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Business Structure

Company

The words 'Pty Ltd', after a business name, indicate that it's a registered legal entity trading in its own right. The company has shareholders (who invested in the start up of the business) and directors (people appointed by the company to run it). Profits are either shared out among the shareholders in the form of dividends or reinvested in the company. Directors can be asked to give personal guarantees to cover any debts incurred. The company will need to be registered with the Australian Securities and Investment Commission (ASIC), which will issue an ACN. A company will need its own tax file number to lodge its own annual income tax return.

PROS

  • Financial liability is limited to the company assets
  • It's easier to raise finance for expansion
  • Ownership can be easily transferred

CONS

  • Must publicly disclose key information
  • Extra regulations around record keeping
  • Owners can't offset losses against other income

You should also consider:

  • GST implications: You will need to register for an Australian Business Number (ABN) and for GST if your projected turnover is going to be $75,000 or above.
  • CGT implications – no discount in company.

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Matt Rowett

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Matt Rowett
Director

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