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If you want to set up another business, without actually establishing another company in Australia, you might want to look into setting up a subsidiary company.
There are several ways to do this, but typically, establishing a subsidiary company may be a good alternative to establishing a separate company or business altogether.
So first thing’s first – what is a subsidiary company?
What Is A Subsidiary Company?
A subsidiary company is a company owned or controlled by a holding or parent company. The subsidiary company is exposed to most of the risk of being sued and is a separate legal entity from the parent company. A parent or holding company will therefore be used to add a layer of protection.
What Does A Subsidiary Company Do?
A subsidiary company will manage the day-to-day activities, whereas a parent or holding company will hold assets and its own stock.
A subsidiary will operate as a regular company where it can enter into contracts, own assets, borrow money and do other related activities. It essentially functions as a parent company.
Benefits Of Setting Up A Subsidiary Company
There are several benefits to setting up a subsidiary company.
The parent company’s liability is limited, management can be separated, and you can diversify your company branding from the parent company. This would be a popular choice if you were looking to expand your business offering or setting up another company in Australia as a foreign company.
If you are a foreign company and set up a subsidiary company in Australia, you can also limit your financial reporting to only Australian activities.
Difference Between A Branch And A Subsidiary
A foreign branch is distinct from a subsidiary company and operates as an existing international business. The key difference is that it is not a separate legal entity. A foreign corporation looking to set up an Australian branch will have to register as a foreign company.
Choosing between incorporating as a subsidiary company or registering as a branch office requires several considerations. These include setup requirements, how liability will be attributed and how often you would like to file tax returns.
How Do I Set Up A Subsidiary Company?
To set up a subsidiary in Australia you will need to ensure you comply with the relevant regulations and tax requirements, and formally register with ASIC.
Like any other business setup, you want to think carefully about your business structure and how this will align with your long-term business goals.
If you already have an established company, you may also consider setting up a dual-company structure.
What You’ll Need
You will have to consider a new company name, obtain an ABN, and if you are a foreign company, appoint a local agent and open an Australian bank account.
- Company name – You will need to choose a new company name for your subsidiary.
- ABN – You will need an Australian Business Number which is an unique 11-digit number that identifies your business or organisation.
- ACN – You will also need an Australian Company Number which is a unique 9-digit number that identifies your company and must be displayed on all company documents.
- Foreign companies
- Select or choose a local representative for your subsidiary company.
- Set up an Australian bank account with a local bank.
| Example 1 Lan, Jenny and Dhruv have been running a successful restaurant for several years and now wish to establish three other food businesses with different concepts. Instead of establishing three separate companies, they decided to set up three subsidiary companies under the parent company to diversify their branding and management from the main parent company. |
| Example 2 Ben and Atiwat operate a mobile application game company in Thailand and seek to expand into the Australian market. Their friends in Australia have told them to set up an Australian branch because it’s a lot cheaper and quicker. However, they want to separate their financial reporting to only their Australian activities and limit potential legal issues only to Australia, so they choose to set up a subsidiary instead. They get a friend who is interested in their business to become a representative director to handle the operations in Australia. |
Need Help?
If you are either seeking to operate a separate business and already have a company or a foreign company and are looking to enter into the Australian market, you could set up a subsidiary company.
Our co-founder has answered some common legal questions we get from our clients. There are a lot of helpful points that are discussed which could be great to help you hit the ground running – watch the video here:
To establish a subsidiary, you will need to register with the Australian Securities and Investment Commission (ASIC), and we’d be happy to help with the process of sorting out all of the company documentation to appoint directors and shareholders.
Reach out to our team for a free, no-obligations chat at team@sprintlaw.com.au or 1800 730 61.
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