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Step By Step Guide To Formation
Incorporation is different in each country. In Australia this process became much less complicated with time, and in this article we’re going to provide you with step-by-step guide for incorporation in the land of Oz.
Step 1: Choosing Business Structure
First step when it comes to business incorporation is to decide which structure would be the most suitable for the owner’s needs. These are some of the most common business structures in Australia:
· Sole trader- It’s kind of an one-man structure where the owner trades as well as controls and manages the whole business. This structure requires smallest amount of capital and paperwork. Since these kind of businesses don’t have an employees, there’s no need for ’’compulsory employee“ superannuation contributions, payroll tax and workers compensation liabilities. On the other hand these kinds of businesses make their owner personally responsible for the sole trader’s debts, which makes them liable even with their personal assets, in case of their business goes to bankruptcy.
· Partnership- This represents association of two or more individuals. Partners need to have a partnership agreement that determines the profit distribution between them. In most partnerships, assets are jointly owned and the same goes for debt liability. In this structure profit sharing is much easier and one of the most useful things when it comes to partnership is that both partners are able to make decisions and to control one another throughout the business process. This business structure also comes with certain disadvantages, one of them being personal liability of all partners, as well as hardly transferable partnership interest.
· Company- It is one of the most popular business structures. Unlike sole trade or partnership, company represents a separate legal entity and therefore its owners are not personally liable for its debts. Other than that companies are suitable for various kinds of tax deductions and government grants and owners can also sell its shares to collect money for future investments. Unlike previous two structures company comes with much higher maintaining costs.
Step 2: Deciding on How Company Will Operate
Each company needs to have some rules that determine how it’s going to be internally governed. Depending on the owner’s preferences it can be operated by:
Replaceable rules- these are the rules included in Corporations Act 2001
Company constitution- companies may have their own constitution which needs to be lodged when they’re applying for registration, except in case of companies being proprietary.
Combination of both
Step 3: Choosing Company’s Name
Company should have a name under which it does its business. Name needs to be unique, and its availability can be checked on Australian Securities & Investments Comission’s website. It is done in the part of the website that’s called ’’Buusiness Name Register“. Option called ’’Check business name avaliability“ from drop down menu should be selected, after which the empty field in which possible company name should be typed will show up bellow.
Newfound business name should be registered at ASIC. This can also be done on their website, after creating an account and completing the name registration application which should take from 15-20 minutes. In the end of the application, applicants will receive the confirmation that their business name is now registered.
Registering a business name costs $33 per a year, or $76 per three years. This name serves as company’s identification and it is not fully owned. There is also another level of company’s name protection and it requires registering a trade mark. These trade mark names last for 10 years, and they are protected in all states and territories throughout Australia.
Step 4: Company Registration
This can be done throughout many service providers that cooperate with AISC. Another way is to complete the Form 201 and send it to Australian Securities and Investment Comission, together with the fees. This will enable new company to get ACN and a Certificate of Registration. Eight days from registration company will receive its corporate key. Filling Form 201 is by far the most important part of company formation in Australia.
Step 5: Applying for ABN
ABN or the Australian Business Number is the unique number that every business structure gets and it serves as an identification when dealing with government and other business entities. Applying for this number is free of charge, and it can be done online.
Every applicant needs to provide:
personal info of all business associates
reasons for applying
previous business activity details and
a declaration that confirms authenticity of all provided details.
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