Should I be registered as a PTY LTD Company?
Starting a Company is a little more complicated to establish than a Sole Trader or Partnership. There's more paperwork involved, but the legal protection it provides could be better for your business in the long run.
Advantages
- Limited liability for shareholders
- Easy to transfer ownership by selling shares
- More favourable tax rates
- Ability to raise capital
Disadvantages
- Expensive to set up
- More regulatory requirements
- Profits distributed to shareholders are taxable
What is a Company?
A Company is an entity that has a separate legal existence from its owners. Think of a Company like a real person. It can incur debt, sue and be sued, register business names and is taxed. This is the most complex of the three major entity types and people often only incorporate a Company after they have been in business as a Sole Trader or in a Partnership.
How does it work?
The main reason people incorporate a Pty Ltd Company structure is to protect their personal assets. Pty Ltd stands for Proprietary Limited, which means that you have limited liability. Unlike a Partnership or Sole Trader, you aren’t personally liable for any debts incurred by the company. In other words, if your company were to go bankrupt, the bank cannot use your personal assets to pay it off. Although there is high start up costs, this is a great incentive to start your company.
Who runs it?
Companies have a more complex organisational structure than other entity types. The two main representatives are the shareholder/s and director/s. Shareholders own the company whereas the directors control and manage the operations. In almost all companies, the director is also a shareholder. Other positions include the treasurer and secretary who are appointed when the company is formed.
Learn more about your roles and responsibilities.
What you need to set up
In Australia, starting a company requires an Australian Company Number (ACN). Additionally you will need to apply for a company Tax File Number and an Australian Business Number (ABN).
Learn more about a Company registration or get started today!