advantages and disadvantages of registering a firm in Australia

1. Costs for registration

As of May 28, 2012, the registration of business names in Australia is conducted nationally, with the government fee being $39 for a one-year registration period, and $92 for a 3-year registration period.

Also, the registration of an Australian business is also an all-Australian ‘thing’ that generally costs from $650 to $750 through a’shelf business provider’ or a ‘company registration agent’, and about $1200 to $1500 through an accountant.

There is no doubt that the simple registration of the business name is less expensive than the registration of a company. However when you register an entity name or company name can eliminate having to apply for the name to be an official corporate name (on the assumption that the exact and full business name, including the name ending – e.g. “Pty Ltd” – is always utilized).

2. In-continuing costs

Name registrations for businesses must be renewed on a regular basis, after their three-year or one-year registration period ends, the fee for renewal being $39 for a second one-year registration period, or $92 for an additional three-year registration.

Contrary to this, a (‘standard private) company is required to pay an annual ASIC annual fee for review of 230 dollars (as at July 1, 2012).

Furthermore, and speaking generally, businesses typically have additional ongoing expenses which include the additional accounting costs related to maintaining a properly maintained account book for the company.

3. Limited liability

The main (and long-standing tradition and history) advantage of incorporating a firm is that it has the benefit of having a limited responsibility. It is (and generalized) the company can be obligated to pay its creditors up to the value of its capital and assets, and any funds that are not paid in respect of its stock (usually not a lot since the majority of companies issue shares that are fully paid upon issue with a minimal sum, such as $1.00). Furthermore, the business is a legal entity, or a ‘person’. In particular, a company is separate from its owners (its members/shareholders) and the persons who run it (its directors).

In general in the assumption that the directors acted with integrity (and particularly did not allow the company to be in debt during a time that they were aware that the company could not pay back its debts as and when they were due) and also assuming the owners or directors of the business have not or otherwise provided personal guarantees for the company’s obligations or debts and their personal wealth of directors as well as the shareholders or owners of the company are not in the hands of (and therefore secured against) any creditors that the company has.

4. “Impression” created on people outside

A lot of times (rightly or incorrectly) strangers are more enthralled by the incorporation of a name for a business (ending with, for instance “Pty Ltd”) as opposed to a simple corporate name that is registered. To begin with, people who are aware’ are aware that it is more expensive to create a company rather than just registering the business name. This is why a stronger impression of ‘authority’ may be a result of being an 澳洲注册公司.

5. Tax

Individuals (including when they trade under a simple company name registered with the government) are taxed at standard marginal tax rates and the highest tax rate (as as of July 1, 2013,) being 47 percent (including the 2 percent Medicare tax). Contrary to this, Australian companies are taxed at a flat corporate tax rate , which is 30 percent (as as of July 1, 2013). However, this doesn’t mean that companies will pay less tax. Why? because the individuals’ tax brackets are based on an escalating scale, and have the tax free threshold for initial income. However, businesses are taxed starting from the first dollar of income and have no threshold for tax-free profits. However, businesses could (or might do not) deductions that individual taxpayers do not. Additionally, it is possible to be a an ‘escape’ for businesses in relation to the tax on capital gains. Why? Since companies are taxed on all assessable capital gains, while individuals and trusts receive 50 percent on their profits tax free. Additionally, there are new tax rules for “personal service” companies that could, for instance, make a company incapable of being allowed to get a tax deduction on the wages it pays to an ‘associated employee (e.g. the spouse of the sole director or shareholder). But all of this depends on the other factors and you must seek advice from an accountant an additional analysis of this.


6. “Own” property, and deal in in the names of business

There are a variety of reasons why it is beneficial for individuals to own properties in, or trade with their company’s name their company , rather than their personal name. Additionally, Australian company law now permits a ‘one-person company’ which is, a firm that is owned by one person as the sole owner (shareholder) or director. In saying this however, one must always remember that a company is an entity separate from its owners & directors – it must not simply be treated as an ‘alter-ego’ of its owner(s)/director(s).

7. Attracting capital investment

Some companies may be able to get capital investment, or even investments, rather than say, a partnership. Why? because (passive) investors are certain that they won’t be legally required to make additional contributions to the business (i.e. in addition to the amount they’ve already paid or are already willing to pay for their shares) in the event the business is in financial trouble (see “Limited liability” above). However, if these passive investors made a contribution of equity funds to an enterprise that is run in partnership, and then become an ‘invisible partner’ of the company, then they will be accountable to, and even liable for the obligations of the partnership. This is especially relevant should the business or partnership is in financial trouble.

8. Transfer of ownership and control

For businesses that are limited through shares, just the existence of the shares facilitates the possibility of selling the business (either in entirety or in parts). Why? Because shares of the company could be traded (either the entire amount or just a portion of them). Share capital can also aid in the entry new owners (either by means of existing shareholders transfer the entire or a portion shareholdings to shareholders who are new or through the company issuing shares to shareholders who are new).

Additionally, a structure for a business allows for any desired change in the day-today management of the company’s business operations (i.e. through the resignation of any or all of the directors in the company as well as the appointment of replacement directors or other directors).

9. Perpetual succession

A company’s existence is perpetual (unless it is wound up) regardless of the death or retirement of its directors, managers and owners/shareholders.

10. Sometimes you simply ‘need’ a company

Example 1: You’re an unincorporated contractor (e.g. or an Australia Post courier) operating as an unincorporated sole trader with the terms of a fixed term contract. The contract ends and will be renewed. You might find that your employer has changed its policy so that they will just renew the contract if you “become an incorporated person’.

Example 2: decide to give your position as an employee to establish a business of your own. You decide that your first venture will be an franchisee (for instance, as mortgage broker, or the owner of a restaurant or pizza shop within a chain of similar companies). But you might find that the franchisor won’t permit you to buy the franchise after you establish a business and purchase and/or manage the business under its name. corporation.