Alex is Sprintlaw's co-founder and principal lawyer. Alex previously worked at a top-tier firm as a lawyer specialising in technology and media contracts, and founded a digital agency which he sold in 2015.
If you’re building a startup or growing an SME, it’s easy to think a “large company” is just a vague milestone you’ll worry about later.
But in Australia, “large company” can have a specific legal meaning - and once your business crosses certain thresholds, it can change what’s expected of you around financial reporting, governance and compliance.
Understanding the legal definition of a large company early helps you plan for growth, avoid nasty surprises (like unexpected reporting or audit costs), and put the right legal foundations in place as you scale.
Below, we’ll break down what “large” means in Australian law, where the definition applies, and what you should do now (even if you’re still small) to stay in control as your business grows.
What Is The Large Company Definition In Australia?
In Australia, when people talk about a “large company” in a legal sense, they’re often referring to a large proprietary company under the Corporations Act 2001 (Cth).
This matters because proprietary companies (the typical “Pty Ltd” structure used by startups and SMEs) have different financial reporting obligations depending on whether they’re classified as small or large.
Large Proprietary Company (Corporations Act Test)
Generally, a proprietary company is a large proprietary company for a financial year if it satisfies at least 2 of the following criteria:
- Consolidated revenue for the financial year of $50 million or more
- Consolidated gross assets at the end of the financial year of $25 million or more
- Employees at the end of the financial year of 100 or more
“Consolidated” is important. If you have a group structure (for example, a holding company and one or more subsidiaries), the totals are looked at across the group, not just a single entity.
Also, the employee headcount is generally measured by reference to the number of employees at the end of the financial year. If you’re hiring quickly, it’s worth monitoring this well before EOFY.
Why The Definition Exists
The whole point of the large/small distinction is to decide how much financial transparency and oversight is required. As companies grow, the law assumes:
- there are more stakeholders affected (investors, creditors, employees, regulators), and
- there’s more risk if financial reporting is inaccurate or incomplete.
So the legal definition of a large company isn’t just a label - it can be a trigger for additional obligations.
Why Does Being “Large” Matter For Startups And SMEs?
If you’re an early-stage founder, you might be thinking: “We’re nowhere near $50 million revenue - why does this matter?”
It matters because growth can be fast (especially with funding rounds, acquisitions, or rapid hiring). Many businesses only realise they’ve crossed a threshold after the fact - when their accountant tells them their reporting requirements may have changed.
Here are some of the practical reasons the large proprietary company definition matters when you’re scaling.
1) Financial Reporting And Potential Audit Requirements
Becoming a large proprietary company can affect what you must prepare and, in some cases, what you must lodge with ASIC.
In broad terms, large proprietary companies are generally required to prepare a financial report and directors’ report for each financial year. Whether you also need to lodge those reports with ASIC depends on your circumstances (for example, if you’re controlled by a foreign company, ASIC directs you to lodge, or certain shareholders request financial reports under the Corporations Act).
Audit requirements also depend on the situation. Some large proprietary companies will need an audit (for example, where reports are required to be lodged, or where an audit is otherwise required), while others may not.
Even where you’re not required to lodge reports publicly, you may still need to:
- prepare financial statements that comply with the relevant standards (where required),
- keep financial records that correctly record and explain transactions, and
- be ready for scrutiny from investors, lenders, or regulators.
If you’re raising capital or negotiating finance, expect counterparties to ask for structured financials regardless of what the law strictly requires. As you scale, the expectation for formal reporting often increases.
2) Director Duties And Governance Expectations Increase
Directors of Australian companies already have serious legal duties (like acting with care and diligence, acting in good faith in the best interests of the company, and avoiding improper use of position).
As you scale, the governance “bar” rises in practice. Decisions are larger, risks are broader, and you’re more likely to have:
- a board with external directors,
- investor consent matters and reporting covenants, and
- more formal processes for approvals and delegations.
Having templates and decision frameworks ready early can prevent confusion later. Many growing companies start formalising board processes through documents like a Directors Resolution Template so key decisions are properly documented.
3) Contracts Become Higher-Risk (And Less Forgiving)
As your company grows, you’ll usually sign bigger, longer contracts - with enterprise customers, strategic suppliers, landlords, technology providers, and sometimes government.
At that stage, contract mistakes become expensive. It’s worth ensuring your team understands the fundamentals of offer/acceptance, scope, liability and termination, because that’s the backbone of enforceability (and dispute prevention). If you’re refreshing your internal understanding, What Makes A Contract Legally Binding is a helpful starting point.
Large Company vs “Small Business” (They’re Not The Same Thing)
One of the most common pain points we see is businesses mixing up different “size” definitions across different laws.
The large proprietary company test above sits within corporations law and is mainly about financial reporting and related obligations.
But other legal areas use totally different thresholds - and those might affect you much earlier than the Corporations Act definition does.
Employment Law: “Small Business Employer” Is A Different Test
In employment law, there are separate rules and eligibility criteria that can apply depending on whether you’re considered a small business employer.
For example, some Fair Work rules look at employee headcount (often under 15 employees) to decide whether certain provisions apply, including some unfair dismissal rules.
The key takeaway is this: you can be “small” under the Corporations Act and still face substantial employment compliance obligations as you hire and grow.
Getting your hiring foundations right early - including having tailored Employment Contract documentation and clear workplace policies - can reduce risk as your headcount grows.
Privacy: Your Obligations Can Increase As You Scale
Many startups begin by collecting only basic customer information. Then suddenly you’re running targeted marketing campaigns, tracking user behaviour, storing IDs for verification, or processing health data.
Even before you’re “large” under corporations law, privacy compliance can become essential because of what data you collect and how you use it.
In practice, a clear Privacy Policy (and the processes behind it) becomes a key part of looking credible to customers, partners and investors.
Tax, Regulators, And Industry Rules Each Have Their Own “Size” Thresholds
Depending on your industry, you may also run into different size-based rules for:
- financial services and fundraising compliance
- consumer law obligations and complaint handling
- industry licensing and reporting
- tendering and government procurement requirements
These thresholds can be technical and fact-specific. This article is general information only (not tax or accounting advice), so it’s worth speaking to your accountant and legal adviser about which rules apply to your structure and industry.
So while this article focuses on the “large proprietary company” definition most commonly used for proprietary companies, the broader lesson is to always check which law you’re dealing with before assuming “small business rules” apply.
What Changes When You Become A Large Proprietary Company?
Crossing the line into “large proprietary company” territory can be a turning point. It doesn’t mean you’ve done anything wrong - it usually means the business is succeeding.
But you should treat it as a signal to level up your internal legal and compliance systems.
More Formal Financial Management
As you approach the thresholds, you should expect more internal work around:
- monthly management reporting (not just annual)
- clear revenue recognition and expense allocation
- group consolidation if you have multiple entities
- better record-keeping and approvals
This is often where founders feel the shift from “move fast” to “move fast, but with systems”.
Heavier Due Diligence In Deals
If you’re doing any of the following, you’ll likely be asked for more documentation as you grow:
- raising capital (equity or convertible instruments)
- selling part of the business
- acquiring another business
- taking on substantial debt or granting security
Investors and lenders typically expect clean corporate records, well-documented IP ownership, employment arrangements, and contracts that reflect how the business actually operates.
More Robust Corporate “Housekeeping”
Growing companies often outgrow informal arrangements quickly. If you started with handshake deals or copied templates, becoming “large” is a good prompt to tidy things up.
This can include:
- updating your company’s internal rules through a fit-for-purpose Company Constitution
- making sure founder/investor rights are clearly documented in a Shareholders Agreement
- confirming IP ownership and licensing (especially if contractors or founders created key assets early on)
These steps can be much easier (and cheaper) to do before you’re in the middle of a funding round or acquisition.
How Can You Plan For “Large Company” Compliance While You’re Still Small?
You don’t need to build a big-company legal department on day one. But you can make smart choices early so that becoming “large” doesn’t cause operational chaos later.
Here are practical, founder-friendly ways to plan ahead.
1) Choose The Right Structure For Where You’re Going (Not Just Where You Are)
Many startups begin as a company because it’s often the preferred structure for investment, growth and liability protection.
If you’re still deciding what structure makes sense, or you’re looking to restructure as you grow, it’s worth getting advice early. A clean setup tends to support future growth much better than patching issues later. If you’re starting from scratch, a structured Company Set Up can help ensure the basics are correctly established.
2) Track Your “Large” Thresholds Like KPIs
If you’re scaling fast, treat the three large proprietary company criteria like performance metrics:
- Revenue: keep visibility on consolidated revenue as you expand products and entities
- Assets: understand how capital raises, inventory, equipment purchases, or acquisitions affect the balance sheet
- Employees: monitor headcount forecasts, especially around EOFY
This isn’t about trying to avoid growth - it’s about being prepared for what growth triggers.
3) Put Repeatable Contracting Processes In Place
As soon as you have multiple salespeople, multiple suppliers, or multiple projects running at once, contracting becomes harder to control.
Simple process improvements can make a huge difference, like:
- having standard customer terms that match your actual service model
- using template review checklists before signing supplier agreements
- setting internal approval thresholds (for example, any contract over $X must be reviewed)
This protects you whether you become “large” next year or in five years.
4) Build A Strong Employment Foundation Early
Many scaling issues start with people. Not because your team isn’t great, but because employment compliance becomes harder as you grow quickly.
As your headcount increases, you’ll want:
- clear role expectations and classifications
- proper onboarding and policies
- well-drafted employment agreements (and contractor agreements where appropriate)
- a performance management and exit process that is fair and well-documented
Even if you’re nowhere near 100 employees, tightening this up early reduces risk later - especially when you’re hiring at speed.
5) Get Ahead Of Privacy And Data Handling
Startups often scale through data: better customer insights, better marketing, better product decisions.
But handling personal information also adds compliance obligations and reputational risk. If you’re building online, taking payments, running subscriptions, or storing customer information, you should treat privacy as part of your core infrastructure - not an afterthought.
That usually includes having a clear Privacy Policy and ensuring your internal practices match what you say you do.
Key Takeaways
- For most startups and SMEs, the most relevant “large company” concept is the large proprietary company test under the Corporations Act.
- A proprietary company is generally “large” if it meets at least 2 of these: $50M+ consolidated revenue, $25M+ consolidated gross assets, or 100+ employees.
- Becoming “large” can change what you’re required to prepare and, in some cases, what you must lodge with ASIC - and it can increase the likelihood of audit and due diligence expectations.
- Different laws use different “size” definitions, so don’t assume the Corporations Act thresholds apply to employment, privacy, tax, or industry compliance.
- You can plan ahead by tracking thresholds early, tightening your contracting and hiring processes, and putting key corporate documents in place as you scale.
If you’d like a consultation on what the large proprietary company rules mean for your business (and how to prepare as you scale), you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
