When most people think about starting a business, they imagine a long and complicated process that requires a significant amount of money. And for many entrepreneurs, that is enough to put their dreams on the back burner.
But what if you were told that starting a business in Australia could cost as little as $550?
Sure, once the company is up and running, your costs will start adding up, so you’ll need to do some proper research and preparation before jumping straight in. The actual process of creating a company, however, is relatively inexpensive.
So, don’t let the thought of it overwhelm you!
From the name as a new legal entity to your company structure, here are a few simple steps you need to take when establishing how to start a company in Australia.
Choose Your Company Name & Business Structure
Before starting any business, the most crucial step is to decide on a business structure. The business structure you choose will impact your tax obligations, legal obligations, level of asset protection, and reporting obligations.
If you’re reading this blog post, you’ve likely gone through this step, decided to go with a company as your preferred structure, and can proceed with the company registration process. If you have not contacted an accountant, be sure to do so as a wrong structure may incur you unnecessary costs or higher taxes.
The next step is to decide on your business name.
Once you’ve decided on a name for your company, you’ll need to reserve it with the Australian Securities and Investments Commission (ASIC) to ensure no one else can register the same name for their business.
The process is simple and only takes a few minutes. First, visit the ASIC website and search for the business name you want to reserve. If the name is available, you can then fill out an online form and pay the reservation fee of $55.
The Australian Government Business Registration Service combines several business and tax registrations into one place, so you can apply for an Australian Business Number (ABN) (which is free to do) and register your company name online simultaneously.
Alternatively, if you already have an ABN, you can apply for your company name using ASIC Connect.
Once your payment has been processed, you will reserve your company name for one year.
After that, you will need to renew your reservation if you want to keep using the same name. If you decide to change your company name, you can cancel your current reservation and start the process over again with a new name.
Decide on the Type of Legal Entity You Want to Incorporate
When you’ve chosen an available company name, the next step is to decide what type of company you will be incorporating.
When it comes to private companies in Australia, you can choose between a proprietary company limited by shares (Pty Ltd) or an unlimited proprietary company limited by share capital (Pty).
A proprietary limited company (Pty Ltd) is limited by shares, which means that shareholders’ liability is capped at the number of shares they own. On the other hand, unlimited proprietary companies (Pty) have share capital, but the shareholder’s liability isn’t limited. That means shareholders could be liable for the full amount of debt if things go wrong. A Pty Ltd structure is more common in Australia than a Pty structure for small businesses.
That said, each type of company has its own advantages and disadvantages, so it’s important to weigh up your options before making a decision. But, the most popular type of private company is a ‘Pty Ltd’.
You could also incorporate a public company.
The main difference between a private and a public company is that a public company conducts business with an unlimited number of shareholders. It can sell its shares to the public, leaving it generally easier to raise the capital you need to further your business. Having said that, because the public is involved, there are also more compliance regulations to which you need to adhere.
Most small businesses start as private companies and then switch to a public company structure once they’ve reached the maximum number of shareholders allowed in a private company and wish to have their business continue growing.
Establish What Rules Will Govern Your Company
After you’ve decided on your company’s legal status and before you register a company, you need to decide how it will be governed. In Australia, a company has its own legal obligations and must be governed by either replaceable rules or its own constitution, or a combination of both.
Replaceable rules are a set of default rules that apply to all companies in terms of the Corporations Act, unless they are modified or replaced by the company’s constitution. A company’s constitution is a document that sets out the rules for how the company will be run.
It can override the replaceable rules and also contain additional rules about areas like the powers of directors and shareholders.
From a cost perspective, using the replaceable rules is free, whereas drawing up a constitution may require consultation with a lawyer, and you’ll incur the expense of updating it. So, if you want to keep costs to a minimum but still adhere to the Corporations Act, you can start with the replaceable rules and always create a constitution at a later stage.
Legal Obligations: Obtain Consent from Officeholders and Members
Once you’ve decided how your company will be governed, you can proceed to registering your company.
Register Your Company with ASIC
The current cost to register a company ranges between $443 and $538, depending on the type of company you register:
Registering a new company in Australia is a simple process that can be completed in five steps. The entire process will cost you less than $550, making it more affordable than you may have initially thought.
Of course, ongoing costs, such as accounting and bookkeeping fees, will be incurred after you decide to register a company. But, these costs are generally tax-deductible, so you can offset them against your company’s income.
If you have a few extra dollars to spare, you may want to consider seeking professional advice from an accountant. Not only can they help register a company on your behalf, but they can also help you navigate your company’s records and tax obligations.
Box Advisory Services is a full-service accounting firm that can help your company with all of its accounting and tax obligations. We have a team of experienced chartered accountants and tax agents who are well-versed in company tax law, and we can help you file your company tax return and maximise your deductions.
We also offer full-service bookkeeping services, so you can be confident that your financial records are in order. Beyond that, we offer a wide range of consulting services, including assistance with financial planning and risk management.
So, whether you need help establishing your company’s details, registering your business, setting up a written constitution, or with any aspect of maintaining your company records, book an appointment today.