<\/p>\n
Business name registration in Australia is done on a state-by-state basis. So the costs, and\u00a0registration periods, vary from state to state. However they range from $65 (in the Northern\u00a0Territory) to around $200 for a two or three year registration period, with the most common\u00a0cost being around $150, and the most common registration period being two or three years.
\nIn contrast, registration of an Australian company is an Australia-wide ‘thing’ and commonly\u00a0costs around $500 to $2,500 depending on the additional services provided as part of the\u00a0registration process.
\nAccordingly, there is no question that the registration of a business name in a single Australian\u00a0state is cheaper than incorporating a company. However, a business name must be registered in\u00a0each Australian state in which the business carries on the business. So if the business is being\u00a0carried on in all Australian states and territories, the business name will need to be registered\u00a0in each Australian state and territory (all eight of them), and thus the cost of doing so may well\u00a0be more than the cost of registering a company (and thus a company name) Australia-wide.\u00a0Further, the registration of the company\/ company name will obviate the need to register the\u00a0name as a business name (on the basis that the full and exact company name, including the\u00a0‘name ending’ – e.g. ‘Pty Ltd’ – is always used).<\/p>\n
Business name registrations need to be renewed periodically (usually every two or three years)\u00a0and the renewal costs vary (see ‘Costs of registration’ above). However the cost is commonly\u00a0around $150 and the renewed registration usually lasts for two or three years.
\nIn contrast, a (‘standard’ private) company must pay a yearly ASIC annual review fee of $230 (as\u00a0at 1 July 2012).
\nIn addition, and speaking generally, companies usually have other additional ongoing costs – the\u00a0most common being additional accounting fees associated with maintaining a proper set of\u00a0company accounts.
\n3. Degree of ‘protection’ of the business\/company name
\nSpeaking very generally and in a practical sense, the registration of a company (and thus the\u00a0company’s name), often has a greater ‘protective effect’ on the name than the mere registration\u00a0of the name as a registered business name in a single Australian state or territory. Why?\u00a0Because if someone else subsequently attempts to register that name as a business or company\u00a0name, the ‘registering authority’ (ASIC or the relevant state or territory ‘business names office’)
\nwill always have to have regard to the previous ‘Australia-wide’ company name registration.
\nIn contrast, a state business names registration office (say in NSW), in receipt of an application
\nto register a particular business name (again in, say, NSW), would not have to have regard to a
\nmere identical registered business name registered in another state (say QLD).<\/p>\n
The principal (and longstanding traditional and historical) advantage of an incorporated\u00a0company is that it has limited liability. That is (and speaking generally), a company may only be\u00a0forced to pay creditors up to the extent of its own assets and capital, plus any moneys unpaid\u00a0on its shares (usually nil because most companies issue shares which are fully paid for at the
\ntime of issue, and for a mere nominal amount such as $1.00). Further, the company is a\u00a0separate legal entity or ‘person’. In particular, a company is separate from its owners (its\u00a0members\/shareholders) and the persons who run it (its directors).
\nSo, speaking generally, assuming that the directors have acted honestly (and in particular have\u00a0not allowed the company to incur debts at a time when they knew that the company would not\u00a0be able to repay its debts as and when they fell due), and assuming that the directors or owners\u00a0of the company have not otherwise given personal guarantees for the company’s debts or
\nobligations, then the personal assets of the directors and the shareholders\/owners of the\u00a0company will be not be within the reach of (and thus will be protected from) the company’s\u00a0creditors.<\/p>\n
Often (rightly or wrongly) outsiders are more impressed by an Australia-wide incorporated company name (ending, for example in ‘Pty Ltd’) than a mere state registered business name.\u00a0For a start, ‘people in the know’, know that it costs more to set up a company than merely to\u00a0register a business name in a single state. Thus, a greater impression of ‘seriousness’ can often
\nresult from the registration of an Australian company.<\/p>\n
Individuals (including if they are trading under a mere registered business name) are taxed at\u00a0the normal marginal rates of tax – with the top tax rate (as at 1 July 2011) being 46.5%\u00a0(including the 1.5% Medicare levy but excluding the 1.0% flood levy applying to the 2011-2012\u00a0tax year).
\nIn contrast, Australian companies are taxed at a flat company tax rate of 30% (as at 1 July 2010).\u00a0But this does not necessarily mean that companies will always pay ‘less tax’. Why? Because the\u00a0individual tax rates are on a sliding scale and they include an initial tax-free threshold. In\u00a0contrast, companies are taxed from their first dollar of profit, with no tax-free threshold.
\nThen again, companies may (or may not have) deductions available to them which individuals do\u00a0not. Also, there can sometimes be a bit of a ‘trap’ with companies as regards capital gains tax.\u00a0Why? Because companies pay tax on all their assessable capital gains, whereas individuals and\u00a0trusts ‘get’ 50% of their capital gains tax-free.
\nMoreover there are some relatively new tax rules regarding ‘personal service companies’ which,\u00a0for example, may result in a company not being able to claim a tax deduction for wages paid to\u00a0an ‘associated’ employee (e.g. the wife of the company’s sole shareholder and director).\u00a0However all of this ‘depends’ and you should therefore speak to an accountant at Axis for a
\nfurther analysis of this.<\/p>\n
For various reasons it sometimes suits persons to ‘own property in, or deal in’ the name of\u00a0their company rather than in their own name. Further, Australian company law now allows for\u00a0a ‘one person company’ – that is, a company which has a single person as its sole owner\u00a0(shareholder) and director. In saying this however, one must always remember that a company
\nis an entity separate from its owners & directors – it must not simply be treated as an ‘alter-ego’\u00a0of its owner(s)\/director(s).<\/p>\n
Companies may find it easier to attract investment\/capital, than say a partnership can. Why?\u00a0Because (passive) investors can be confident that they will not be legally obliged to contribute\u00a0further funds to the company (i.e. in addition to what they have already paid, or already have\u00a0agreed to pay, for their shares) in the event that the company gets into financial difficulties (see
\n‘Limited liability’ above).
\nIn contrast, if such passive investors were to contribute equity funds to a business being run as\u00a0a partnership, and become a ‘silent partner’ of the partnership, they would be likely to be fully\u00a0exposed to, and liable for, the debts of the partnership – this becomes particularly relevant in\u00a0the event that the partnership\/business gets into financial difficulties.<\/p>\n
In the case of companies limited by shares, the very fact that the company has shares acts to\u00a0facilitate a possible sale of the company (either in whole or in part). Why? Because the\u00a0company’s shares may be sold (either all of them, or only some of them). Share capital also\u00a0facilitates the bringing in of new owners (either by way of existing shareholders transferring all
\nor some of their shares to new shareholders, or by way of the company issuing new shares to\u00a0new shareholders).
\nAlso, a company structure facilitates any desired changes in the day-to-day control of the\u00a0company and its business activities (i.e. by way of the resignation of all or some of the\u00a0company’s directors, and by the appointment of replacement or additional directors).<\/p>\n
A company exists indefinitely (unless wound up), irrespective of the retirement or death of its\u00a0managers, directors, and shareholders\/owners.<\/p>\n
Example 1:<\/strong>
\nYou are an independent contractor (e.g. an Australia Post courier) operating as an\u00a0unincorporated sole trader under a fixed term contract. The contract expires and comes up for\u00a0renewal. You may find that your ’employer’ changes its policy such that it will only renew your\u00a0contract if you ‘become incorporated’.
\nExample 2:<\/strong>
\nYou give up your position as an employee in order to go into business on your\u00a0own. You decide that your new business will be as a franchisee (for example as a mortgage\u00a0broker or as the proprietor of a hamburger or pizza outlet in a chain of such businesses).\u00a0However you may find that the franchisor will only allow you to purchase a franchise if you first\u00a0form a company and then purchase and\/or run the new business in the name of the company.<\/p>\nWe also offer the following range of accounting and referral services through our\u00a0strategic partners:<\/strong><\/h4>\n
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\nContact Us Today<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"