The advantages and disadvantages of registering a business 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 three-year registration period.
Also, when you have an 澳洲注册公司, it is an all-Australian ‘thing’ that typically costs between $650 and $750 through a’shelf business provider’ or a ‘company registration agent’, and about $1200 or $1500 with an accountant.
There is no doubt that the registration of the business name is less expensive than the registration of a company. However when you register the name of a company or company will eliminate the requirement to create an official company name (on the assumption that the exact and full name of the company, which includes 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 cost of $39 for an additional one year registration or $92 for an additional three-year registration.
A (‘standard private) company is required to pay an annual ASIC Annual review cost of $230 (as at July 1, 2012).
Furthermore, and speaking generally, businesses generally have additional ongoing expenses including additional accounting charges that are related to maintaining a properly maintained account book for the company.
3. Limited liability
The primary (and long-standing, traditional and historic) benefit of a incorporated company is that it is the benefit of having a limited responsibility. This means (and generalized) the company can be obligated to make payments to creditors to the amount of its capital and assets, as well as any unpaid money for its share capital (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).
If we take a more general view in the assumption that the directors have behaved in a fair and honest manner (and specifically, did not allow the company to be in debt in a time they were aware that the business could not pay its debts in the time when they became due) as well as assuming that the owners or directors of the business have not provided personal guarantees to the company’s obligations or debts and their personal wealth of the directors as well as the shareholders or owners of the company aren’t in the hands of (and consequently secured by) those who are the creditors of the business.
4. “Impression” is a song that was filmed on people who are not their
A lot of times (rightly or incorrectly) strangers are more enthralled by a company’s name that is incorporated (ending in “Pty Ltd”) rather than a simple trademarked business. To begin with, people who are well-informed’ are aware that it is more expensive to create a company rather than just registering the business name. Therefore, a higher perception of “seriousness” can be a result of having an Australian business.
Individuals (including when they trade under a company name registered with the government) are taxed at standard marginal tax rates with the highest tax rate (as as of 1 July 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 businesses will pay less tax. Why? Because individuals’ tax brackets are based on an uni-directional scale and have some tax-free initial thresholds. However, businesses are taxed starting from the first dollar of profits and have no threshold for tax-free profits. In addition, they 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 are able to receive 50 percent on their profits tax free. Furthermore, there are new tax rules for “personal service” companies that can, for example, cause a business to not being eligible to take advantage of tax deductions for wages paid to an “associated employee (e.g. the spouse of the sole director or shareholder). But all of this depends on you and you should seek advice from an accountant an additional analysis of this.
6. Own property, and to ‘deal in in the names of business
There are a variety of reasons why it makes sense for people to have properties in, or trade in the name of their business rather than their personal name. Furthermore, Australian company law now permits a ‘one-person company’, that is, a firm that is owned by one person as the sole owner (shareholder) as well as a 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 secure capital or investment as opposed to 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 have already agreed to pay, in exchange for their shares) should the business is in financial trouble (see “Limited liability” above). However, if these passive investors contributed equity funds to a company that is run in partnership, and then become an ‘invisible partner’ of that partnership will be accountable to, and even liable for the obligations of the partnership. This is particularly true should the business or partnership faces financial difficulties.
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 completely or in parts). Why? because the shares of the company can be traded (either the entire amount or just a portion of them). Share capital can also aid in the introduction new owners (either through existing shareholders transfer all or part shareholdings to shareholders who are new or through the company issuing shares to shareholders who are new).
Additionally, a structure for a business permits any desired changes to the day-to-day management of the company’s business operations (i.e. through the resignation of any or all directors of the company and the appointment of replacement directors or more directors).
9. Perpetual succession
The company is in existence for a long time (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 individual contractor (e.g. one of the Australia Post courier) operating as an unincorporated sole trader with the terms of a fixed term contract. The contract ends and is due for renewal. It is possible that your employer has changed its policy so that it’ll just renew the contract if you “become integrated’.
2. You decide to give your job as an employee to start a business on your own. You decide that your first venture will be franchisee (for instance, mortgage broker or the owner of a restaurant or pizza shop within a chain of enterprises). 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 your new business in your name as a corporation.
The advantages and disadvantages of registering a business in Australia