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Rome wasn’t built in a day. Likewise, a business doesn’t get incorporated with a snap of your fingers. The journey from concept to incorporation involves careful planning, legal compliance, and strategic decision-making. How well you incorporate your business will play a significant role in determining the strength and legal protection your company enjoys.
After all, Rome wasn’t built in a day but they were laying bricks every hour. The process of incorporating your business requires a step-by-step approach – starting with gaining the right knowledge. As a business owner, understanding the process of incorporation is key to making the right choices for your future company. Keep reading to learn more about how a company gets set up.
Understanding The Different Types Of Business Structures
The first thing to know about companies is the difference between an incorporated business and one that isn’t. Not every business is an incorporated one. In Australia, there are multiple types of business structures, with the most common being:
- Sole Proprietorship
- Partnerships
- Corporations
Sole Proprietorship (commonly referred to as sole traders) and partnerships are classified as businesses as they are not incorporated. Setting up a sole proprietor or partnership business is relatively simple – you simply need to apply for an Australian Business Number (ABN) and register a business name. However, sole proprietor and partnership business structures provide very little legal protection as their existence is attached to you – putting you at personal risk.
A company structure is the opposite. A company is an independent legal entity with the ability to exist separately from you. When you register a company, you gain limited liability which offers much more legal protection. Therefore, something happening with the company doesn’t necessarily need to put you at personal risk.
For serious business endeavours, registering as a company is always recommended. Even though the setup process is a little extra complicated, a company structure is always better if you plan on playing the long game.
Defining The Process Of Incorporating A Business
The process of incorporating a company simply refers to setting up a company. The application to register a company for incorporation can be completed online though the Australian Securities and Investments Commission’s (ASIC) website.
Before you start the application process though, you’ll need to gather a few details such as who your directors and shareholders will be, how your company will be governed as well as what type of legal structure your company will have. It can be pretty confusing to know which options are right for your specific company, so it’s a good idea to have the guidance of a legal expert.
Can A Single Person Be A Corporation?
If you don’t have multiple people ready to work in your company, you can still incorporate it as a single person. A proprietary company structure allows you to register yourself as the sole shareholder and director.
As a single person corporation, your company will still be as legally valid as companies with multiple people. This also means your company will be held to the same obligations and duties as a company with multiple different officeholders – so it’s important to ensure you stay on top of everything when running a single person company.
When Is The Best Time To Start A Corporation?
The best time to start a corporation will depend highly on your individual circumstances. Generally, we advise all serious business owners to incorporate their businesses early on, so they can reap the benefits and security of having a company as soon as possible. Starting off with a company structure also avoids the hassle of switching structures later on.
If you have started your business as something other than a company, you can still change your business structure. It’s not uncommon for business owners to shift to a company structure when they’re ready for a bigger commitment or want to raise capital (which can only be done under a company structure). The shift to a company structure can get a little tricky, so make sure you have expert help along the way.
The “Limited Liability” Concept Of Companies
One of the main advantages of incorporating your business into a company is “limited liability.” This means your personal liability towards the business is limited. Unlike sole proprietorships or partnerships, only a company structure offers limited liability. Since the company is a separate legal entity, there is a clear separation between you and the company.
Other business structures, on the other hand, do not enjoy this separation. As such, business owners in sole proprietorships or partnerships are not protected by limited liability, leaving them exposed to significant personal risk.
Advantages Of Registering Your Business As A Corporation
Aside from limited liability, there’s plenty of other advantages that come with registering your business as a corporation. Companies typically have greater legal protection, stability, credibility and ease of certain processes – let’s take a closer look at a few more of these advantages below.
Easier Access To Capital
If you want to raise capital for your venture, you will need to register it as a company. Investors are generally hesitant to invest their funds into sole proprietorships or partnerships because these structures do not support shareholders. By incorporating your business, you create a company structure that can issue shares, making it more attractive to potential investors. If you’re looking to grow your business with capital, incorporating it is a necessary step.
Perpetual Existence
As a company is a separate legal entity, it will continue to exist regardless of changes in management, shareholders and even ownership. This provides greater stability for the company and more security for stakeholders.
Tax Advantages
Companies have certain tax advantages, dedication and incentives. Needless to say, the exact tax advantages that will apply to your company will be dependent on your company’s specific financial state – however, they are worth looking into.
Credibility And Reputation
Companies have greater credibility and typically, a stronger reputation and legal presence. As a separate legal entity, companies are held to a higher standard of compliance than other business structures as companies need to abide by the Corporations Act 2001. A corporate structure can also lead to greater opportunities for growth and investment as stakeholders are more likely to place their confidence in a legally registered company.
Easier Ownership Transfer
If you ever want to sell your company, it’s much easier to complete a business sale under a company structure. Company shares and assets can be transferred or sold without disrupting Companies often have a centralised management structure where top-level decisions are made by senior management or executives. This structure focuses decision-making at higher levels, allowing for consistent and strategic direction across the organization.business operations, providing flexibility and continuity.
Centralised Management Structure
Companies tend to be organised in a centralised management structure where top-level decisions are made by senior management or executives. This structure focuses decision-making at higher levels, which is better for a consistent direction and controlled information flow across the organisation.
How To Process: The Incorporation Of Your Business
So, how exactly do you incorporate your business? Incorporating a business involves several key steps, each playing a crucial role in laying the foundation of your company. From deciding on the type of company to selecting company directors, every stage is essential for a smooth incorporation process. Therefore, having clear guidance and direction at each step is vital.
Navigating the corporate-legal landscape can be challenging due to several regulations, forms, exceptions, and obligations. It’s easy to feel overwhelmed and uncertain about what to do next. This is where having an expert by your side can make a significant difference.
To help you get started, we’ve outlined the basics of what it takes to incorporate a business. For a more detailed guide, check out our comprehensive article, Steps To Incorporate Your Small Business.
Conduct Thorough Research
It’s important to equip yourself with the necessary knowledge before incorporating your company. Understanding the different company types, the general process of registering a company as well as your duties and obligations when it comes to running a company can help be well prepared for what’s ahead.
Select Your Company Structure
Not all companies are the same – you might want to register a public company, private company, a dual company structure or a B-Corp. The incorporation process for each type of company differs, as well as the benefits and duties. It’s important to understand your options and make the right choice for your business.
Decide On The Governance Structure
In Australia, companies are either governed by their own company constitution or the replaceable rules found in the Corporations Act 2001. When incorporating your business, you will need to determine whether you will be developing a constitution for your company or adopting the replaceable rules in the act – a choice that will play a significant role in determining the future direction of your company.
Appoint Directors And Shareholders
Every company needs to have officeholders – directors and shareholders are the main officeholders you will need to appoint when incorporating your business. There are certain requirements your officeholders will need to meet, such as age and residential conditions.
Apply For An Australian Company Number (ACN)
When you complete your business incorporation application, you will attain an Australian Company Number (ACN). An ACN is not something you need to apply for separately. Rather, once your business is successfully incorporated, you will receive your ACN. An ACN is a unique identifier for your business, so make sure you secure it somewhere safely.
Obtain An Australian Business Number (ABN)
In most cases, you will also need to have an Australian Business Number (ABN – yes, even if you already have an ACN). Applying for an ABN is free and can be done through a simple, online application. An ABN is something almost every business in Australia has and typically, companies need both an ABN and an ACN.
Stay Compliant With Ongoing Obligations
Once you’ve incorporated your company, your legal obligations don’t end there. In fact, they’ve only just begun. Running a company means staying on top of your legal compliance and reporting measures with ASIC. We’ve written in detail about your legal obligations when running a company – check it out here.
How Long Does The Process Take?
You might be thinking, with so many different steps, incorporating a business must be a long process. The time it takes to incorporate your business will actually depend on your individual circumstances. It can take anywhere from several days to several weeks, or even longer.
The primary application to incorporate your business with ASIC only takes about 20 minutes to fill out. It’s the preparatory steps and the few matters that need to be addressed afterward that are generally the most time-consuming.
We’ve talked in more detail about the time it takes to set up a company in our article, How Long Does It Take To Set Up A Company?.
Tax And Legal Obligations When Having A Registered Company
To successfully operate your company, you will need to comply with a number of tax and legal obligations. This will ensure your company runs smoothly and stays out of trouble, so it’s necessary to be on top of all your legal and tax duties.
Tax Obligations
Everybody needs to pay their dues – companies are no exception. The exact taxes your company will need to register for will depend on your specific operations, earnings, industry and any other relevant factors. It’s a good idea to do your research and make sure you’re paying the correct taxes.
Legal Obligations
As a company, you’ll have a number of legal obligations that you need to adhere to. From ASIC compliance to consumer protection, running a company comes with legal compliance measures regardless of your industry or the size of your company. Here are a few important regulations to be aware of:
- ASIC Compliance: Compliance with ASIC involves ensuring you complete the annual review and pay the necessary fees. Notify ASIC of any changes in company details, such as changes in directors or registered office address
- Australian Consumer Law: Comply with regulations regarding misleading conduct, advertising, and product safety
- Intellectual Property (IP) Law: Ensure your company’s intellectual property is protected your company is respecting IP the rights of others
- Data and Privacy Law: Adhere to data protection and privacy regulations, making sure your company is legally handling information
- Employment Law: Comply with employment laws, including workplace health and safety regulations, anti-discrimination laws, and employee rights
- Industry-Specific Regulations: Follow regulations specific to your industry, which may include licensing, safety standards, and operational guidelines
- Local Council and State Laws: Abide by local council and state laws, which can include zoning laws, environmental regulations, and business permits
- Corporate Law: Compliance with the Corporations Act 2001 is essential, covering matters such as directors’ duties, company operations and financial reporting requirements
The Importance Of Legal Expert Assistance When Starting A Company
When you have an idea for a business, you likely don’t just launch your product or service into the market without careful planning. It takes time, research, and consideration to develop your business idea before releasing it to the public.
The same concept applies to starting a company. Incorporating your business thoughtfully ensures it is well protected, functions smoothly, and is prepared for future growth. Since every company is unique, it’s crucial to set up your company in a way that aligns with your goals and vision.
Navigating the corporate landscape of company incorporation can be confusing. That’s why it’s beneficial to seek the help of a legal expert when starting a company. They can consider your specific business needs and ensure everything is set up correctly.
How Can Sprintlaw Help With Your Business
Our legal experts at Sprintlaw are ready and happy to assist with incorporating your businesses whenever you’re ready.
Company Registration
We can handle your company registration for you, so you don’t need to worry about it. Our legal experts can provide you with the necessary legal support and knowledge to determine the best way to set up your company. Don’t worry about hidden fees or billable hours – we’ll provide you with a fixed fee quote so you’re not caught off guard by unexpected expenses.
Corporate Lawyer Consultation
Have questions or need immediate assistance? Our experienced corporate lawyers are available to provide consultations tailored to your specific needs, at your convenience. Whether you need advice on structuring your company, understanding your legal obligations, or planning for future growth, we’ve got you covered.
Incorporating Your Business Is Easy With Sprintlaw
With Sprintlaw, incorporating your business is straightforward and hassle-free. Our dedicated team of legal professionals will ensure that all the legal aspects are taken care of, allowing you to focus on building your company.
If you would like a consultation on incorporating your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat. Start processing your business incorporation with Sprintlaw today. Learn more about how we can help.
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