What is an incorporated business?
An incorporated business, also known as a corporation, is a legal entity that is separate from its owners, meaning it has its own legal rights, obligations, and liabilities. The business is owned by shareholders, who hold shares in the company, and is managed by a board of directors who are elected by the shareholders. Incorporation is a legal process in which an organisation becomes incorporated and enables it to conduct business activities under its own name.
In Australia, the Corporations Act 2001 (Cth) regulates the formation, operation, and dissolution of corporations. This legislation requires companies to have at least one director who is ordinarily resident in Australia, and at least one shareholder. Companies must also have a registered office in Australia, and must comply with certain reporting and disclosure obligations, such as keeping accurate financial records and submitting annual financial statements to the Australian Securities and Investments Commission (ASIC).
What are the benefits of having an incorporated business?
There are several benefits to incorporating a business, including:
One of the primary benefits of incorporating a business is limited liability protection. This means that the company is liable for its own debts and obligations, and the shareholders are not personally liable for the company’s debts. If the company is sued or goes bankrupt, the shareholders’ personal assets are protected.
Separate Legal Entity:
Another benefit of incorporating a business is that it is considered a separate legal entity from its owners. This means that the company can enter into contracts, own assets, and sue or be sued in its own name. This provides the business with more flexibility and autonomy in its operations.
A corporation has perpetual existence, which means that it continues to exist even if its owners, directors change or pass away. This provides stability and continuity for the business and makes it easier to attract investors or obtain financing.
Access to Capital:
Incorporating a business also makes it easier to raise capital by issuing shares to investors. This can provide the business with the funds it needs to grow and expand.
There may be tax benefits associated with incorporating a business, such as lower tax rates or deductions for certain expenses. However, the tax implications of incorporating a business will depend on its specific circumstances, and it is important to seek professional advice before making any decisions.
What is the process of incorporating a business?
Incorporating a business in Australia involves several steps, which may vary depending on the type of company being formed. The most common type of company is a proprietary limited company (Pty Ltd), which is a private company that is owned by one or more shareholders.
- Choosing a business structure: There are several business structures to choose from, including a sole trader, partnership, company, and trust. Each structure has its own advantages and disadvantages, and the choice depends on the business’s specific needs and goals.
- Choosing a name: The business name must be unique and not already registered with ASIC. A search of the ASIC database can be conducted to check availability.
- Registering for an Australian Business Numbers (ABN) and Goods and Services Tax (GST): Most businesses are required to register for an ABN and GST with the Australian Taxation Office (ATO)
- Registering the business with ASIC: To register a company with ASIC, the necessary forms must be completed and submitted along with the required fees. The process can be completed online through the ASIC Connect portal.
- Drafting a constitution: A constitution sets out the rules and regulations that govern the company’s operation. It must be approved by the shareholders and filed with ASIC.
- Appointing directors and shareholders: Directors are responsible for managing the company’s affairs, and shareholders own the company. A minimum of one director and one shareholder is required.
- Meeting ongoing legal and regulatory requirements: Once the company is incorporated, it must comply with ongoing legal and regulatory requirements, such as filling annual reports and maintaining accurate financial records.
Incorporating a business provides many benefits, including limited liability protection and increased credibility. The process of incorporation involves registering the company with ASIC, appointing directors, issuing shares, and obtaining an ABN and other licenses. Business owners should seek professional advice before incorporating their business to ensure they comply with all legal obligations and make the best decisions for their business.
The process of incorporation can be complex and requires careful consideration of the business’s specific needs and goals. Seeking advice from qualified professionals, can help ensure that the process is completed correctly and efficiently. Please do not hesitate to contact our sister company, Legal Kitz. You can contact us by phone on 1300 988 954 or email us at firstname.lastname@example.org. We also provide a FREE 30 minute consultation to set you in the right legal direction. Additionally, you can also check out our Business Kitz Subscription today to access our full range of legal, commercial and employment document templates to begin or manage your business with a solid foundation that ensures compliance.